Non-payment of GST does not automatically imply fraud or wilful misstatement; evidence of intention to evade tax is necessary for penalties under Section 74 of the CGST Act.

Order :

(R. Raghunandan Rao, J.)

Heard Sri V. Raghu Ram, learned Senior Counsel representing Sri Anil Bezawada, learned counsel appearing for the petitioner, Smt. Santi Chandra, learned Standing Counsel appearing for respondents 1 to 3 and learned Government Pleader for Commercial Tax appearing for the 4^th respondent.

2. The facts in the present case, as stated by the petitioner, are as follows:

a) The petitioner is a partnership firm, established in January 2017 and carrying on the business of a works contractor, which is executing infrastructure based Engineering Procurement Construction contracts. The petitioner registered itself under the GST Act. The primary and main business of the petitioner, for the relevant period from July, 2017 to March 2018, was the execution of works, as a sub-contractor, for one M/s. Vijay Nirman Company Ltd.

b) The petitioner raised nine invoices with an aggregate value of Rs.20,92,02,422/-. These invoices, were inclusive of GST of Rs.3,19,12,234/-. The said invoices were raised in the month of March, 2018.

c) The petitioner, though paid certain amounts, by M/s. Vijay Nirman Company Ltd., was unable to pay GST as the payments received from M/s. Vijay Nirman Company Ltd., were not sufficient even for executing the works awarded by it. As the GST portal, does not accept filing of returns, unless accompanied by payment of tax, the petitioner was unable to file the GSTR-3B returns within the statutory time limit.

d) On 31.07.2018, the principal place of business of the petitioner was inspected, by the DGGI officers, on the authorization given by the Joint Director, DGGI, Visakhapatnam Zonal Unit, Visakhapatnam. In the course of the said inspection, the officers had seized certain documents and records and had also recorded the statement of the Managing Partner of the petitioner. At that stage, the petitioner, having realized its mistake of non-filing of GST returns and non-payment of GST, had taken steps to deposit necessary tax. The petitioner, in four installments, between 31.07.2018 to 29.09.2018, had deposited a sum of Rs.3,36,51,468/- and also filed all the pending GSTR-3B’s for the financial year 2017-2018 by 29.09.2018.

e) After these payments had been made and after the returns had been filed, the 3^rd respondent issued a show cause notice, dated 21.08.2020, calling upon the petitioner to pay tax liability, (which had already been paid, as shown above) interest and penalty. Thereafter, the 3^rd respondent again issued a show cause notice, dated 03.09.2020, to show cause as to why a tax amount of Rs.3,19,12,233/- payable under the CGST, SGST and IGST Acts, should not be demanded; the payments made by the petitioner to the tune of Rs.3,19,12,233/- earlier, should not be adjusted against such a demand; interest at the applicable rates, under Section 50 of the CGST and corresponding Sections of CGST, SGST and IGST Acts, should not be demanded; penalty equivalent to the output tax mentioned above, should not be imposed under Section 122(1) read with Section 74(1) of the CGST Act, 2017 for contravention of CGST, SGST and IGST Acts. Penalty under Section 122 (2) and (b) of the CGST Act, 2017 and corresponding Sections of CGST, SGST and IGST Acts; penalty under Section 122(3) (d) of the CGST Act and corresponding Sections of CGST, SGST and IGST Acts; penalty under Section 125 of the CGST Act, 2017 and corresponding Sections of CGST, SGST and IGST Acts; and late fee under Section 47 of the CGST Act, 2017 and corresponding Sections of CGST, SGST and IGST Acts.

f) The petitioner filed a detailed reply on 23.09.2021 to these show cause notices and also availed a personal hearing, on 23.09.2021 itself. The 2^nd respondent confirmed the demand, raised in the show cause notice, by way of an order, dated 24.12.2021. Aggrieved by the same, the petitioner had approached the 1^st respondent, by way of an appeal, on 05.05.2022. The 1^st respondent, after considering the submissions made by the petitioner, upheld the penalty