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W.P.No.25826/2023

IN THE HIGH COURT OF ANDHRA PRADESH

***

+W.P.No.25826 of 2023

Between:

# M/s. Sriba Nirman Company,

Rep. by Shri Chaparala Venkata Naga Murali Krishna,

Its Managing Partner, D.No.78-14-20,

Syamalanagar, Rajahmundry,

Andhra Pradesh – 533 103

… Petitioner

AND

$ 1. The Commissioner (Appeals), Guntur, Central Tax & Customs, Sub-

office @ Visakhapatnam, 4

th

Floor, Customs House, Prt Area,

Visakhapatnam.

2. The Joint Commissioner of Cntral Tax, Visakhapatnam Central GST

Commissionerate, GST Bhavan, Port Area, Visakhapatnam.

3. The Joint Cirector, Directorate General of GST Intelligence,

Visakhapatnam Zonal Unit, Door NO.28-14-17, Suryabagh, Beside

Melody Theatre, Visakhapatnam.

4. The Assistant Commissioner (ST), Aryapuram Circle,

Rajahmahendravaram.

... Respondents

Date of Judgment pronounced on : 29-01-2025

HON’BLE SRI JUSTICE R. RAGHUNANDAN RAO

And

HON’BLE SRI JUSTICE HARINATH. N

1. Whether Reporters of Local newspapers : Yes/No

May be allowed to see the judgments?

2. Whether the copies of judgment may be marked : Yes/No

to Law Reporters/Journals:

3. Whether The Lordship wishes to see the fair copy : Yes/No

Of the Judgment?

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W.P.No.25826/2023

*IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI

* HON’BLE SRI JUSTICE R. RAGHUNANDAN RAO

And

HON’BLE SRI JUSTICE HARINATH. N

+ W.P.No.25826 of 2023

% Dated:29-01-2025

Between:

# M/s. Sriba Nirman Company,

Rep. by Shri Chaparala Venkata Naga Murali Krishna,

Its Managing Partner, D.No.78-14-20,

Syamalanagar, Rajahmundry,

Andhra Pradesh – 533 103

… Petitioner

AND

$ 1. The Commissioner (Appeals), Guntur, Central Tax & Customs, Sub-

office @ Visakhapatnam, 4

th

Floor, Customs House, Prt Area,

Visakhapatnam.

2. The Joint Commissioner of Cntral Tax, Visakhapatnam Central GST

Commissionerate, GST Bhavan, Port Area, Visakhapatnam.

3. The Joint Cirector, Directorate General of GST Intelligence,

Visakhapatnam Zonal Unit, Door NO.28-14-17, Suryabagh, Beside

Melody Theatre, Visakhapatnam.

4. The Assistant Commissioner (ST), Aryapuram Circle,

Rajahmahendravaram.

... Respondents

! Counsel for Petitioner : Sri V. Raghu Ram, Sr. Counsel

For Sri Anil Kumar Bezawada

^Counsel for Respondents 1 to 3 : Smt. Santi Chandra S.C.

^Counsel for Respondent No.4 : G.P. for Commercial Tax

<GIST :

>HEAD NOTE:

? Cases referred:

1. 2012 (26) STR 3 (Kar)

2. 2017 (7) GSTL 142 (AP)

3. 2013 (288) E.L.T. 161 (SC)

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W.P.No.25826/2023

APHC010498482023

IN THE HIGH COURT OF ANDHRA PRADESH

AT AMARAVATI

(Special Original Jurisdiction)

[3488]

WEDNESDAY, THE TWENTY NINTH DAY OF JANUARY

TWO THOUSAND AND TWENTY FIVE

PRESENT

THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO

THE HONOURABLE SRI JUSTICE HARINATH.N

WRIT PETITION NO: 25826/2023

Between:

Sriba Nirman Company ...PETITIONER

AND

The Commissioner Appeals and Others ...RESPONDENT(S)

Counsel for the Petitioner:

1. ANIL KUMAR BEZAWADA

Counsel for the Respondent(S):

1. SANTHI CHANDRA (Jr. Standing Counsel for CBIC)

2. GP FOR COMMERCIAL TAX

3.

