The Madras High Court upheld penalty on the ground of non-compliance of Statutory GST requirements.
The writ petitioner, M/s.Suvarna Fibrotech Pvt Ltd, is in the business of manufacturing Fibre glass composite moulded products and that the writ petitioner’s place of business was inspected by Enforcement Wing Officials and during the course of inspection, certain defects were noticed and an inspection report was made and that this pertains to ‘Financial Year 2019-20’
Defects under three heads were noted (a)alleged sales suppression; (b) contravention of statutory provisions [and (c) GSTR-1 filed up to 2019 but GSTR 3B not filed, tax collected but not paid to the Government.
The counsel for writ petitioner, adverting to the grounds of appeal submitted that each of the alleged defects have been assailed but the same have not been considered by the Appellate Authority. A careful perusal of Section 74 of the TN-G & ST and C-G & ST Acts makes it clear that ‘suppression of facts to evade tax’ is the expression used. Section 73 of the TN-G & ST and C-G & ST talks about tax that has not been paid or short paid and it excludes ‘suppression of facts to evade tax’.
The Court of Justice M Sundar, observed that “This writ Court deems it appropriate to leave it at that and say that interference is refused but it is made clear that it cannot be put against the writ petitioner that there is ‘suppression of facts to evade tax’ within the meaning of Section 74(1) and it is only a case of tax not being paid within the meaning of Section 73(1).”
“As regards the ground raised by the writ petitioner is with regard to Section 44 of TN-G & ST and C-G & ST Acts read with Notification No.4 of 2021-Central Tax, dated 28.02.2021 for ‘said FY’ petitioner had time for reconciling the annual return till 31.03.2021, whereas the inspection was in April of 2019” the Court said.
The Court further noted that the Original Authority has levied penalty of only Rs.25,000/- for all three non-compliances put together. Therefore, it cannot be gainsaid that maximum penalty to which a general penalty under Section 125 can extend, has been exercised in the case on hand. In the case on hand, Section 122(1)(iii) read with Section 122(1) makes it clear that it is expressed in both units namely a fixed sum as well as a fixed percentage. On this ground also Section 126 does not come to the aid of the writ petitioner.
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