Appellate Authority Must Consider Cess-Disclosure In Annual Return, 'No Negative Mandate' For Late-Filing: Calcutta High Court
The Calcutta High Court in a matter concerning non-disclosure of Cess in monthly return GSTR-3B which came to be rectified by filing annual return in GSTR-09, has set aside appellate order. The High Court has directed the Authority to revisit the matter and consider subsequent rectification in GSTR-09 of initial error of non-disclosure. In an order dated November 26, 2025 the...
The Calcutta High Court in a matter concerning non-disclosure of Cess in monthly return GSTR-3B which came to be rectified by filing annual return in GSTR-09, has set aside appellate order. The High Court has directed the Authority to revisit the matter and consider subsequent rectification in GSTR-09 of initial error of non-disclosure.
In an order dated November 26, 2025 the Single Bench of Justice Om Narayan Rai noted that at the time of finalization of the books of account, Petitioners realized their mistake and disclosed the entire amount of CESS in the annual report filed in form GSTR-9. The Calcutta High Court emphasizing on effect of Form GSTR-9 observed that non-consideration of the aspect that Input Tax Credit (ITC) on the Cess paid remained unavailed would contravene the Constitutional Principles. It was also stated that although Section 44(2) Amendment set a 3-year filing date for annual returns but same was without penalties or prohibition, therefore, late filing cannot be treated as barred.
“Indeed the explanation appended to Section 44(2) of the said Act of 2017 provided for a date by which annual returns were to be filed but then since there was neither any fatal consequence provided for failure to file the same within that time nor was there any negative mandate prohibiting filing of return after a particular period, therefore the same cannot be interpreted in a manner so as to totally preclude late filers from filing the return.”
Petitioners, motor vehicle dealers made purchases in FY 2017–18 and paid GST together with Compensation Cess on inward supplies. Petitioners collected Cess on outward supplies but believing that no Cess was payable as they had accumulated inward cess credit, Cess was not disclosed in GSTR-3B. Subsequently, Petitioners corrected the error by disclosing cess in annual return (GSTR-9), claiming revenue neutrality.
However, a Show Cause Notice was issued to Petitioner which sought to recover Rs. 44,71,625 as Cess not paid but collected from various suppliers at the time of outward supply of motor vehicles. This led to an Order under Section 74 of the CGST Act, 2017 thereby fastening liability together with interest and penalty worth Rs. 1.28 crores. On appeal, the Appellate Authority considering Petitioner's stance that non-disclosure relating to Cess amount was ultimately rectified at the time of filing GSTR-09, converted Section 74 proceedings into Section 73 proceedings. The Appellate Authority, however, did not take into consideration the effect of GSTR-9 and confirmed the tax liability while substantially slashing the penalty amount.
Challenging the Appellate Order, Petitioner contended that Appellate Authority erred in not considering effect of GSTR-9 disclosure & unavailed ITC on inward cess. It was also pointed out that by payment of differential sum viz. the difference between ITC available on the Cess paid by them to their supplier and the Cess collected by them from their purchasers, the error of initial non-disclosure of Cess had become revenue neutral. The GST Department countered by stating that disclosure in GSTR-09 was beyond the time limit prescribed in Section 44(2) of the CGST Act, 2017 as amended by the Finance Act, 2023.
The High Court clarified that as Appellate Authority ignored the aspect of unavailed ITC on inward Cess, it resulted in disregarding GSTR‑9 disclosure and correction, offending Constitutional mandate in Article 265.
Effect of rectification in GSTR-09
Vide the Finance Act, 2023, Section 44(2) of the CGST Act, 2017 was amended and mandatory prohibition on late filing was brought about ordained to take effect from October 01, 2023. The amendment prescribed a statutory time limit of 3 years. As per the amendment, the registered person cannot file an annual return more than 3 years after its due date. However, it includes a provision allowing the government, under specific conditions and notifications, to permit certain registered persons or classes of persons to file even after this three-year period.
The High Court perused Section 44 (2) of the CGST Act, 2017 as it existed prior to the Amendment in 2023 to state that Petitioners filed GSTR-9 earlier on August 28, 2023 whereas amendment applied only from October 01, 2023. Further, the High Court also pointed out that differential sum between cess collected and ITC available was paid up by the Petitioner, making the error neutral. It also referred to principles as set out by Co-ordinate Bench in Ankit Kumar Agarwal, Bisweswar Midhya and Madras High Court in Sri Shanmuga Hardwares.
Accordingly, the High Court set aside order of the Appellate Authority and remanded it back for considering the appeal afresh.
Case Detail: Bidyut Autotech Private Limited and another v. The Assistant Commissioner of State Tax,
Bureau of Investigation, South Bengal (HQ)
For Petitioner: Advocates Ankit Kanodia, Megha Agarwal, Piyush Khaitan
For State: Advocates Swapan Kumar Dutta, Tanoy Chakraborty, Sumita Shaw, Saptak Sanyal.