TMI Blog2019 (8) TMI 1572X X X X Extracts X X X X X X X X Extracts X X X X ..... from Dec., 2017 to Aug., 2018). Levy of penalty of ₹ 36,22,84,718/- - HELD THAT:- The AA has invoked Section 122, on which he has supposedly relied and treated the appellant non submission of GSTR-3B as a means for fraudulent and wilful attempt for suppression of liable tax and levied 100% penalty. The basic discrepancy in the AA s interpretation is that it cannot be said that the appellant has acted deliberately to suppress the outward taxable supplies, because the appellant has filed GSTR-1 returns declaring the actual turnovers, hence prima facie no ground can be made for wilful suppression attribution. That means, though the AA has assigned appellant s action with a motive of wilful attempt for suppression of facts, but it is beyond any doubt and the AA also admitted that the appellant has filed GSTR-1 returns declaring the outward taxable supplies, hence attribution of wilful suppression by the appellant does not holds legit. To levy of penalty under Section 122, basically there must be suppression of facts, but in the instant case the appellant has not attempted for suppression of facts and duly declared his outward taxable supplies turnovers thorough GSTR-1 retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders dated 1-11-2018, disputing the levy of tax of ₹ 75,22,00,588/-. 2. The case is posted for personal hearing. The details there of are as under : Sl. No. Date of notice issued Posted for hearing on Status of hearing 1. 19-3-2019 9-4-2019 Attended 2. 9-4-2019 23-4-2019 Adjournment filed 3. 24-4-2019 6-5-2019 Attended 4. 15-5-2019 20-6-2019 Not Attended 5. 1-6-2019 12-7-2019 Not Attended 6. 5-8-2019 19-8-2019 A.R. Attended 3. Sri P. Phani Raj, Executive Director and Authorized Representative of the supplier (hereinafter referred to as A.R. ) has appeared on some occasions and finally on 19-8-2019 for personal hearing. Finally, he was heard personally. Statement of facts : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,35,374 2,16,52,918 20,35,374 4,33,05,836 Apr. 18 2,16,52,918 17,10,580 2,16,52,918 17,10,580 4,33,05,836 May 18 2,16,52,918 13,74,960 2,16,52,918 13,74,960 4,33,05,836 Jun. 18 2,16,52,918 10,50,167 2,16,52,918 10,50,167 4,33,05,836 Jul. 18 2,16,52,918 7,14,546 2,16,52,918 7,14,546 4,33,05,836 Aug. 18 2,16,52,918 3,78,926 2,16,52,918 3,78,926 4,33,05,836 Total Amt. 18,01,12,887 1,37,02,849 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iculties of the appellant in remitting the salaries to the security personal affecting the livelihood of the 20,000 employees of the appellant. (4) Though the client was facing cash crunch, it prioritized the revenue of the government over business needs and started depositing cash into the electronic cash ledger as and when the collections were made from the debtors. The same can be evidenced from the Electronic cash ledger which is enclosed herewith as Annexure--- (5) Thus, no sooner did they feel that the amount in the cash credit ledger would be sufficient to discharge the liability of a particular month, they filed the return as in the case of December, 2017. (6) Therefore, what has to be understood here is that, there was no reason with the client for non-filing of return except for the fact that they had no money to discharge the output liability, and as soon as even a part of receivables were being realized, efforts were being made to accumulate the same in the electronic cash ledger until the accumulated amount was enough to offset the liability for the respective month. (7) Also, as on date, the client has filed its return for the month Decembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing into account all the relevant material which is available or which he has gathered and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates. (2) As seen from the above, the proper officer may assess the tax liability only inter alia if the (a) Registered person failed to furnish the returns under section 39 of CGST Act, 2017. (b) Notice under section 46 of CGST Act, 2017 is served. The above mentioned pre-requisites are not fulfilled in the present set of factual matrix as explained herein below : In Re : No failure in furnishing of the returns under Section 39 ibid (3) Appellant submits that GST was introduced w.e.f. 1-7-2017. According to the original scheme of GST, a person was required to file details and returns monthly as explained below : (a) FORM GSTR-1 - As per Section 37 of the CGST Act, 2017 read with Rule 59 of CGST Rules, 2017, a person is required to file a Form GSTR-1 mentioning details of the outward supply effected during a tax period. Accordingly, the entire outward supply (that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, from the above retrospective amendment (i.e. w.e.f. 