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W.P.No.25826/2023

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The Court made the following Order:

(per Hon’ble Sri Justice R. Raghunandan Rao)

Heard Sri V. Raghu Ram, learned Senior Counsel representing Sri Anil

Bezawada, learned counsel appearing for the petitioner, Smt. Santi Chandra,

learned Standing Counsel appearing for respondents 1 to 3 and learned

Government Pleader for Commercial Tax appearing for the 4

th

respondent.

2. The facts in the present case, as stated by the petitioner, are as

follows:

a) The petitioner is a partnership firm, established in January 2017

and carrying on the business of a works contractor, which is executing

infrastructure based Engineering Procurement Construction contracts. The

petitioner registered itself under the GST Act. The primary and main business

of the petitioner, for the relevant period from July, 2017 to March 2018, was

the execution of works, as a sub-contractor, for one M/s. Vijay Nirman

Company Ltd.

b) The petitioner raised nine invoices with an aggregate value of

Rs.20,92,02,422/-. These invoices, were inclusive of GST of Rs.3,19,12,234/-.

The said invoices were raised in the month of March, 2018.

c) The petitioner, though paid certain amounts, by M/s. Vijay Nirman

Company Ltd., was unable to pay GST as the payments received from M/s.

Vijay Nirman Company Ltd., were not sufficient even for executing the works

awarded by it. As the GST portal, does not accept filing of returns, unless

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accompanied by payment of tax, the petitioner was unable to file the GSTR-

3B returns within the statutory time limit.

d) On 31.07.2018, the principal place of business of the petitioner

was inspected, by the DGGI officers, on the authorization given by the Joint

Director, DGGI, Visakhapatnam Zonal Unit, Visakhapatnam. In the course of

the said inspection, the officers had seized certain documents and records

and had also recorded the statement of the Managing Partner of the

petitioner. At that stage, the petitioner, having realized its mistake of non-filing

of GST returns and non-payment of GST, had taken steps to deposit

necessary tax. The petitioner, in four installments, between 31.07.2018 to

29.09.2018, had deposited a sum of Rs.3,36,51,468/- and also filed all the

pending GSTR-3B’s for the financial year 2017-2018 by 29.09.2018.

e) After these payments had been made and after the returns had

been filed, the 3

rd

respondent issued a show cause notice, dated 21.08.2020,

calling upon the petitioner to pay tax liability, (which had already been paid, as

shown above) interest and penalty. Thereafter, the 3

rd

respondent again

issued a show cause notice, dated 03.09.2020, to show cause as to why a tax

amount of Rs.3,19,12,233/- payable under the CGST, SGST and IGST Acts,

should not be demanded; the payments made by the petitioner to the tune of

Rs.3,19,12,233/- earlier, should not be adjusted against such a demand;

interest at the applicable rates, under Section 50 of the CGST and

corresponding Sections of CGST, SGST and IGST Acts, should not be

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W.P.No.25826/2023

demanded; penalty equivalent to the output tax mentioned above, should not

be imposed under Section 122(1) read with Section 74(1) of the CGST Act,

2017 for contravention of CGST, SGST and IGST Acts. Penalty under Section

122 (2) and (b) of the CGST Act, 2017 and corresponding Sections of CGST,

SGST and IGST Acts; penalty under Section 122(3) (d) of the CGST Act and

corresponding Sections of CGST, SGST and IGST Acts; penalty under

Section 125 of the CGST Act, 2017 and corresponding Sections of CGST,

SGST and IGST Acts; and late fee under Section 47 of the CGST Act, 2017

and corresponding Sections of CGST, SGST and IGST Acts.

