Sri Jahar Sur Chowdhury vs. The Union Of INDIA And Ors

Held

The Court found a clear contradiction between the order of the adjudicating authority (Respondent No. 3) dated 06.01.2021, which was passed under Section 74 of the CGST Act, 2017, and the order of the appellate authority (Respondent No. 2) dated 30.03.2022, which justified the penalty under Section 129(1)(a) of the CGST Act, 2017. The Court held that Section 74 of the CGST Act, 2017, would not apply in this case as no case was made out in the show cause notice or the impugned orders. Consequently, the Court set aside and quashed both the order dated 06.01.2021 passed by the Assistant Commissioner and the order dated 30.03.2022 passed by the Additional Commissioner. The matter was remanded back to the concerned authorities to decide afresh in accordance with the law. The ratio decidendi is that a penalty cannot be justified under a provision of law different from the one under which the initial proceedings were initiated and the show cause notice was issued, especially when it leads to a contradiction and violates principles of natural justice.

Facts

The petitioner, Sri Jahar Sur Chowdhury, filed a writ petition challenging an order passed by the Additional Commissioner (Respondent No. 2) which upheld a penalty imposed by the Assistant Commissioner (Respondent No. 3). The petitioner had claimed Input Tax Credit (ITC) of Rs. 63,93,317.00 in GSTR-3B for July 2019, while the available ITC in GSTR-2A was Rs. 13,33,407.00. The petitioner attributed this to accumulated ITC from previous periods and system reconciliation. He claimed to have reconciled purchase records and reversed the excess ITC of Rs. 47,36,977.00 before any notice from the GST Department, posting it as outward GST liability in January 2020. The Assistant Commissioner initially imposed a penalty under Section 74 of the CGST Act, 2017. The appellate authority, however, justified the penalty under Section 129(1)(a) of the CGST Act, 2017 and Tripura SGST Act, 2017.

Key Issues

1. Whether the imposition of penalty under Clause (a) of Sub-Section (1) of Section 129 of the CGST Act, 2017 and Tripura SGST Act, 2017 by the appellate authority is legally sustainable, given that the initial order by the adjudicating authority was passed under Section 74 of the CGST Act, 2017? Petitioner's Contention: The petitioner argued that the initial order was passed under Section 74 of the CGST Act, 2017, and the appellate authority's decision to justify the penalty under Section 129(1)(a) was a clear violation of principles of natural justice and Section 74(2) & (10) of the CGST Act, 2017, as no assessment could be made under Section 74(10) before filing an annual return. The petitioner also contended that there was no mala fide intention and that the excess ITC was reversed before any departmental communication. Revenue's Contention: The respondents, through their counter affidavit, stated that the petitioner availed excess ITC of Rs. 47,36,977/- in July 2019. They argued that the departmental officer initiated investigation proceedings under Section 74 of the CGST Act, 2017, and asked the petitioner to reverse the excess ITC with interest and penalty under Section 74, as the petitioner did not reverse the amount on his own before departmental communication.