Allahabad High Court Order Dated 23 November 2023 Reducing 56 Lakhs GST Penalty to 10000
In a significant decision on 23 November 2023, the Allahabad High Court has reduced a penalty order of Rs. 56 lakhs imposed on a private limited company to a mere Rs. 10,000. The petitioner, Clear Secured Services Pvt Ltd is a manpower supply services provider who challenged the penalty order under Section 122 of the GST Act, asserting that the delay in depositing GST was due to untimely collection of tax under COVID-19 situation and there was no evasion of tax.
Brief Overview:
The petitioner received a show-cause notice in May 2021, alleging non-payment of GST within the prescribed time. The petitioner could not reply to the notice due to prevalent COVID-19 situation and consequently an ex-parte order was passed against the petitioner, imposing a substantial penalty of Rs. 56,00,952.72. The petitioner’s appeal was dismissed, with the Appellate Authority citing Section 122(1)(iii) of the Act. Aggrieved by this order, the petitioner has filed this appeal before the Allahabad High Court.
Legal Proceedings:
The petitioner argued that, according to Section 122(1)(iii), a penalty could be imposed for a delay in depositing tax, but the amount specified was Rs. 10,000 or an amount equivalent to the tax evaded. The petitioner highlighted the government’s notification dated. 1 June 2021 waiving late fees for returns filed between July 2017 and April 2021 due to the COVID-19 situation.
Decision of Allahabad High Court:
The court noted that there was no material on record that the tax was collected but not paid timely and there was also no evidence of tax evasion and if the delay allegation was considered true, the maximum penalty would be Rs. 10,000 according to section 122(1)(iii) of the act. The court criticized both the Assessing Authority and Appellate Authority for not following penalty disciplines and failing to consider the government’s notification dated. 1 June 2021 while imposing the penalty.
Conclusion:
In light of the facts and relevant provisions, the court directed the petitioner to pay a reduced penalty of Rs. 10,000 within two weeks and the penalty order was set aside.
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