f) The petitioner filed a detailed reply on 23.09.2021 to these show

cause notices and also availed a personal hearing, on 23.09.2021 itself. The

2

nd

respondent confirmed the demand, raised in the show cause notice, by

way of an order, dated 24.12.2021. Aggrieved by the same, the petitioner had

approached the 1

st

respondent, by way of an appeal, on 05.05.2022. The 1

st

respondent, after considering the submissions made by the petitioner, upheld

the penalty imposed under the original order. Thereafter, the 4

th

respondent

issued a notice dated 19.08.2023, demanding payment of Rs.3,20,72,233/-

failing which recovery action would be initiated under Section 79 of the CGST

Act, 2017.

3. The petitioner being aggrieved by these proceedings, has

approached this Court challenging the appellate order of the 1

st

respondent,

dated 26.07.2022, upholding penalty under Section 74 of the GST Act, along

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W.P.No.25826/2023

with other penalties imposed in the original order of the 2

nd

respondent dated

24.12.2021.

4. Sri V. Raghuram, learned Senior Counsel representing Sri Anil

Bezawada, learned counsel appearing for the petitioner, assails the impugned

orders, essentially on three grounds:

a) The provisions of Section 74 (5) of the GST Act, 2017 could not

have been invoked merely on the ground that the petitioner had not paid

pending GST taxes till the visit of the tax authorities on 31.07.2018. Such non-

payment cannot be treated to have been done by way of fraud or that there

was wilful misstatement or suppression of facts to evade tax.

b) Section 74 of the GST Act can be invoked only where payment of

tax had not been made before issuance of show cause notice under Section

74. In the present case, payments of all taxes had been completed by

September 2018 itself whereas the show cause notice was issued on

03.09.2020, which is almost two years after the payment of the tax. As such,

the necessary jurisdictional facts, to invoke Section 74 are not available.

c) The last date for filing of annual returns and payment of any tax

dues would actually be 07.02.2022, by virtue of Section 44 of the CGST Act,

and the relevant circulars and proceedings. The question of non-payment of

taxes would arise only after that date.

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5. The learned Government Pleader for Commercial Tax contends

that none of the aforesaid contentions can be raised, in as much as, the

factual matrix, necessary for raising such contentions, is absent in the present

case. The learned Government Pleader for Commercial Tax would contend

that Sections 37 to 39 of the CGST Act, read with necessary Rules, requires

the registered dealers under the GST regime, to submit returns on a monthly

basis, which is on or before the 20

th

day of the month succeeding the said tax

period. The contention of the petitioner that non-filing of monthly returns

cannot be treated as suppression of facts, till the due date of the filing of the

annual returns, is not acceptable, in as much as, the non-filing of monthly

returns and non-payment of tax along with such monthly returns would

amount to contravention of the provisions of Section 37 of the CGST Act and

consequently, would also amount to suppression of fact and evasion of tax.

Consideration of the Court:

6. Section 37 of the CGST Act, which is in pari materia with the

corresponding provision under the APGST and IGST Act, read with Sections

38 and 39, stipulates that every registered person, is required to furnish a

return electronically of inward and outward supplies of goods and services or

both, input tax credit available, tax payable, tax paid, and such other

particulars, in the prescribed format, for every calendar month or part thereof,

within 10 days of the expiry of the said month. Section 44 also requires an

annual return to be filed by every registered person, within such time and

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W.P.No.25826/2023

format as may be prescribed. The prescribed time, for the purpose of this

case, would be till 07.02.2020.

7. In the event of non-filing of returns and non-payment of tax, the

CGST Act provides for certain penalties. These penalties are under Section

73, 74, 122 of the Act. Apart from this, interest can be levied for delayed

payment, under Section 50 of the CGST Act.

