The High Court of Calcutta, Circuit Bench at Jalpaiguri, has struck down a penalty imposed under Section 129(3) of the West Bengal Goods and Services Tax (WBGST)/Central Goods and Services Tax (CGST) Act, 2017 on the finding that there is no taxable supply effected by the petitioner.
The matter was remanded back to the proper officer to pass a reasoned order citing inadequate reasons and non-consideration of the objections raised by the petitioner.
The order came in response to a writ petition filed by DRB Infrastructure Pvt Ltd against the State of West Bengal and others.
The crux of the case revolved around a truck owned by DRB Infrastructure Pvt Ltd, which was seized during construction work in Arunachal Pradesh back in 2018. Subsequently, a show cause notice was served to the petitioner raising a demand under the WBGST Act and Rules, 2017, based on this incident. The petitioner responded to this demand with a detailed submission on February 13, 2023. Without considering the contentions and explanation provided by the petitioner, an order was passed on February 15, 2023, levying a demand of Rs.8,13,600.
The petitioner, represented by Mr. Bharat Raichandani and Mr. Debajit Kundu contended that the order lacked essential reasoning and failed to address their objections adequately.
The petitioner also argued that no penalty shall be imposed since no tax was due and payable by them as there is no taxable supply effected by them.
The respondent revenue, State of West Bengal, represented by Mr. Subir Kr. Sahs, defended the penalty imposition, arguing that the petitioner’s objections lacked merit and that the order was legally sound.
The bench concurred with the petitioner’s contention, highlighting the absence of substantial reasoning in the order.
The bench emphasised that the justification and reasonableness of any conclusion must be based on explicit reasons provided in support. In this case, the order failed to provide these crucial reasons, leading to its unsustainability.
Moreover, the petitioner had raised a significant concern about the imposition of a penalty, arguing that no tax was due and payable since no supply was made. This critical objection, according to the petitioner, should have been addressed by the proper officer within the order. However, the order did not engage with this objection, rendering the conclusion reached devoid of any basis.
Consequently, the bench set aside the order passed under Section 129(3) of the CGST Act, 2017 and remanded the matter to the proper officer for further adjudication.
The single bench of Justice Ravi Krishan Kapur directed the proper officer to consider the response submitted by the petitioner on February 13, 2023, and to issue a reasoned order within eight weeks from the date of the judgment.
The petitioner has been instructed to maintain the bank guarantee they had furnished in compliance with an interim order dated June 16, 2023. This bank guarantee is to remain in force until the final resolution of the representation, the bench directed.
The judgment underscores the importance of providing transparent and robust reasoning in the orders and decisions, ensuring that the taxpayers’ objections are adequately considered before imposing penalties.
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