Home GST Allahabad HC Reduces INR 56,00,952 Penalty to INR 10,000 Under GST

Allahabad HC Reduces INR 56,00,952 Penalty to INR 10,000 Under GST

Allahabad HC Reduces INR 56,00,952 Penalty to INR 10,000 Under GST
Allahabad High Court's for Clear Secured Services Private Limited

The Allahabad Excessive Court docket dominated on the case involving Clear Secured Companies Personal Restricted Via. Shailendra Dubey Licensed Signatory versus Commissioner, State Tax GST, Up Lucknow. They’ve decreed {that a} GST penalty initially set at Rs. 56,00,952 has been diminished to Rs. 10,000 by the Excessive Court docket.

Official Order Essential Factors

Given the shared concern in each petitions, they’re being addressed collectively on this ruling.

The present petition has been lodged by the petitioner to contest the choice dated 25.08.2021, the place a penalty of Rs.28,00,476 underneath CGST and Rs.28,00,476 underneath SGST was imposed, purportedly underneath the authority of Part 122 of the GST Act.

Moreover, the petitioner challenges the ruling dated 14.09.2022, which dismissed the petitioner’s attraction. These two orders are detailed in Annexures – P1 and P2.

Clear Secured Companies Personal Restricted Case Info

The petitioner, a non-public restricted firm, operates in offering manpower provide providers. On twenty seventh Could 2021, they acquired a present trigger discover (Annexure – P1) alleging that though they’d collected GST, they hadn’t paid it inside the stipulated time. Consequently, they have been accused of violating Part 122(1)(iii) of the GST Act and confronted a penalty whose specifics have been outlined within the discover.

Resulting from prevailing COVID-19 circumstances, the petitioner couldn’t reply, resulting in an ex-parte order in opposition to them. This order imposed a penalty matching the sooner specified quantities: Rs. 28,00,476.36 for CGST and an equal sum for SGST, totalling Rs. 56,00,952.72 levied in opposition to the petitioner.

The petitioner’s counsel contends that whereas Part 122(1)(iii) of the Act permits for imposing a penalty because of a delay in depositing collected tax past three months, the desired penalty quantity is both Rs.10,000 or the equal of the evaded tax or tax not deducted underneath Part 51 of the Act.

In response to their argument, even when the allegations in opposition to the petitioner have been thought-about legitimate, the utmost penalty they may face can be Rs.10,000 since no tax has been evaded.

Part 122(1)(iii) of the Act reads as underneath:

“122: Penalty for particular offences.

(1) The place a taxable one who –

(iii) collects any quantity as tax however fails to pay the identical to the Authorities past a interval of three months from the date on which such cost turns into due.”

He additional highlights Part 123’s requirement and emphasizes Sections 126, 127, and 128 of the Act, quoted under:

123: Penalty for not submitting data return.

If a person obligated to submit an data return underneath part 150 fails to take action inside the specified interval talked about within the discover issued underneath sub-section (3) of that part, the approved officer can stipulate that the stated particular person shall be topic to paying a penalty of 100 rupees for every day the failure persists:

Nonetheless, the penalty imposed underneath this part can’t exceed 5 thousand rupees.

Part 126: Basic guidelines regarding penalties.

(1) No officer empowered by this Act can impose penalties for minor infractions of tax guidelines or procedural calls for, significantly for omissions or errors in documentation that may be simply rectified and have been made with out fraudulent intent or gross negligence.

Learn Additionally: GST Portal Retains All Data Which The Division Should Affirm It: Allahabad HC Quakes Tax Penalty Order

Clarification: Below this sub-section:

(a) A breach qualifies as a ‘minor breach’ if the tax quantity concerned is under 5 thousand rupees.

(b) An omission or error in documentation is definitely rectifiable if it’s an apparent mistake within the data.

(2) Penalties underneath this Act will differ based mostly on the specifics of every case, aligning with the severity of the breach and the circumstances surrounding it.

(3) No particular person shall face a penalty with out being granted a chance to current their case.

(4) When an officer enforces a penalty for a violation of any regulation, regulation, or procedural requirement underneath this Act, they need to specify the character of the breach and cite the related regulation, regulation, or process that determines the penalty quantity.

(5) If a person voluntarily discloses a breach of tax regulation, regulation, or procedural requirement to an officer earlier than it’s found, the officer might take into account this disclosure as a mitigating issue when figuring out the penalty for that particular person.

(6) These provisions received’t apply in circumstances the place the penalty specified underneath this Act is both a set quantity or expressed as a hard and fast share.

Part 127. Authority to impose penalties in particular circumstances.

When the approved officer believes that an individual is topic to a penalty not lined underneath proceedings outlined in sections 62, 63, 64, 73, 74, 129, or 130, they’ll situation an order imposing such penalty after offering a good likelihood for that particular person to be heard.

Part 128: Authority to pardon penalties, charges, or each.

The Authorities, by means of notification, can partially or utterly waive any penalties talked about in sections 122, 123, or 125, or any late charges detailed in part 47 for particular teams of taxpayers and underneath specific mitigating circumstances specified therein, based mostly on the suggestions of the Council.

After reviewing the arguments introduced in courtroom and inspecting the statements within the writ petition and counter affidavit, it seems that the income’s stance is centred on funds made after the stipulated three-month interval, regardless of being collected. There’s no proof or accusation in opposition to the petitioner suggesting non-payment or evasion of the collected quantity; the one competition is the delayed cost.

Even when, hypothetically, this competition is acknowledged, the utmost penalty relevant to the petitioner can be Rs.10,000 since there’s no indication that the petitioner evaded any tax. Furthermore, each the Appellate Authority and the Assessing Authority have ignored the final pointers relating to penalties, notably disregarding the directive of Part 126(2) of the Act.

Allahabad Excessive Court docket Order

On this occasion, as per the Notification issued on 1st June 2021 exercising powers underneath Part 128 of the Act, the Authorities waived late charges for return submitting. This facet ought to have been appropriately taken under consideration when making use of the penalty, as mandated by Part 126(2) of the Act. Contemplating the circumstances right here, the utmost penalty relevant was both Rs.10,000 or the quantity of tax evaded, whichever was larger.

Since there’s no allegation of tax evasion, the utmost penalty that would have been imposed stood at Rs.10,000. Nonetheless, this quantity might have been even decrease had each the Taxing Authority and the Assessing Authority thought-about the directive of Part 126(2) of the Act together with the Notification from 1st June 2021. Sadly, it’s evident that this consideration was not undertaken.

At this juncture, the petitioner’s counsel signifies that the petitioner is ready to settle the dispute by agreeing to pay a penalty of Rs.10,000.

Contemplating the aforementioned provisions and the petitioner’s proposal, the challenged orders dated twenty fifth August 2021 and 14th September 2022 in Writ Tax No.5 of 2023 are nullified.

Concerning the second case, Writ Tax No.1 of 2023, the place solely the quantities differ however different parts stay constant, the contested orders from fifteenth March 2021 and 14th September 2022 are additionally revoked.

The petitioner is directed to settle a penalty of Rs.10,000 in each circumstances inside two weeks from immediately by submitting the quantity to the division.


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