8. Sri V. Raghuram, learned Senior Counsel, contends that the

annual returns had been filed, by the petitioner, for the relevant period, within

the time stipulated under Section 44 of the CGST Act, and that the necessary

tax had also been paid by the said date. He would contend that such filing of

return and payment of tax is sufficient compliance of the requirement of CGST

Act and as such the question of invoking the penal provisions of either Section

73 or Section 74 or Section 122 of the CGST Act would not arise. He would

further submit that as far as the interest payable under Section 50 of the

CGST Act is concerned, necessary interest of Rs.25,49,481/- was paid, on

20.07.2022, by way of debiting the same in the electronic cash ledger of the

petitioner.

9. There is no dispute between the petitioner and the tax authorities

that a sum of Rs.3,19,12,233/- is the tax liability of the petitioner under the

CGST, SGST and IGST Acts. There is also no dispute that this amount had

been paid. The petitioner also does not appear to dispute the fact that a sum

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W.P.No.25826/2023

of Rs.25,49,481/- is payable in terms of interest payable under Section 50 of

the Act and that the same has been paid.

10. The primary dispute is on the question of whether penalty under

Section 74(1) of the CGST Act can be levied, along with the other penalties,

on the petitioner.

11. Section 74 of the CGST Act, reads as follows:

74. Determination of tax not paid or short paid or

erroneously refunded or input tax credit wrongly

availed or utilized by reason of fraud or any wilful-

misstatement or suppression of facts.— (1) Where it

appears to the proper officer that any tax has not been paid

or short paid or erroneously refunded or where input tax

credit has been wrongly availed or utilized by reason of

fraud, or any wilful-misstatement or suppression of facts to

evade tax, he shall serve notice on the person chargeable

with tax which has not been so paid or which has been so

short paid or to whom the refund has erroneously been

made, or who has wrongly availed or utilized input tax

credit, requiring him to show cause as to why he should not

pay the amount specified in the notice along with interest

payable thereon under section 50 and a penalty equivalent

to the tax specified in the notice.

(2) The proper officer shall issue the notice under sub-

section (1) at least six months prior to the time limit

specified in sub-section (10) for issuance of order.

(3) Where a notice has been issued for any period under

sub-section (1), the proper officer may serve a statement,

containing the details of tax not paid or short paid or

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W.P.No.25826/2023

erroneously refunded or input tax credit wrongly availed or

utilized for such periods other than those covered under

sub-section (1), on the person chargeable with tax.

(4) The service of statement under sub-section (3) shall be

deemed to be service of notice under sub-section (1) of

section 73, subject to the condition that the grounds relied

upon in the said statement, except the ground of fraud, or

any wilful-misstatement or suppression of facts to evade

tax, for periods other than those covered under sub-section

(1) are the same as are mentioned in the earlier notice.

(5) The person chargeable with tax may, before service of

notice under sub-section (1), pay the amount of tax along

with interest payable under section 50 and a penalty

equivalent to fifteen per cent. of such tax on the basis of

his own ascertainment of such tax or the tax as

ascertained by the proper officer and inform the proper

officer in writing of such payment.

(6) The proper officer, on receipt of such information, shall

not serve any notice under sub-section (1), in respect of

the tax so paid or any penalty payable under the provisions

of this Act or the rules made thereunder.

(7) Where the proper officer is of the opinion that the

amount paid under sub-section (5) falls short of the amount

actually payable, he shall proceed to issue the notice as

provided for in sub-section (1) in respect of such amount

which falls short of the amount actually payable.

(8) Where any person chargeable with tax under sub-

section (1) pays the said tax along with interest payable

under section 50 and a penalty equivalent to twenty-five

percent of such tax within thirty days of issue of the notice,

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W.P.No.25826/2023

all proceedings in respect of the said notice shall be

deemed to be concluded.

(9) The proper officer shall, after considering the

representation, if any, made by the person chargeable with

tax, determine the amount of tax, interest and penalty due

from such person and issue an order.

(10) The proper officer shall issue the order under sub-

section (9) within a period of five years from the due date

for furnishing of annual return for the financial year to

which the tax not paid or short paid or input tax credit

wrongly availed or utilized relates to or within five years

from the date of erroneous refund.