1-7-2017), it can be construed that FORM GSTR-3B is a return which will be notified by the Commissioner of GST and it has no nexus with FORM GSTR-3 the way it had before this amendment and accordingly, it can be construed that FORM GSTR-3B is not a return prescribed under Section 39 of CGST Act, 2017 as the very foundation of the parity clause between two returns has been am ended so as to partake either of the returns colour in isolation. (8) Also the fact that Rule 61(1) states, Every registered person other than a person referred to in Section 14 . shall furnish a return specified under sub-section (1) of section 39 in FORM-GSTR-3 electronically . . Thereby drawing no relevance to GSTR-3B with GSTR-3 and leaving no room for doubt regarding the distinct identity of both the returns. In other words, the GSTR-3 and GSTR-3B are two different returns while the GSTR-3 is return prescribed under Section 39, ibid read with Rule 61(1) of CGST Rules, 2017 and the GSTR-3B is not so. (9) Appellant submits that undisputedly the filing of the GSTR-3 is deferred now vide Notification No. 12/2019, dated 7-3-2019 con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GSTR-3B for the respective months are attached as annexure I) and the demand may be set aside as the applicable tax dues has been remitted. (13) The appellant informs your good office that GSTR-3B for the following months would be filed in due course and the compliance for the same would be reported at the earliest. (14) Appellant further submits that, when GSTR-01 disclosing the details of outward supplies was filed for the subject period, the turnover was available from the form GSTR-1, the Ld. Adjudicating authority has raised the demand based on the actual turnovers instead of estimated turnover. The same Ld. Adjudicating authority has raised the demand based on the turnover declared in the GSTR-01 for the month of September, 2018 to December, 2018 while the same analogy was not being followed the other months. Enclosing herewith a table comparing the turnovers as considered in the GSTR-01, and considered in the assessment proceedings for your kind perusal. Also enclosing a table showing differential demand. Month As per GSTR-01 As per assessment order IGST CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18,01,12,887 18,01,12,887 36,22,84,718 Table showing differential demand : (Figures in () indicate excess demanded by the assessment order) Month Differential Amount IGST CGST SGST SUB-TOTAL Dec. 17 21,91,139 (1,36,12,794) (1,36,12,794) (2,50,34,449) Jan. 18 21,86,181 (1,20,57,786) (1,20,57,786) (2,19,29,391) Feb. 18 (1,44,144) (3,94,834) (3,94,834) (9,33,812) Mar. 18 24,88,737 (1,29,20,264) (1,29,20,264) (2,33,51,791) Apr. 18 14,69,985 (1,57,20,021) (1,57,20,021) (2,99,70,057) May 18 22,78,322 (1,30, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading to cash crunch in its hands. 14. The appellant further put forth that in spite of the above stated cash crunch, it has always prioritized the discharging the tax liability over business needs and frequently deposited cash in to its electronic cash ledger as and when the consideration is received from its recipients. Detailing about the above circumstances, the appellant strongly contended that there is no reason except cash crunch for its failure to file the returns in Form GSTR-3B. Hence, argued that holding/alleging suppression of tax and passing the best judgment orders is not justifiable and not lawful. 15. The appellant further points out that it has filed the returns in Form GSTR-1, that means actually scored outward taxable supplies are disclosed to the Department, and as such there are no circumstances or logic to estimate the outward supplies turnovers. The appellant also advanced two more objections. Firstly, the AA has added 50% to its actually scored turnover, while estimating the total turnover for all the months except for February, 2018. The same analogy applied by the AA to February, 2018 must have been applied to all the months, while passing the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner. 19. Thus, from the above retrospective amendment (i.e. w.e.f. 1-7-2017), it can be construed that FORM GSTR-3B is a return which will be notified by the Commissioner of GST and it has no nexus with FORM GSTR-3 the way it had before this amendment and accordingly, it can be construed that FORM GSTR-3B is not a return prescribed under Section 39 of CGST Act, 2017 as the very foundation of the parity clause between two returns has been amended so as to partake either of the returns colour in isolation. 