Rathore Building Material Vs Commissioner of State tax (Allahabad High Court)
Introduction: In a significant ruling dated December 1, 2023, the Hon’ble Allahabad High Court addressed the case of M/s. Rathore Building Material v. Commissioner of State tax [Writ Tax No 136 of 2023. The court held that the petitioner, Rathore Building Material, had adhered to the terms of the Show Cause Notice (SCN) by furnishing returns within the stipulated 15 days. Despite compliance, an unwarranted penalty was imposed on the petitioner, rendering the impugned orders contrary to law and non-application of mind.
Facts:
M/s. Rathore Building Material (“the Petitioner”) was served the Show Cause Notice (“the SCN”) under Section 46 of the Central Goods and Service Tax Act, 2017 (“the CGST Act”) by the Commissioner of State Tax (“the Respondent”) where they were asked to furnish returns within 15 days in order to withdraw the proceedings.
Subsequently, the Petitioner furnished the returns within the time prescribed in the SCN. However, the Respondent passed the Order (“the Impugned Order”) imposing penalty under Section 125 of the CGST Act, recorded the date of reply submitted by the Petitioner, and returned the findings stating that no reply was furnished by the Petitioner.
Hence, the Petitioner filed the writ petition before the Hon’ble Allahabad High Court.
Issue:
Whether the penalty be imposed when the Petition complied with the terms of the SCN?
Held:
The Hon’ble Allahabad High Court in the case of Writ Tax No. 136 of 2023 held as under:
- Observed that, the Respondent issued the Impugned Order by imposing the Penalty by returning the findings that no reply to the SCN was tendered by the Petitioner. The finding is vitiated on account of non-application of mind to the facts in the record.
- Noted that, the petitioner had complied with the terms of the SCN by furnishing the returns within 15 days, there was no lawful justification to impose the penalty.
- Held that, the Impugned Order is contrary to law and passed on non-application of mind. Hence, the Impugned Order is liable to be set aside.
Conclusion:
The judgment of the Hon’ble Allahabad High Court in the case of M/s. Rathore Building Material vs Commissioner of State tax sets a precedent emphasizing the invalidity of penalties when the terms of a Show Cause Notice are diligently complied with. The court’s decision ensures a fair and just application of tax laws, preventing unwarranted penalties when taxpayers adhere to the prescribed procedures.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
Heard Shri Puneet Arun, learned counsel for the petitioner and Shri Ravi Shankar Pandey, learned Additional Chief Standing Counsel for the respondents-State.
By the notice dated 28.01.2023 taken out in purported exercise of powers under Section 46 of the GST Act, the petitioner was asked to furnish the returns within 15 days. The show cause notice dated 28.01.2023 contained the recital that if the returns were tendered in time stated therein, the proceedings shall be withdrawn. The petitioner in response to the said notice furnished the returns on 07.02.2023. The proceedings were liable to be dropped. Instead the authorities went on to impose a penalty under Section 125 of the GST Act by the impugned order dated 10.02.2023.
Shri Ravi Shankar Pandey, learned Additional Chief Standing Counsel for the respondents-State could not dispute these facts.
The impugned order also records that the petitioner submitted his reply on 07.02.2023. However, the assessing authority by the impugned order dated 10.02.2023 while imposing the penalty has also returned the findings that no reply to the show cause notice was tendered by the petitioner. The finding is vitiated on account of non application of mind to the facts in the record.
Admittedly since the petitioner had complied with the terms of the show cause notice by furnishing the returns, there was no lawful justification to impose the penalty.
The impugned orders dated 10.02.2023 and the order dated 14.03.2023 are contrary to law and passed on non application of mind.
In the wake of preceding discussion, the impugned order dated 10.02.2023 and the order dated 14.03.2023 are liable to be set aside and are set aside.
The writ petition (tax) is allowed.
*****
(Author can be reached at info@a2ztaxcorp.com)