Nandi Pvc Products Pvt Ltd VS Union Of India

This joint order addresses the consolidation of two writ petitions, W.P. No. 7192 of 2021 being the principal case considered herein, while both petitions share the same underlying issue. These petitions have been brought under Article 226 of the Constitution of India, seeking judicial intervention to rectify what the petitioners perceive as legal infractions in the actions of the respondents.

At the forefront of the relief sought is a plea to invalidate Assessment Order OC No. 80/2019, dated 05.02.2019, as issued by the third respondent. This specific order, as delineated within the petition, has raised concerns due to the imposition of a penalty totaling Rs.1,37,31,305/-. The petitioners contend that this penalty imposition lacks legal foundation, alleging arbitrariness and a violation of pertinent provisions enshrined within the Central Goods and Services Tax Act, 2017, and the Andhra Pradesh State Goods and Services Tax Act, 2017. Furthermore, the petitioners argue that the penalty contravenes constitutional principles outlined in Articles 14 and 265 of the Constitution of India.

Central to this legal dispute is the identity of the petitioner—a manufacturing entity specializing in Lateral Pipes & Drippers—registered under the Central Goods and Services Tax Act, 2017 (CGST). Operating in compliance with statutory requirements, the petitioner diligently submits monthly returns in the prescribed formats of Form GSTR 1 and GSTR 3B, thereby fulfilling its tax obligations since the year 2017.

The petitioners’ diligent adherence to tax regulations underscores their commitment to legal compliance, thereby elevating the gravity of their legal grievances against the actions of the respondents. Thus, these writ petitions encapsulate broader themes of legal accountability, procedural fairness, and the paramount importance of upholding constitutional and statutory provisions within the domain of tax administration.

The crux of the legal dispute arises from an Assessment Order issued under Section 62 of the Central Goods and Services Tax (CGST) Act, specifically delineated in Form GSTR ASMT-13, dated 05.02.2019, wherein the petitioner is mandated to remit taxes alongside interest and penalties. The details of the assessment are comprehensive, indicating liabilities amounting to Rs.16,05,007/- for IGST, Rs.60,63,149/- for CGST, and Rs.60,63,149/- for SG/UT GST, spanning the tax period from September 2017 to December 2018. Additionally, the assessment entails interest charges totaling Rs.2,49,712/- for IGST, Rs.8,89,101/- for CGST, and Rs.8,89,101/- for SG/UT GST, as stipulated under Section 50 of the CGST Act/ AP GST Act. Furthermore, late fees amounting to Rs.1,40,000/-, penalty charges of Rs.1,21,26,298/- under CGST and SG/UT GST, and Rs.16,05,007/- under IGST, are levied pursuant to Section 122(2)(a) of the CGST Act/AP GST Act.

Allegations surface regarding the expeditious issuance of the Assessment Order, dated 05.02.2019, without adhering to the statutory waiting period of 15 days post the issuance of GSTR-3A, as mandated by Section 46. Additionally, the petitioner contends non-receipt of the letter associated with GSTR-3B, dated 04.02.2020. The affidavit further underscores the procedural irregularity in imposing penalties under Section 122 of the CGST Act, positing that the prescribed procedures outlined in Sections 73 or 74 necessitate adherence, including the issuance of a show cause notice. Given these discrepancies and the perceived deviation from established legal procedures, the petitioner, through their learned counsel, implores the court to set aside the impugned order.

The petitioner’s narrative unveils a tangled web of procedural lapses and legal discrepancies, compelling a thorough examination of the statutory provisions and the actions of the respondents. Central to the petitioner’s plea is the assertion of their rights under the CGST Act and the principles of natural justice, urging the court to rectify the purported deviations and uphold the rule of law.

The Commissioner of Central GST, Tirupati, submitted a counter to dispute the assertions made in the affidavit supporting the Writ Petition. The counter contends that the petitioner has not fulfilled their GST liabilities and has failed to submit monthly returns within the stipulated deadlines. Despite filing GSTR-I for certain periods, the petitioner allegedly neglected to file corresponding GSTR-3B returns. This omission, according to the counter, has dual repercussions: firstly, no revenue is remitted to the government, and secondly, recipients of the petitioner’s invoices might have availed GST credit despite the petitioner’s failure to remit GST. Consequently, the failure to file GSTR-3B returns is deemed a violation of Sections 9, 37, and 49 of the CGST Act, following amendments to Rule 61 of the CGST Rules.

Paragraph 7 of the counter delineates the petitioner’s GSTR-3B filing status, highlighting the department’s issuance of notices under GSTR-3A due to the petitioner’s non-response. Subsequently, an Assessment Order dated 05.02.2019 was issued, demanding payment of Rs.1,37,31,998/- towards tax and Rs.20,27,914/- towards interest, coupled with late fees and penalties equivalent to the tax amount. The counter asserts that this assessment order is appealable, as explicitly mentioned in its preamble. Since the petitioner neither filed an appeal nor obtained any orders, the department initiated recovery proceedings by issuing notices.

The counter further contends that the petitioner selectively filed GSTR-I returns for certain periods while failing to submit GSTR-3B returns, thereby withholding statutory taxes collected from customers. The allegation that the petitioner did not receive GSTR-3A returns is deemed an afterthought raised after a two-year lapse. The counter justifies the imposition of penalties, asserting that Section 62 of the CGST Act does not preclude penalty imposition for petitioner contraventions. Additionally, the prescribed format of GSTR ASMT-13 includes a column for penalties, affirming that penalties can be imposed under Section 122 of the CGST Act when issuing assessment orders under Section 62.

Regarding Article 265 of the Constitution of India, the counter argues that statutorily notified tax liabilities were imposed due to the petitioner’s failure to comply with CGST Act provisions and rules. The petitioner’s alleged retention of taxes collected from customers without remitting them to the government prompted the department’s actions under the CGST Act. Thus, the counter concludes that the Writ Petition lacks merit and should be dismissed.

In response to the counter filed by the Commissioner of Central GST, Tirupati, a rejoinder was submitted, disputing the assertions made therein. The rejoinder contends that there is no evidence on record to indicate that the respondents served a copy of GSTR-3B, dated 04.02.2019, which was purportedly acknowledged by the petitioner. The absence of this document on record raises doubts about its existence and service.

Furthermore, the petitioner challenges the authority of the third respondent to impose penalties under Section 122(2)(a) of the CGST Act, which imposes a cap on the quantum of penalties. Referring to a Circular dated 09.02.2018, the rejoinder highlights that penalties should not exceed Rs.20,00,000/-. Additionally, the petitioner contends that the impugned order has not been electronically uploaded, depriving them of the statutory right to appeal under Section 107 of the Act. The uploaded summary of the order lacks crucial details, rendering it insufficient for the petitioner to avail themselves of the appeals process.

Reiterating the arguments presented in the affidavit supporting the writ petition, the petitioner’s counsel, Sri. M.V.J.K. Kumar, emphasizes that the assessment order violates Section 62 of the GST Act. The crux of the argument revolves around the alleged failure to provide the mandatory 15-day period for filing returns. According to the petitioner’s counsel, while a notice was purportedly issued under Section 46 on 04.02.2019, the order was swiftly passed on 05.02.2019, contravening the provisions of Section 62. Additionally, the counsel asserts that the petitioner was not served with the notice under Section 46 directing payment of tax, interest, and penalties until after the order was uploaded onto the portal in August 2020. Ultimately, the petitioner’s counsel contends that the imposed penalties were unjustified as proper procedural protocols were not followed.

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