20. Thus, interpreting Section 39 in its point of view as discussed above, the appellant contemplated that since GSTR-3 is deferred now vide Notification No. 12/2019, dated 7-3-2019, consequently the jurisdiction to make the assessment under Section 62 ibid is also deferred. Further, the failure to file the returns in Form GSTR-3B do not give jurisdiction to make the assessment under Section 62 ibid as the GSTR-3B is not a return for the purpose of Section 39 of the Act ibid. Hence, the assessment made under Section 62 ibid fails and requires to be set aside. 21. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty, is found to be having any basis and such wilfulness, has been established by AA or not? (4) Whether the interest levied by AA, is in tune with the provisions of the GST Act or not? Analysis : 25. Perused the grounds of appeal along with the assessment orders passed by the AA, and after thorough verification of records, the following findings are recorded; (1) Regarding the levy of tax of ₹ 36,22,84,718/- : A basic perusal of AA s order reveals that the findings on the turnovers are not based on analytical and exhaustive scrutiny. The palpably pointing out certain anomalies, which are discussed hereunder :- Firstly, the appellant raised some strong dissensions regarding invoking Section 62 with reference to Section 39, contemplating that GSTR-3B is not a statutory return prescribed under Section 39. Thus, the appellant s objections caused necessity for analysis and interpretation of statutory provisions i.e. Section 39 and Section 62 of the Act. In this connection, the following judgment - 2019-VIL-314-GUJ = 2019 (26) G.S.T.L. 481 (Guj.) though not advanced and relied on by appellant, but proclaimed recently, will be much helpful in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/GGST Rules provides that the return required to be filed in terms of Section 39(1) of the CGST/GGST Act is to be furnished in Form GSTR-3. 30. It would be apposite to state that initially it was decided to have three returns in a month, i.e. return for outward supplies i.e. GSTR-1 in terms of Section 37, return for inward supplies in terms of Section 38, i.e. GSTR-2 and a combined return in Form GSTR-3. However, considering technical glitches in the GSTN portal as well as difficulty faced by the taxpayers it was decided to keep filing of GSTR-2 and GSTR-3 in abeyance. Therefore, in order to ease the burden of the taxpayer for some time, it was decided in the 18th GST Council meeting to allow filing of a shorter return in Form GSTR-3B for initial period. It was not introduced as a return in lieu of return required to be filed in Form GSTR-3. The return in Form GSTR-3B is only a temporary stop gap arrangement till due date of filing the return in Form GSTR-3 is notified. Notifications are being issued from time to time extending the due date of filing of the return in Form GST-3, i.e. return required to be filed under Section 39 of the CGST Act/GGST Act. It was notified vide Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to deduct tax at source under the provisions of Section 51 shall furnish, in such form and manner as may be prescribed, a return, electronically, for the month in which such deductions have been made within ten days after the end of such month. (4) Every taxable person registered as an Input Service Distributor shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, within thirteen days after the end of such month. (5) Every registered non-resident taxable person shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, within twenty days after the end of a calendar month or within seven days after the last day of the period of registration specified under sub-section (1) of Section 27, whichever is earlier. (6) The Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit for furnishing the returns under this section for such class of registered persons as may be specified therein : Provided that any extension of time limit notified by the Commissioner of State tax or Union ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hind the A.A s dodged findings are lacking legitimacy as well as authenticity, making the orders vulnerable to be set-aside. If GSTR-3B is not the return prescribed under Section 39, the whole strength behind Section 62 for assessing the appellant would be nullified without any further doubt. It is also pertinent relevant here to observe that as held in many judgments that, if there is any ambiguity in the language of statutory provisions, the benefit of that ambiguity must be given to the assessee. Secondly, the A.A has chosen to determine the turnovers on his best judgment and presumes the suppression of outward taxable supplies by the appellant on mere guess work. He has not conducted any worthy verifications or elaborate enquiries. We have to read and comprehend that Section 62 thoroughly before analyzing the present issue. Hence Section 62(1) of the Act, is abstracted hereunder :- Section 62(1) Notwithstanding anything to the contrary contained in section 