19 Sep 2023 4:00 AM GMT
In a recent verdict, the Patna High Court upheld the imposition of interest and penalty on M/s Munna Traders, an assessee under the Bihar Goods and Services Tax Act (BGST Act). The penalties were enforced due to an excessive claim of input tax credit, with the Court deeming the penalty as a civil liability arising from the failure to pay the due tax, stemming from an erroneous input tax...
In a recent verdict, the Patna High Court upheld the imposition of interest and penalty on M/s Munna Traders, an assessee under the Bihar Goods and Services Tax Act (BGST Act). The penalties were enforced due to an excessive claim of input tax credit, with the Court deeming the penalty as a civil liability arising from the failure to pay the due tax, stemming from an erroneous input tax credit claim.
The Division Bench comprising Chief Justice Vinod Chandran and Justice Partha Sarthy issued this judgment, asserting that the assessee had defaulted on tax payment due to the excessive input tax credit claim. However, they later deposited the input tax credit without paying the corresponding interest, as required by Section 50 of the BGST Act. This failure to pay both the tax and interest led to the imposition of the penalty under Section 122 of the BGST Act.
The Court observed, “In the present case, there is no proceeding of scrutiny or appeal pending and there cannot be any revision of the input tax credit since the allegation of excess claim has been admitted and differential amount paid by the assessee. The penalty levied was proper and a civil liability, attracted on the failure to pay the tax due, on a wrong claim of input tax credit”.
The background of the case involved the petitioner challenging the imposition of interest and penalty after a notice was issued under the BGST Act for the excessive input tax credit claim. The petitioner's appeal, filed with a delay, was rejected as it exceeded the allowable timeframe for condonation specified in Section 107(4) of the BGST Act.
The petitioner's counsel argued that an alternative recourse was available before the Tribunal, which had not been established at the time. They also contended that the Court often issued a stay on recovery upon payment of 20% of the outstanding tax, pending the formation of the Tribunal and the initiation of an appeal. Additionally, the counsel claimed that their excessive input tax credit claim was unfounded and that their payment had been made under duress from authorities.
In response, the Government Advocate highlighted that the discrepancies had come to light during the scrutiny of the petitioner's return, leading to the issuance of a notice. While the petitioner paid the differential tax amount, they failed to pay the corresponding interest, despite being served a notice under Section 73(1) of the BGST Act.
Consequently, the Assessing Officer imposed both interest and penalty. The Division Bench, after considering the submissions from both parties, found that the assessee had admitted the discrepancy concerning the excessive input tax credit claim and had paid the amounts due, including the interest as required by Section 50 of the BGST Act. The non-payment of tax and the failure to pay interest resulted in the imposition of the penalty.
The Bench noted that Section 107 of the BGST Act had established a specific timeframe during which a delayed appeal could be considered by the first appellate authority if valid reasons for the delay were presented.
Furthermore, the Bench pointed out that Circular F. No. CBIC-20001/2/2022-GST specifically outlined that the directives within that Circular applied exclusively to ongoing procedures encompassing scrutiny, audit, investigation, etc., pertaining to the financial years 2017-18 and 2018-19 but did not extend to concluded proceedings.
In conclusion, the Division Bench clarified that there were no ongoing scrutiny or appeal processes, making it impossible to revise the input tax credit since the allegation of an excessive claim had been admitted, and the differential amount had been paid by the petitioner. Therefore, the Bench deemed the imposed penalty as appropriate, representing a civil liability arising from the failure to pay the due tax, due to a wrong claim of the input tax credit.
Counsel For the Petitioner/s : Mr. Manoj Kumar Keshri, Advocate
Counsel For the Respondent/s : Mr. Vivek Prasad (GP7)
LL Citation: 2023 Livelaw (Pat) 112
Case Title: M/s Munna Traders vs. The State of Bihar and Others
Case No.: Civil Writ Jurisdiction Case No.9032 of 2023
Click Here To Read Judgment