(11) Where any person served with an order issued under

sub-section (9) pays the tax along with interest payable

thereon under section 50 and a penalty equivalent to fifty

per cent. of such tax within thirty days of communication of

the order, all proceedings in respect of the said notice shall

be deemed to be concluded.

Explanation 1.—For the purposes of section 73 and this

section,—

(i) the expression ―all proceedings in respect of the said

notice‖ shall not include proceedings under section 132;

(ii) where the notice under the same proceedings is issued

to the main person liable to pay tax and some other

persons, and such proceedings against the main person

have been concluded under section 73 or section 74, the

proceedings against all the persons liable to pay penalty

under sections 122, 125, 129 and 130 are deemed to be

concluded.

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Explanation 2.––For the purposes of this Act, the

expression ―suppression shall mean non-declaration of

facts or information which a taxable person is required to

declare in the return, statement, report or any other

document furnished under this Act or the rules made

thereunder, or failure to furnish any information on being

asked for, in writing, by the proper officer.

12. The provisions of Section 73 (2) to (11) may not be relevant for

the purposes of this case. However, Section 73(1) has to be considered.

73. Determination of tax not paid or short paid or

erroneously refunded or input tax credit wrongly

availed or utilized for any reason other than fraud or

any wilful-misstatement or suppression of facts.—

(1) Where it appears to the proper officer that any tax has

not been paid or short paid or erroneously refunded, or

where input tax credit has been wrongly availed or utilized

for any reason, other than the reason of fraud or any wilful-

misstatement or suppression of facts to evade tax, he shall

serve notice on the person chargeable with tax which has

not been so paid or which has been so short paid or to

whom the refund has erroneously been made, or who has

wrongly availed or utilized input tax credit, requiring him to

show cause as to why he should not pay the amount

specified in the notice along with interest payable thereon

under section 50 and a penalty leviable under the

provisions of this Act or the rules made thereunder.

13. Under Section 74 (1) of the Act, a penalty, equivalent to the tax, is

leviable, where a tax has not been paid or short paid or erroneously refunded,

or where input tax credit has been wrongly availed or utilized ( for purposes of

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W.P.No.25826/2023

brevity the said scenario is being referred to as the ― non payment of tax‖).

Similarly, under Section 73 (1) read with Section 73 (9) a penalty, equivalent

to 10% of the tax not paid or Rs.10,000/-, whichever is higher, can be levied.

14. The differentiation, between invocation of Section 73 and the

invocation of section 74, is on the basis of the circumstances in which such

tax has not been paid. Section 74 is to be invoked where non-payment of tax

occurs on account of fraud, wilful misstatement or suppression of facts for the

purpose of evading tax. Where non-payment or short payment is for reasons

other than the aforesaid reasons set out under Section 74, the provisions of

Section 73 of the GST Act would be applicable.

15. The learned Senior Counsel relied upon the judgments in CCE

vs. Adecco Flexione Workforce Solutions Ltd.,

1

; Commissioner of

Central Excise, Viskahaptanam vs. Tirupathi Fuels Pvt. Ltd.,

2

; Uniworth

Textiles Ltd., vs. CCE

3

; and CBIC Instruction 05/2023, dated 13.12.2023,

to explain the scope of Section 74 of the Act.

16. The learned Senior Counsel relied upon paragraph-3 of CCE vs.

Adecco Flexione Workforce Solutions Ltd., which reads as follows:

3. Unfortunately, the assessing authority as well as the

appellate authority, seem to think, if an assessee does not

pay the tax within the stipulated time and regularly pays

tax after the due date with interest. It is something which is

1

2012 (26) S.T.R. 3 (Kar)

2

2017 (7) GSTL 142 (AP)

3

2013 (288) E.L.T. 161 (S.C)

