M/S. Sri Parameshwara Bricks vs. State Tax Officer, Peddapalli Circle & Ors.

Facts

M/s. Sri Parameshwara Bricks (the appellant), a manufacturer of red clay bricks, was registered under the composition scheme under Section 10(1) of the TSGST/CGST Act, 2017, availing a concessional tax rate of 1%. Audit authorities compared the turnover reflected in e-way bills with the turnover declared in FORM GST CMP-08 and alleged that the appellant exceeded the prescribed threshold of ₹1.50 crore during FY 2020-21. Show cause notices were issued proposing recovery of differential tax at the regular rate. The adjudicating authority confirmed the demand at the applicable rate of 5%, with interest and penalty. The First Appellate Authority upheld this order. The appellant contended that the excess turnover occurred inadvertently due to the COVID-19 pandemic and was due to a bona fide belief.

Held

The Court held that upon the aggregate turnover crossing the statutory ceiling of ₹1.50 crore, the option availed under the composition scheme lapses automatically by force of Section 10(3) of the Act. The registered person becomes liable to discharge tax at the applicable regular rate from the date of such lapse, with the consequence being automatic and operating by force of statute. The Department duly considered and excluded the excess turnover attributable to typographical errors in e-way bills. However, since the appellant, as a composition taxpayer, was prohibited under Section 10(4) from collecting tax separately, the value declared in invoices must be treated as inclusive of tax. Consequently, the benefit of cum-tax valuation under Rule 35 must be extended while determining the differential tax liability. The appellant's omission to specifically claim this benefit does not disentitle them from receiving it, as the relevant facts are on record and the Department must collect the legally due tax. The proper officer is directed to re-compute the tax liability by treating the declared value as cum-tax and applying Rule 35. Consequential interest and penalty are to be determined afresh. The question of entitlement to input tax credit was left open as no submissions were advanced by the appellant on this specific issue.

Key Issues

1. Whether the appellant ceased to be eligible for the composition scheme upon exceeding the prescribed threshold turnover of ₹1.50 crore, as per Section 10(3) of the Act? - Petitioner's argument: Not explicitly stated, but implied by their contention of inadvertent excess turnover and bona fide belief. - Revenue's argument: The appellant exceeded the threshold, thus automatically ceasing to be eligible. 2. Whether the Department correctly determined the differential tax after excluding excess turnover attributable to typographical errors in e-way bills? - Petitioner's argument: Not explicitly stated, but implied by their contention of inadvertent excess turnover. - Revenue's argument: The Department duly considered and excluded excess turnover due to typographical errors. 3. Whether the benefit of cum-tax valuation under Rule 35 of the Rules should be extended to the appellant while computing the differential tax liability? - Petitioner's argument: Implied by their contention that invoices reflect total consideration and tax should be calculated on the correct value. - Revenue's argument: Not explicitly stated, but their confirmation of demand at 5% suggests they did not apply cum-tax valuation. 4. Whether the appellant's failure to specifically claim the benefit of Rule 35 before the authorities below disentitles them from receiving it? - Petitioner's argument: Not explicitly stated, but their appeal implies they seek this benefit. - Revenue's argument: Not explicitly stated. 5. Whether the appellant is entitled to input tax credit upon cessation of the composition scheme? - Petitioner's argument: Not explicitly stated, but implied by their appeal seeking relief. - Revenue's argument: Not explicitly stated.