73 or section 74, where a registered person fails to furnish the return under section 39 or section 45, even after the service of a notice under section 46, the proper officer may proceed to assess the tax lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere suspicion cannot be sustained. Suspicion can only lead to investigation and unearthing material on which any conclusion can be based but on mere suspicion without further investigation no inference can be drawn and no conclusion can be arrived at . (v) Hon ble Delhi High Court vide its order dated 27-5-1998 in the case of Deepak Industries v STO Others (Delhi High Court) 38 DSTC 3-79; 73 (1998) DLT 718; 1998 (46) DRJ 208 held as follows :- To sum up, the principles governing a best judgment assessment are : (1) A best judgment assessment is not a wild assessment. Exclusion of arbitrariness and caprice is an obligation implicit in the power to assess to the best of judgment. (2) Assessment to the best of judgment must be founded upon some rational basis, relevant material and logic so that nexus between such basis or material and the figure of assessment arrived at can be objectively seen though some amount of guess work or estimation is to be allowed like a play in the joint. Though, the above case laws are pertaining to Sales Tax/Income Tax Acts, but the principles and concepts regarding the best judgment assessment formulated by the earlier jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work, the AA has never attempted to verify transactions/payments of anyone connected with the determined sales suppressions in issue, the same clearly points towards a conclusion that the estimates of sales suppression are pure guess work, and not based on any authenticate/dependable evidence and/details. The appellant has submitted a detailed statement and copies of the returns in Form GSTR-1 filed by it and asserted that the turnovers and taxes shown in this statement are actually scored outward supplies. Since, the returns in Form GSTR-1 filed by it are found to be not rejectable due to lack of any additional contra evidence, hence the turnover tax liability disclosed through these GSTR-1 returns, is to be confirmed as the real turnovers of the appellant. It is also an anomaly in the AA s determination, wherein the AA stated that he has added 50% to the declared turnover of the appellant. But, the thorough examination of the said GSTR-1 returns of the appellant, it is revealed that the AA s computations on this aspect even after adding 50% are observed to be erroneous. The common best judgement assessment, penalty and interest orders are passed in a single order calle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner of submission of monthly return. - (1) Every registered person other than a person referred to in section 14 of the Integrated Goods and Service Tax Act, 2017 or an Input Service Distributor or a non-resident taxable person or a person paying tax under Section 10 or Section 51 or, as the case may be, under Section 52 shall furnish a return specified under sub-section (1) of section 39 in FORM GSTR-3 electronically through the common portal either directly or through a Facilitation Centre notified by the Chief Com missioner. Thus, it is very clear that the best judgment assessment under Section 62 can be made only when the dealer fails to file the return specified in Section 39(1) of the Act, read with Rule 61(1) of the Rules, that is the return in Form GSTR-3. Nothing else. Thus, the next question to answer is whether the return in Form GSTR-3B can be treated as return in Form GSTR-3 within the meaning of Section 39(1) of the Act read with Rule 61(1) of the Rules. But, my enquiry is made easy by the judgment and orders of the Hon ble High Court of Judicature of Gujarat at Ahmadabad in R/special Civil Application No. 18962 of 2018, dated 24-6-2019. Thus, the issue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2018 of the Government of India is held to be illegal. Thus, the very Jurisdictional factor to exercise the power of the best judgment assessment under Section 62 is conspicuously absent herein. Thus, I have no hesitation to declare that the best judgment common assessment, penalty and interest orders impugned herein are without the jurisdiction and hence, I declare them as non est/void. (2) For another reason also, these best judgment orders cannot be sustained in law. The best judgment assessment under Section 62 can be made by taking into account all the relevant material which are already available and/or the material available which is gathered from the other sources. It is also clear from the settled judicial principles on best judgment assessment that the estimations involved in the best judgment assessment should not be based on mere surmises and/or conjectures. Though