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not pardonable in law. Though the law does not say so,

authorities working under the law seem to think otherwise

and thus they are wasting that valuable time in proceeding

against persons who are paying service tax with interest

promptly. They are paid salary to act in accordance with

law and to initiate proceedings against defaulters who

have not paid service tax and interest in spite of service of

notice calling upon them to make payment and certainly

not to harass and initiate proceedings against persons

who are paying tax with interest for delayed payment. It is

high time, the authorities will change their attitude towards

these tax payers, understanding the object with which this

enactment is passed and also keep in mind the express

provision as contained in sub-sec. (3) of Sec. 73. The

Parliament has expressly stated that against persons who

have paid tax with interest, no notice shall be served. If

notices are issued contrary to the said Section, the person

to be punished is the person who has issued notice and

not the person to whom it is issued. We take that, in

ignorance of law, the authorities are indulging in the

extravaganza and wasting their precious time and also the

time of the Tribunal and this Court. It is high time that the

authorities shall issue appropriate directions to see that

such tax payers are not harassed. If such instances are

noticed by this Court hereafter, certainly it will be a case

for taking proper action against those law breakers.‖

17. However, this is a case where the assessee had paid both

service tax and interest for delayed payments before the issue of a show

cause notice under the Act. The Court relying upon the provisions of sub-

section (3) of Section 73 of the Finance Act, 1994, which stipulates that no

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W.P.No.25826/2023

notice can be issued after the payment of service tax and interest, had made

the afore said observations.

18. The learned Senior Counsel relied upon Commissioner of

Central Excise, Visakhapatnam vs. Tirupathi Fuels Pvt. Ltd. In this case,

the assessee, after the authorities had found that the assessee had not filed

the returns or paid the tax, had sought to levy penalty on the assessee.

However, the assessee paid the service tax and interest before any show

cause notice could be issued. The argument before the Hon’ble High Court

was that the penalty could not have been levied, in view of the fact that

Section 78 prohibits initiation of any penalty proceedings, if tax and interest

had already been paid. The Hon’ble High Court, in terms of the specific

language of Section 73(3) of the Finance Act, 2015, had held in favour of the

assessee. However, the language of Section 73(3) stipulated that no penalty

could be levied if the service tax payable, had been paid by the assessee on

his own verification or on the basis of tax ascertained by a Central Excise

Officer. In this case, the statute itself stipulated that the assessee can escape

payment of penalty, if he pays the unpaid tax, even after the authorities find

out about the non-payment of tax, if such payment is made before the notice

is issued. The language in Section 73 and 74 of the GST Act does not provide

for any such situation.

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19. The learned senior counsel relies upon Uniworth Textiles Ltd.,

vs. CCE. More specifically, paragraph-12 of the said judgment, which reads

as follows:

12. We have heard both sides, Mr. R.P. Bhatt, learned

Senior Counsel, appearing on behalf of the appellant, and Mr.

Mukul Gupta, learned Senior Counsel appearing on behalf of

the Revenue. We are not convinced by the reasoning of the

Tribunal. The conclusion that mere non-payment of duties is

equivalent to collusion or wilful misstatement or suppression of

facts is, in our opinion, untenable. If that were to be true, we fail

to understand which form of non-payment would amount to

ordinary default? Construing mere non-payment as any of the

three categories contemplated by the proviso would leave no

situation for which a limitation period of six months may apply.

In our opinion, the main body of the section, in fact,

contemplates ordinary default in payment of duties and leaves

cases of collusion or wilful misstatement or suppression of

facts, a smaller, specific and more serious niche, to the proviso.

Therefore, something more must be shown to construe the acts

of the appellant as fit for the applicability of the proviso.

20. In this case, the assessee, had procured furnace oil for running

the captive power plant of a sister unit, which was supplying electric energy to

the assessee. The purchase of furnace oil was exempted from payment of

customs duty on the basis of a notification which stated that customs duty was

exempted on goods, which are used for manufacture etc., of goods, which are

exported. At one stage, on account of certain difficulties, the sister concern

was unable to supply electric power and the assessee obtained such power

from another unit by supplying furnace oil to the said unit. The revenue took

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W.P.No.25826/2023

the view that the claim of exemption from customs duty of such furnace oil

was not permissible and sought to penalize the assessee for such purpose. In

that situation, the Hon’ble Supreme Court made the aforesaid observations.

