The court emphasized the principle of revenue neutrality in tax assessments, stating the importance of timely disclosures and the limits of procedural penalties under tax law.

JUDGMENT :

Om Narayan Rai, J.

1. This writ petition is directed against an order dated February 6, 2025 passed by the appellate authority under Section 107 of the West Bengal Goods & Services Tax Act, 2017/Central Goods and Services Tax Act, 2017 (hereafter “the said Act of 2017”).

2. The relevant facts as may be gathered from the material on record are these :

a) The petitioners are dealers of motor vehicles. During the financial year 2017-2018, the petitioners had purchased motor vehicles from their supplier and had paid GST along with CESS as indicated in the tax invoices.

b) CESS charged by the petitioners’ supplier on the supplies made by it to the petitioners were duly reflected in Form GSTR2A in terms of Section 38 of the said Act of 2017.

c) The petitioners also charged CESS to their purchasers but since the petitioners earnestly believed that no CESS was payable by the petitioners as the petitioners had sufficient accumulated CESS on the inward supplies, therefore the petitioners did not disclose the CESS collected by them from the recipients of the outward supplies made by them to the recipients, while filing return in Form GSTR3B.

d) However, at the time of finalization of the books of account, the petitioners realized their mistake (upon it being pointed out by their Chartered Accountant) and disclosed the entire amount of CESS in the annual report filed in form GSTR-9 in terms of Section 44 of the said Act of 2017, thereby indicating that no CESS was actually payable by the petitioners and the earlier non-disclosure of CESS was revenue neutral.

e) Subsequently, a notice to show-cause was issued to the petitioners alleging that the petitioners had not paid the CESS to the tune of Rs. 44,71,625/- (Rupees forty four lakh seventy one thousand six hundred and twenty five only) calculated from various suppliers at the time of outward supply of motor vehicles. The said notice was issued invoking Section 74 of the said Act of 2017. The petitioner did not reply to the said show-cause notice and, accordingly, an order under Section 74 of the said Act of 2017 was passed thereby holding the petitioner liable in a sum of Rs. 41,31,946/- (Rupees forty one lakh thirty one thousand nine hundred and forty six only) on account of taxes together with interest and penalty aggregating to Rs. 1,28,26,999/- (Rupees one crore twenty eight lakh twenty six thousand nine hundred and ninety nine only).

f) The petitioners carried the matter in appeal before the appellate authority under Section 107 of the said Act of 2017 contending that the petitioners have not made any suppression or willful misstatement and have not committed any fraud, as alleged in the notice to show- cause and as held in the adjudication order impugned before the appellate authority. It was also contended by the petitioners that the mistake that had been committed in form GSTR-3B was ultimately corrected by the petitioners by filing the annual return in form GSTR-9. It was further contended on behalf of the petitioners that since the petitioners were also entitled to ITC in respect of CESS paid by them on the inward supplies made to the petitioners, the same would be offset with the demand made by the GST Authorities in respect of the CESS in respect of outward supplies.

g) The appellate authority considered the petitioner’s case and accepted the petitioner’s contention that there was no willful misstatement or suppression of fact or fraud committed on the part of the petitioners and accordingly converted the proceeding under Section 74 of the said Act of 2017 to a proceeding under Section 73 of the said Act of 2017.

h) The appellate authority, however, di