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2020 (12) TMI 1338 - MADRAS HIGH COURTLevy of penalty, interest and GST, for the remittance of the shortage amount - the shortage was found at the time of counting the stocks, subsequent to the transfer of the same from Shop to godown for the purpose of safe custody - HELD THAT:- When the respondent issued a show cause notice to the petitioner, with regard to the imposition of penalty under Section 7(b) (xiv) of the Code, the petitioner sent a reply stating that only the respondents have construed it as shortage amount but it was only the after sales amount. When such being the case, without conducting any domestic enquiry to find out the fact that whether the said amount was after sales amount or it was a shortage amount; whether the petitioner was really sent any intimation about the after sales amount to the respective District managers and whether there was any obstacles to the petitioner to deposit, the after sales amount. All these facts can be proved only by conducting a domestic enquiry and enquiring the concerned District Managers, Supervisors, Salesmen and those who did stock verification. Without conducting any such enquiry and giving the opportunity to the petitioner to explain his case, in a personal hearing, it is not proper for the respondents to arrive at a preconceived manner as if that the amount deposited subsequent to the stock taken by the respondents as shortage amount particularly when the petitioner took a stand that the amount already deposited subsequent to the stock verification is only an after sales occurred between 4.00 p.m. to 6.00 p.m. On 24.03.2020. When the petitioner has taken definite stand that it was only an after sale amount and not a shortage amount, the respondents should not have come to the conclusion arbitrarily without conducting the domestic enquiry as shortage amount. This Court is of the opinion that the impugned order was passed in an arbitrary manner and in violation of the principles of natural justice, without conducting any domestic enquiry as contemplated in the Code and the procedure adopted in the course of decision making process is not as contemplated in the Code, thus, this Court find fault on such decision making process and the same is totally illegal and liable to be quashed. Whether the penalty imposed in a disciplinary proceedings in a service matter is liable for GST, in terms of Section 7(1) (d) or 7(1-A) of the GST Act, 2017? - HELD THAT:- Admittedly the said Section 7(1) (d) was not in force as on the date of passing the impugned order in the month of September 2020. The said Section was omitted with effect from 01.02.2019. The respondent, in his counter clearly stated that the notice of collection of GST was issued under Section 7(1) (d) alone. Therefore, without any provision/authority, the third respondent has issued the show cause notice to collect the GST, which is totally illegal - Secondly, even assuming that Section 7(1A) of the Act r/w Rule 5(e) of the Rules will be applicable and the show cause notice was issued in accordance with the said provision, as contended by the learned counsel for the respondents, nowhere either in the show cause notice or in the impugned order or in the counter affidavit, the respondents never ever stated about the applicability of Section 7(1A) r/w Rule 5(e). In any angle, the imposition of the GST by the respondents, to the penalty imposed, under Rule 7(b) (xiv) of the Code, in a disciplinary proceedings initiated against the employees would not attract the GST and the penalty referred therein would only refer the penalty imposed in the course of trade or commerce - As such in the present case the penalty was imposed in a disciplinary proceedings which cannot be construed that the penalty imposed in the course of trade or commerce for the imposition of GST. The GST imposed by the respondents is illegal on the face of it and the same is liable to be set aside - Petition allowed - decided in favor of petitioner.
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