21. Apart from the judgments, cited by the learned Senior Counsel, it

may be appropriate to consider the scope of section 74, on the plain language

of the provision. At the cost of repetition, the relevant part of section 74(1)

reads as follows:

Where it appears to the proper officer that any tax has

not been paid or short paid or erroneously refunded or

where input tax credit has been wrongly availed or utilized

by reason of fraud, or any wilful-misstatement or

suppression of facts to evade tax,

22. Non-payment of tax, would attract penalties, under Section 74 (1),

in three circumstances. The first two circumstances are fraud and wilful mis-

statement. Both these require an intention to evade tax by unfair or illegal

means. The third circumstance is suppression of fact, which is also defined, in

Explanation-2, as non-declaration of relevant information. In view of the

collocation of the terms, before this term, and in view of the requirement,

under the two earlier terms of mens rea, the term ―suppression of facts‖ would

have to be read as wilful or deliberate suppression of fact, for evading tax. The

term ―evade‖ puts this issue beyond controversy, as this term means that the

suppression must be for the purpose of evasion, which clearly requires

intention and mens rea.

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23. The learned Senior Counsel relied upon the instructions of CBIC,

which came to be issued on the basis of the directions of the Hon’ble

Supreme Court in the case of Northern Operating Systems Private Limited

(Nos) Instruction No.5/2023-GST (F.No.CBIC-20004/3/2023-GST), Dated

13.12.2023, while considering Section 74(1) of the CGST Act, stated as

follows:

3.3. From the perusal of wording of Section 74(1) of

CGST Act, it is evident that Section 74(1) can be invoked

only in cases where there is a fraud or wilful misstatement

or suppression of facts to evade tax on the part of the said

taxpayer. Section 74(1) cannot be invoked merely on

account of non-payment of GST, without specific element

of fraud or wilful misstatement or suppression of facts to

evade tax. Therefore only in the cases where the

investigation indicates that there is material evidence of

fraud or wilful misstatement or suppression of fact to

evade tax on the part of the taxpayer, provisions of

Section 74(1) of CGST Act may be invoked for issuance of

show cause notice, and such evidence should also be

made a part of the show cause notice.‖

24. There can be no quarrel with this view relating to Section 74(1) of

CGST Act. Every non-payment of tax cannot be treated as evasion of tax by

way of fraud, wilful misstatement or suppression of facts. Every case needs to

be looked into for ascertaining whether necessary evidence of fraud, wilful

misstatement or suppression of fact, for the purpose of evading tax, is

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W.P.No.25826/2023

available in the record and whether such material has been demonstrated

before the authority.

25. Though Section 74 provides for a penalty of 100% of the tax not

paid, the said provision itself provides for reduction of such liability. This

liability can be reduced, by the tax payer, if he accepts that there was non-

payment of tax, on account of any of the three circumstances set out In

section 74 (1), and voluntarily pays tax, interest and penalty, as per the

provisions of Section 74. The following table sets out the payments that need

to be made:

Section Point of time of

payment

Tax and penalty

Section 74(5) Before service of notice

Tax along with interest under

Section 50 and penalty equivalent

to 15% of such tax.

