Sona Enterprises Vs State of AP (Andhra Pradesh High Court)
The petitioner, a registered person under the GST Act engaged in the business of trading ferrous waste and scrap, purchased scrap from Indian Railways and was liable to discharge GST under the reverse charge mechanism. An audit conducted for the periods 2017-18 and 2018-19 revealed that the petitioner had deposited the GST payable under reverse charge in cash into the electronic cash ledger but had not made the necessary debit entries appropriating the amount to the Government account. The audit also found that the petitioner had availed input tax credit (ITC) related to such payments without first debiting and appropriating the amounts to the Government. After the audit, the petitioner debited the amounts and appropriated them to the Government account. Nevertheless, proceedings under Section 74 of the GST Act were initiated.
The show cause notice alleged that mere deposit of cash into the electronic cash ledger did not amount to payment of GST, that ITC had been wrongly availed before appropriation of the tax to the Government account, that there was contravention of Section 16 of the CGST Act, and that the petitioner was liable to pay interest for the delay. The petitioner contended that GST had effectively been paid within time by depositing the amount into the electronic cash ledger and that the omission to debit the amount was due to ignorance of the GST system and an assumption based on practices followed under the earlier VAT regime. The petitioner argued that the lapse was, at most, a case of misreporting and not fraud, wilful misstatement, or suppression of facts, and therefore Section 74 could not be invoked.
