2025 (6) TMI 1073 - HC - GST

Failure to file GSTR-01 returns and remit the collected tax to the Government - illegal holding the tax which resulted in denying of input tax credit the petitioner - official respondents (Respondents 1 to 5) state that the 6th respondent falls within the jurisdiction of the Central GST authorities and no action can be initiated as against the 6th respondent by the official respondents - HELD THAT - This stand taken by the official respondents is contrary to Section 76 (1) of the Jharkhand GST Act 2017 which mandates that every person who has collected from any other person any amount as representing GST and had not paid the said amount to the Government shall forthwith pay it to the Government and if he does not do so under subsection (2) thereof the proper officer may direct him through a notice to show cause as to why the said amount as specified in the notice should not be paid by him to the Government and why a penalty equivalent to the amount specified to the notice should not be imposed on him under the Act . Thus action can be taken under subsection (2) of section 76 against every person including a person not registered under the JGST Act 2017 if he does not having received JGST from the petitioner file any return under GSTR-01 and does not remit the same to the official respondents. Therefore it is not permissible for the official respondents to contend that they need not do anything since the 6th respondent is registered with the CGST authorities. It is their bounden duty to take action against the 6th respondent under sub-section (2) of Section 76 forthwith and there is no valid excuse for its inaction. This writ petition is allowed with costs of Rs. 1, 00, 000/- to be paid by the 6th respondent to the petitioner within eight weeks; and the Respondents 1 to 5 are directed to initiate proceedings under Section 76 the Jharkhand GST Act 2017 against Respondent 6 for collection of the tax from the petitioner and not crediting it to the Jharkhand State Government during the financial year 2020- 2021 and withholding the tax amount which is due to the Government thereby preventing petitioner from claiming input tax credit of the amount so paid.

Summary

Issues Presented and Considered

The core legal questions considered by the Court include:

• Whether the 6th respondent, who supplied rental/hiring services of commercial motor vehicles and collected GST from the petitioner, failed to file GSTR-01 returns and remit the collected tax to the Government, thereby violating the provisions of the Jharkhand GST Act, 2017.
• Whether the official respondents (Respondents 1 to 5) are obligated under Section 76 of the Jharkhand GST Act, 2017 to take action against the 6th respondent for non-payment of GST collected from the petitioner, despite the 6th respondent being registered under the Central GST authorities.
• Whether the petitioner is entitled to seek relief by way of writ petition for the failure of the 6th respondent to remit GST and for the inaction of the official respondents in initiating proceedings under the Jharkhand GST Act.
• Whether the principle of res judicata applies to bar the present writ petition on account of a prior writ petition filed by the petitioner on the same subject.
• Whether the 6th respondent's plea of non-liability to pay tax under the Jharkhand GST Act is tenable given that the invoices raised by it included CGST and SGST components.

Issue-wise Detailed Analysis

1. Liability of the 6th Respondent to File GSTR-01 and Remit GST Collected

Legal Framework and Precedents: Section 76 of the Jharkhand GST Act, 2017 mandates that any person collecting GST from another person must remit the collected amount to the Government forthwith. Sub-section (2) empowers the proper officer to issue a show cause notice and impose penalties if the tax collected is not paid.

Court's Interpretation and Reasoning: The Court noted that the 6th respondent raised invoices including SGST and CGST components and collected GST amounting to Rs. 11,18,832.58 from the petitioner. However, the 6th respondent failed to file GSTR-01 returns, resulting in the non-reflection of the tax in the petitioner's GSTR-2A and denial of input tax credit.

Key Evidence and Findings: The petitioner produced invoices (Annexure-1) and bank statements (Annexure-2) evidencing payment of GST to the 6th respondent. The 6th respondent did not deny collection of GST but failed to demonstrate remittance of the tax to the Government or filing of returns.

Application of Law to Facts: The Court held that the 6th respondent is bound by Section 76 to remit the collected GST to the Government. The failure to file GSTR-01 and remit tax constitutes a violation of the statutory obligation.

Treatment of Competing Arguments: The 6th respondent's claim of non-liability to pay tax under the Jharkhand GST Act was rejected as contradictory to the inclusion of GST components in its invoices. The Court found this plea to be "totally false" and unexplained.

Conclusion: The 6th respondent is liable to remit the GST collected from the petitioner and file the requisite returns under the Jharkhand GST Act.