Section 74(8) Within 30 days of issue

of notice

Tax along with interest under

Section 50 and penalty equivalent

to 25% of such tax

Section 74(11) Within 30 days of

communication of the

order under Section

74(9)

Tax along with interest under

Section 50 and penalty equivalent

to 50% of such tax

26. The scheme, under section 74, appears to be in the nature of a

permanent amnesty/settlement/compunding scheme, where the tax payer,

liable to pay penalty under Section 74, is given an opportunity to voluntarily

accept wrong doing and reduce the penalty that would be payable. In such

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circumstances, the contention of the Petitioner, that action can not be taken,

under section 74, against him may have force. However, this issue is not

being decided as the petitioner does not meet the requirements of section 74

(5). This provision, read with Section 74(6), as extracted above, sets out that

the proper officer cannot issue a notice, under sub-section (1) of Section 74,

where the person chargeable with tax, has already paid the tax and the

interest payable under Section 50 and penalty equivalent to 15% of such tax

even before the issuance of notice. While the petitioner had paid the tax prior

to the issuance of notice under Section 74(1) of the CGST Act, the interest

payable under section 50, was paid after the notice had been issued. Further

penalty of 15% was not paid.

27. In that context, the contention of the learned Senior Counsel that

a notice under Section 74 could not have been issued as the tax had been

paid prior to the issuance of the notice would have to be rejected.

28. The next contention of the learned Senior Counsel was that, non-

filing of tax returns and non-payment of tax, could not have been invoked

against the petitioner, as the petitioner had time, up to 07.02.2020, to file the

annual returns under Section 44. This contention, however, side steps the

requirement to file monthly returns along with payment of tax under Section 37

to 39 of CGST Act. Section 39 of the Act, read with Rule 61(1) of the CGST

Rules, requires registered persons, like the petitioner, to file returns, in form

GST3B, for each month, on or before the twentieth day of the month

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succeeding such month. Rule 61 (2) of the CGST Rules requires the person,

filing GSTR-3B returns, to clear the taxes due under such returns. The

affidavit filed, in support of the writ petition, by the managing partner of the

petitioner, himself states that the GSTR-3B returns had not been filed, though

they needed to be filed. In the light of these pleadings, the contention of the

learned Senior Counsel would have to be rejected. It must be held that non-

filing of monthly returns and non-payment of GST along with such monthly

returns, subject to the requirement of making out a case of fraud, wilful

misstatement or suppression of fact, would be sufficient for invoking Section

74 of the CGST Act.

29. In the present case, there has been a failure, on the part of the

petitioner, in filing the monthly returns and making payment of tax under the

said monthly returns. This may not amount to fraud or misstatement.

Explanation-2 to Section 74 states that suppression, for the purpose of the

Act, would mean non-declaration of facts or information which is required to

be declared in the returns, statement or report or any other document which

needs to be furnished under the Act. To that extent, non-filing of the monthly

return would amount to suppression of fact. However, the requirement under

Section 74 is not fulfilled on mere suppression of fact. The said suppression of

fact would have to be wilful suppression of facts.

30. The petitioner herein has neither filed the monthly returns nor

made the necessary payments of tax. The defense of the petitioner is that his

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sole client, viz., M/s. Vijay Nirman Company had not paid its dues, due to

which the petitioner could not remit the necessary taxes along with returns.

The appellate authority held that the petitioner had been paid certain amounts

by his main client M/s. Vijay Nirman Company and as such, there was no

impediment for the petitioner to remit the necessary taxes. On this basis, the

appellate authority held that there was wilful suppression and upheld the

penalty. In such a situation it is difficult to accept the contention, of the

petitioner, that there was no wilful intention to suppress facts or the turnover of

the petitioner and the requirement to pay tax. The other penalties levied

against the petitioner are natural corollaries of the above finding and do not

require any further consideration.

31. Consequently, the writ petition fails and the same is dismissed.

There shall be no order as to costs. As a sequel, pending miscellaneous

petitions, if any shall stand closed.

_______________________

R RAGHUNANDAN RAO, J

______________

HARINATH.N, J

Js.

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THE HON’ABLE SRI JUSTICE R RAGHUNANDAN RAO

AND

THE HON’BLE SRI JUSTICE HARINATH. N

WRIT PETITION No.25826 of 2023

(per Hon’ble Sri Justice R Raghunandan Rao)

29

th

January, 2025

Js