FACTS & SUBJECT MATTER: The Revenue Department issued a Show Cause Notice dated May 27, 2021 wherein it was alleged that the Petitioner has collected the GST, but the said tax has not been paid by the Petitioner, as per Section 122(1)(iii) of the CGST Act. The Petitioner could not file the reply due to COVID-19, thus, the Respondent, vide ex-parte order dated August 25, 2021 passed against the Petitioner, imposed a penalty of the amount of Rs.28,00,476.36/- towards CGST and SGST each, thus the amount of Rs.56,00,952.72/- penalty was imposed by the Respondent.

CASE LAW: M/s Clear Secured Services Private Limited v. Commissioner, State Tax GST UP, [Writ Tax No. 5 of 2023 dated November 23, 2023]

ISSUE : (1) Whether a penalty of Rs.56,00,952.72/- could be imposed when there is only a delay in depositing the amount of tax collected by the Supplier?
(2) Section 122(1)(iii) : "Collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due: Whether he shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher.”

HELD: The Hon’ble Allahabad High Court held as under:
(1) Observed that, the Government has issued guidelines for waiving of late fees for filing returns vide Notifications dated June 1, 2021 (“the Notification”). The Court stated that the aforementioned factor has to be taken into consideration along with the factors stated in Section 126(2) of the CGST Act while imposing the penalty.
(2) Noted that, there is no material on record or even an allegation that the amount has been collected but not paid or evaded. The Respondent only alleged that the Petitioner had not paid the amount within the prescribed period i.e., three months from the date on which such payment becomes due.
(3) Opined that, the maximum penalty of Rs.10,000/- could be imposed by the Respondent on the Petitioner as no amount of tax has been evaded by the Petitioner. Also, the Court stated that the amount of penalty of Rs.10,000/- could have been lowered by the Respondent if the mandate of Section 126(2) of the CGST Act along with the Notifications was taken into consideration, which was not done by the Respondent.
(4) Held that, the Impugned Orders are set aside. Hence, the writ petition is allowed.
(5) Directed that, the Petitioner shall pay the penalty of Rs.10,000/- within two weeks from the date of order.

Click to download Order by Hon'ble High Court in the case of M/s Clear Secured Services Private Limited v. Commissioner, State Tax GST UP, [Writ Tax No. 5 of 2023 dated November 23, 2023]

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