M/S Rathore Building Material vs. The Commissioner Of State Tax And 2 Others

Held

The Court held that the penalty imposed under Section 125 of the GST Act was unlawful. The petitioner had complied with the notice issued under Section 46 of the GST Act by furnishing the returns on 07.02.2023. The recital in the notice clearly stated that if returns were tendered in time, the proceedings would be withdrawn. Since the petitioner had complied, there was no lawful justification to impose a penalty. Furthermore, the Court found that the impugned order dated 10.02.2023 suffered from a non-application of mind because it recorded that no reply was tendered, despite the fact that the petitioner had submitted their reply on 07.02.2023. The Court concluded that the impugned orders dated 10.02.2023 and 14.03.2023 were contrary to law and passed without due application of mind. Consequently, the Court set aside both impugned orders. The ratio decidendi is that a penalty cannot be imposed when the taxpayer has complied with the conditions stipulated in a notice for withdrawal of proceedings, and orders passed without considering the factual record are liable to be quashed.

Facts

The petitioner, M/s Rathore Building Material, received a notice dated 28.01.2023 under Section 46 of the GST Act, directing them to furnish returns within 15 days, with a recital that proceedings would be withdrawn upon timely compliance. The petitioner responded by furnishing the returns on 07.02.2023. Despite this compliance, the authorities imposed a penalty under Section 125 of the GST Act through an order dated 10.02.2023. The impugned order also incorrectly stated that no reply was tendered, despite acknowledging the petitioner's submission on 07.02.2023. The petitioner challenged these orders, dated 10.02.2023 and 14.03.2023, arguing they were passed without application of mind and contrary to law.

Key Issues

1. Whether the penalty imposed under Section 125 of the GST Act was lawful when the petitioner had complied with the terms of the notice issued under Section 46 of the GST Act by furnishing the returns within the stipulated period. Petitioner's arguments: The petitioner contended that by furnishing the returns on 07.02.2023, they had complied with the conditions of the notice dated 28.01.2023, which explicitly stated that proceedings would be withdrawn. Therefore, there was no lawful justification for imposing a penalty. They further argued that the impugned order dated 10.02.2023 was vitiated by a non-application of mind as it incorrectly stated that no reply was tendered, despite acknowledging the petitioner's submission on 07.02.2023. The orders were thus contrary to law. Respondent's arguments: The learned Additional Chief Standing Counsel for the respondents-State could not dispute the facts presented by the petitioner.