Case Law Details
Golden Mesh Industries Vs ACST (Telangana High Court)
The Hon’ble Telangana High Court in case of M/S Golden Mesh Industries v. Assistant Commissioner State Tax [W.P. No. 7789 of 2021, dated March 31, 2021] set aside the best judgment assessment order passed for non-compliance with the request to file GSTR-3B return, by the Assistant Commissioner under Section 62 of the Central Goods and Services Tax Act, 2017 (“CGST Act”), being prima facie arbitrary and contrary to the provisions of the CGST Act. Remanded back the matter for fresh consideration and directed the Authority to pass a reasoned order w.r.t. levy of tax, interest and penalty, in accordance with the law.
Facts:
M/S Golden Mesh Industries (“the Petitioner”) did not file Form GSTR- 3B return for the month of November 2018, for which a notice dated January 29, 2019 was issued to the Petitioner by Assistant Commissioner State Tax (“the Respondent”), stating to file return within 15 days otherwise tax liability will be assessed under Section 62 of the CGST Act based on relevant material available with the Respondent along with interest and penalty.
The Petitioner did not file the return within aforesaid time limit, and subsequently the best judgment assessment order dated December 27, 2019 (“Impugned order”), was passed by the Respondent determining the tax liability, by multiplying by 3 times the monthly average SGST tax of ₹ 1,50,000/- and levying 100% penalty. Meanwhile, consequential attachment orders/garnishee orders were also issued by the Respondent and its officials.
Being aggrieved with the Impugned order passed by the Respondent, this petition has been filed.
Issue:
- Whether the method adopted by the Respondent by multiplying by 3 times the monthly average SGST tax to determine the tax liability is reasonable?
- Whether levy of 100% penalty levied is according to provisions of the CGST Act or not?
Held:
The Hon’ble Telangana High Court in W.P. No. 7789 of 2021 dated March 31, 2021 held as under:
- Observed that, there is no principle on which Impugned order passed by the Respondent by multiplying 3 times the monthly average SGST tax, and adopting it as a basis for assessing the Petitioner to tax for the month of November, 2018. Further observed that, 100% penalty has been levied on the Petitioner without indicating the provision of law.
- Held that, the Impugned order appears to be prima facie arbitrary and contrary to the provisions of the CGST Act.
- Set aside the Impugned order passed by the Respondent. Further, set aside the consequential attachment orders/garnishee orders issued by the Respondent and its officials.
- Remanded back the matter to the Respondent and directed the Respondent to issue notice to the Petitioner indicating the method of assessment under the best judgment assessment provision contained in Section 62 of the CGST Act and pass a reasoned order both with regard to levy of tax but also with regard to interest and penalty afresh within 8 weeks.
Relevant Provisions:
Section 62 of the GST Act:
“Assessment of non-filers of returns
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 liability of the said person to the best of his judgement taking 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) Where the registered person furnishes a valid return within thirty days of the service of the assessment order under sub-section (1), the said assessment order shall be deemed to have been withdrawn but the liability for payment of interest under sub- section (1) of section 50 or for payment of late fee under section 47 shall continue.”
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FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
This Writ Petition is filed challenging the Assessment Order dt.27-12-2019 passed by the 1st respondent under the Telangana GST Act, 2017 in relation to the petitioner for the tax period November, 2018.
2. It is not in dispute that petitioner did not file GSTR-3B return for the said month of November, 2018 and notice was issued on 29-01-2019 under Section 46 of the Telangana GST Act, 2017 warning the petitioner that if it did not file its return within 15 days, tax liability would be assessed under Section 62 of the Act based on the relevant material available with the 1st respondent along with interest and penalty.
3. Petitioner did not comply with the request to file GSTR-3B return, and best judgment under Section 62 of the Act was made through the impugned order by 1st respondent. In the impugned order, the 1st respondent states:
“4. Discussions and Findings: Your Average monthly SGST Tax is Rs.1,50,000/-. Therefore your turnover under SGST, CGST and IGST are arrived to the best of my judgment to be 3 times the monthly Average and the Tax for the above tax period i.e. SGST Rs.1,50,000/-, CGST Rs.1,50,000/- and IGST Rs.1,50,000/-.”
4. Learned counsel for petitioner contends that though the 1st respondent is entitled to do best judgment in the absence of filing of GSTR-3B, the method adopted by 1st respondent in multiplying by 3 times the monthly SGST tax of Rs.50,000/- to determine the tax liability is arbitrary and not based on any principle. He also contended that 100% penalty has been levied without indicating under which provision of the Act the same has been levied.
5. Sri Sai Krishna, learned Assistant Government Pleader attached to the Office of the learned Advocate General appearing for respondents is unable to point out what is the principle followed by the 1st respondent in doing best judgment assessment in the manner indicated above i.e. multiplying 3 times the monthly average SGST, and adopting it as a basis for assessing the petitioner to tax for the month of November, 2018. He also could not indicate under which provision of law 100% penalty is levied on the petitioner.
6. In this view of the matter, since the impugned order appears to be prima facie arbitrary and contrary to the provisions of the Telangana GST Act, 2017, the impugned order is set aside; the matter is remitted back to the 1st respondent for fresh consideration; the 1st respondent shall issue notice to the petitioner indicating the method of assessment under the best judgment assessment provision contained in Section 62 of the said Act; grant a personal hearing to the petitioner; and then pass a reasoned order both with regard to levy of tax but also with regard to interest and penalty afresh within eight (8) weeks from the date of receipt of a copy of this order. In view of setting aside of the impugned order dt.27-12-2019 passed by 1st respondent, consequential attachment orders/garnishee orders issued by respondent Nos.1 to 3 are also set aside.
7. The Writ Petition is allowed as above. No costs.
8. Consequently, miscellaneous petitions, pending if any, shall stand closed.
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