estimations are involved in the best judgment assessment, the same cannot be without any basis or with some basis. In the instant case, uniformly the suppressed turnovers for a particular month are estimated either mostly on the basis of returns of the outward supplies of the dealer in Form GSTR-1 of that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xhaustive reasons, while determining the tax as well as the penalty and passed tax/penalty orders through a single order, which is not legitimate. In this connection, the following case law is relevant and essential to explore, before analyzing the penalty justifiability aspect. THE HON BLE SRI JUSTICE RAMESH RANGANATHAN AND THE HON BLE SMT JUSTICE KONGARA VIJAYA LAKSHMI WRIT PETITION NO. 33777 OF 2018, dated 26-9-2018 [ORDER : Per the Hon ble Sri Justice Ramesh Ranganathan] Heard Sri P. Balaji Varma, Learned Counsel for the petitioner and Sri Shaik Jeelani Basha, Learned Special Standing Counsel for Commercial Taxes and, with their consent, the Writ Petition is disposed of at the stage of admission. The proceedings under challenge in this Writ Petition is the order passed by the second respondent on 20-8-2018, for the tax period March, 2018, directing the petitioner to pay tax and penal interest without issuing an assessment order under Section 61 of the Andhra Pradesh Goods and Services Tax Act, 2017 ( the APGST Act for brevity), and without issuing a show cause notice, as illegal, arbitrary and without jurisdiction. By the order, impugned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated to pay penalty at 15% under Section 74(5) of the Act. Section 74(5) of the Act merely enables the petitioner to pay penalty at 15% on his own accord, in which event the assessing authority cannot thereafter issue a notice seeking recovery of the balance 85% penalty (i.e. penalty equivalent to the tax specified in the notice). Whether penalty at 15% should be paid or not is for the assessee to decide. While he would, undoubtedly, run the risk of being subjected to penalty at 100% of the tax specified, the power conferred on the assessing authority to recover penalty, equivalent to the tax specified in the notice, is only after a notice is issued calling upon the petitioner to show cause why penalty should not be imposed on him. The impugned order, to the limited extent the petitioner was called upon to pay penalty at 15%, is set aside. As the validity of the order is not subjected to challenge in this Writ Petition on any other ground, it is wholly unnecessary for us to examine the said order on its merits. Suffice it, therefore, to set aside the impugned order to the limited extent the petitioner was called upon to pay penalty at 15%. The Writ Petition stands disposed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay to the Government the amount collected as tax under sub-section (3) of Section 52; (vii) takes or utilises Input Tax Credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made there under; (viii) fraudulently obtains refund of tax under this Act; (ix) takes or distributes input tax credit in contravention of Section 20, or the rules made there under; (x) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax due under this Act; Non-appealable decisions and orders. Penalty for certain offences. (xi) is liable to be registered under this Act but fails to obtain registration; (xii) furnishes any false information with regard to registration particulars, either at the time of applying for registration, or subsequently; (xiii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rupees or the tax due from such person, whichever is higher. The AA has invoked Section 122, on which he has supposedly relied and treated the appellant non submission of GSTR-3B as a means for fraudulent and wilful attempt for suppression of liable tax and levied 100% penalty. The basic discrepancy in the AA s interpretation is that it cannot be said that the appellant has acted deliberately to suppress the outward taxable supplies, because the appellant has filed GSTR-1 returns declaring the actual turnovers, hence prima facie no ground can be made for wilful suppression attribution. That means, though the AA has assigned appellant s action with a motive of wilful attempt for suppression of facts, but it is beyond any doubt and the AA also admitted that the appellant has filed GSTR-1 returns declaring the outward taxable supplies, hence attribution of wilful suppression by the appellant does not holds legit. To levy of penalty under Section 122, basically there must be suppression of facts, but in the instant case the appellant has not attempted for suppression of facts and duly declared his outward taxable supplies turnovers thorough GSTR-1 returns filed by them. Though, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