2. Obligation of Official Respondents to Initiate Action under Section 76

Legal Framework and Precedents: Section 76(2) empowers the proper officer to issue show cause notices and impose penalties on persons who collect GST but fail to remit it to the Government. The official respondents are responsible for enforcement within their jurisdiction.

Court's Interpretation and Reasoning: The official respondents contended that the 6th respondent's registration under Central GST authorities placed it outside their jurisdiction, absolving them of responsibility. The Court rejected this contention, emphasizing that Section 76 applies to "every person" who collects GST and fails to remit it, irrespective of registration under State or Central GST.

Key Evidence and Findings: The petitioner's representations and legal notices to the official respondents went unheeded despite clear statutory obligations.

Application of Law to Facts: The Court held that the official respondents have a "bounden duty" to initiate proceedings against the 6th respondent under Section 76 and cannot shirk this responsibility on jurisdictional grounds.

Treatment of Competing Arguments: The official respondents' jurisdictional defense was dismissed as invalid and contrary to the statutory mandate.

Conclusion: The official respondents must initiate proceedings against the 6th respondent forthwith under Section 76 of the Jharkhand GST Act.

3. Petitioner's Locus Standi and Entitlement to Relief

Legal Framework and Precedents: The petitioner, having paid GST to the 6th respondent and being denied input tax credit due to the latter's failure to remit tax, has a direct interest in enforcement of the GST Act provisions.

Court's Interpretation and Reasoning: The Court found that the petitioner had sufficient locus standi as it had paid GST supported by invoices and bank statements, but was unable to claim input tax credit due to the 6th respondent's non-compliance.

Key Evidence and Findings: The petitioner's payment records and the 6th respondent's failure to remit tax were undisputed.

Application of Law to Facts: The petitioner's grievance is a legitimate cause for seeking writ relief to compel official respondents to act under the GST Act.

Treatment of Competing Arguments: The official respondents' contention that the petitioner lacked locus standi was rejected.

Conclusion: The petitioner is entitled to file the writ petition and seek enforcement of the statutory provisions.

4. Applicability of Res Judicata

Legal Framework and Precedents: The principle of res judicata bars re-litigation of issues finally adjudicated on merits.

Court's Interpretation and Reasoning: The Court observed that the previous writ petition filed by the petitioner was disposed of directing it to approach the official respondents with a fresh representation. There was no final adjudication on merits in the earlier petition.

Key Evidence and Findings: The order dated 19.07.2022 in the previous writ petition did not decide the substantive issues but merely directed procedural steps.

Application of Law to Facts: Since no final adjudication occurred, the principle of res judicata does not apply to bar the present writ petition.

Treatment of Competing Arguments: The 6th respondent's plea invoking res judicata was held untenable.

Conclusion: The present writ petition is maintainable and not barred by res judicata.

5. Contradiction in 6th Respondent's Plea of Non-liability

Legal Framework and Precedents: Inclusion of GST components in invoices implies acceptance of liability to collect and remit GST under the relevant GST Act.

Court's Interpretation and Reasoning: The Court found the 6th respondent's claim of non-liability to pay tax under the Jharkhand GST Act to be "totally false" and unexplained, given the inclusion of CGST and SGST in its invoices.

Key Evidence and Findings: Invoices (Annexure-1) clearly showed GST components, contradicting the 6th respondent's denial of liability.

Application of Law to Facts: The Court held that the 6th respondent cannot evade liability by denying it while issuing GST-inclusive invoices.

Treatment of Competing Arguments: The 6th respondent's contradictory stance was rejected.

Conclusion: The 6th respondent is liable to remit the GST collected as per the Jharkhand GST Act.

Significant Holdings

"It is not permissible for the official respondents to contend that they need not do anything since the 6th respondent is registered with the CGST authorities. It is their bounden duty to take action against the 6th respondent under sub-section (2) of Section 76 forthwith and there is no valid excuse for its inaction."

"Every person who has collected from any other person any amount as representing GST, and had not paid the said amount to the Government, shall forthwith pay it to the Government."

"The plea raised by the 6th respondent that it is not liable for paying tax under the GST Act is totally false because invoices raised by it included CGST and SGST components."

"The principle of res judicata is not attracted as there was no final adjudication on merits in the previous writ petition."

The Court directed the official respondents to initiate proceedings under Section 76 of the Jharkhand GST Act, 2017 against the 6th respondent within eight weeks and imposed costs of Rs. 1,00,000/- on the 6th respondent to be paid to the petitioner within the same timeframe.