Penalty for late GST payment without tax evasion should be nominal; failure to provide a fair hearing and consider relevant mitigating factors is a breach of due process.

JUDGMENT

Pankaj Bhatia, J.

Since both the petitions raise a common issue, they are being decided by this common order.

2. Heard Shri Raghvendra Sworup Sharma and Shri Jameel Ahmad, learned counsel for the petitioner and Shri Anurag Shukla, learned counsel for the respondent department.

3. For the sake of brevity, the facts of Writ Tax No.5 of 2023 is being taken up.

4. Present petition has been filed by the petitioner challenging the order dated 25.08.2021 whereby the order of penalty was passed imposing a penalty of Rs.28,00,476/- towards CGST and Rs.28,00,476/- towards SGST in purported exercise of powers under Section 122 of GST Act.

The petitioner also challenges the order dated 14.09.2022 whereby the appeal preferred by the petitioner was dismissed. The said two orders are contained in Annexure - P1 & P2.

5. The facts, in brief, are that the petitioner is a private company limited and is providing manpower supply services. The petitioner was served with a show-cause notice dated 27.05.2021 contained in Annexure - P1, whereby allegations were levelled against the petitioner alleging that although the petitioner had collected the GST but the same was not paid within the time prescribed and thus, the petitioner was liable for payment of penalty in terms of the mandate of Section 122 (1)(iii) of the GST Act (hereinafter referred to as 'the Act'). The quantum of penalty was specified in the show-cause notice. The petitioner could not give a reply on account of Covid - 19 situation prevalent and in the absence of such a reply, an order came to be passed against the petitioner which was ex-parte. In terms of the said order passed against the petitioner, a penalty of the amount as indicated in the show-cause notice was imposed. The amount imposed was Rs.28,00,476.36/- towards CGST and a similar amount towards SGST, as such, the total amount of penalty imposed against the petitioner was Rs.56,00,952.72/-.

6. Aggrieved against the said order, the petitioner preferred an appeal. The Appellate Authority dismissed the appeal by means of an order dated 14.09.2022. While dismissing the appeal, the Appellate Authority recorded the submission of the petitioner to the effect that the amount could not be deposited within the time frame as the amounts were not received within time owing to the Covid - 19 situation and in any case, the said amounts were paid along with late fee after the expiry of three months' time and thus no case for levy of penalty was made out. The ground with regard to not giving an opportunity of hearing was also taken. The Appellate Authority after recording the submission upheld the imposition on penalty and dismissed the appeal by placing reliance on the mandate of Section 122 (1)(iii) of the Act.

7. A counter affidavit has been filed by the State justifying the orders imposing penalty again on the strength of the mandate of Section 122 (1)(iii) of the Act. In the counter affidavit filed by the respondents, it has been reiterated that in terms of the GSTR - 1 filed by the petitioner, the petitioner did not pay the amount for a period of three months. It is also taken as a defense that the petitioner not only failed to deposit the GST collected by him within the time limit but also failed to provide any justification in not depositing the tax amount so collected within the time limit, and again placing reliance on the mandate of Section 122 (1)(iii) of the Act, the penalty imposed against the petitioner is sought to be justified.

8. Contention of counsel for the petitioner is that the penalty is imposable in terms of the mandate of Section 122 (1)(iii) of the Act in respect of there being delay in depositing the tax so collected beyond a period of three months, how