Facts of the Case

The petitioner, Mohammed Nazar, approached the Kerala High Court being aggrieved by proceedings completed against him for the assessment year 2018-19.

The petitioner’s grievance was that the proceedings had been completed without affording him a comprehensive opportunity to produce books of accounts and other relevant materials before the assessing authority.

The proceedings comprised:

  • an assessment order dated 05.10.2020 under Section 63 of the CGST/SGST Acts; and
  • a penalty order dated 04.12.2020 under Section 122 of the CGST/SGST Acts.

Against the assessment order and penalty order, the petitioner approached the first appellate authority. The appeals were disposed of through appellate orders dated 31.05.2022, granting certain reliefs. However, according to the petitioner, he was still not afforded an opportunity to produce the books of accounts before the assessing authority.

The petitioner further stated that his next remedy lay in filing an appeal before the GST Appellate Tribunal, but the Tribunal had not been constituted at that time.

Issues Involved

The principal issues arising before the High Court were:

  1. Whether the petitioner should be granted protection against recovery when the further statutory appellate remedy before the GST Appellate Tribunal could not be effectively pursued because the Tribunal had not been constituted.
  2. Whether coercive recovery pursuant to the assessment and penalty proceedings should continue despite the practical unavailability of the next appellate forum.
  3. Whether interim protection could be made conditional upon the petitioner remitting a specified portion of the outstanding demand.
  4. Whether the recovery protection should continue for a reasonable period even after constitution of the Appellate Tribunal, enabling the petitioner to pursue the statutory remedy.

Petitioner’s Arguments

The petitioner contended that the proceedings for assessment year 2018-19 had been completed without providing a comprehensive opportunity to produce the books of accounts and other relevant materials before the assessing authority.

It was submitted that although the petitioner challenged:

  • the assessment order under Section 63; and
  • the penalty order under Section 122,

before the first appellate authority, the resulting appellate orders granted only certain reliefs and did not provide the petitioner with the opportunity sought for production of books of accounts before the assessing authority.

The petitioner further submitted that the next statutory remedy was an appeal before the GST Appellate Tribunal. However, since the Tribunal had not been constituted, that appellate remedy was not practically available.

Accordingly, the petitioner sought intervention of the High Court against recovery action arising from the assessment and penalty demands.

Respondents’ Arguments

The respondents were represented by the learned Senior Government Pleader.

The judgment records that the High Court heard both the learned counsel appearing for the petitioner and the learned Senior Government Pleader appearing for the respondents.

The order does not record any detailed separate counter-arguments or elaborate factual submissions on behalf of the respondents. Therefore, no additional respondent contention should be attributed beyond what is expressly reflected in the judgment.

Court Order / Findings

The Kerala High Court took specific note of the fact that the Appellate Tribunal had not been constituted.

Having heard the parties and considering the non-constitution of the Tribunal, the High Court disposed of the writ petition with a conditional recovery-protection direction.

The Court directed that:

if the petitioner remitted a total amount equivalent to 20% of the amounts then demanded, after giving credit for any amount already paid, steps for recovery of the amounts due under the assessment and penalty orders would be kept in abeyance.

The recovery protection was directed to continue for a period up to two months after the date of constitution of the Appellate Tribunal.

Thus, the Court balanced the interests of revenue and the petitioner by:

  • requiring payment equivalent to 20% of the demanded amounts;
  • directing adjustment/credit for amounts already paid;
  • keeping recovery proceedings in abeyance; and
  • continuing such protection until two months after constitution of the Appellate Tribunal.

Important Clarification

The judgment should not be understood as setting aside the assessment order under Section 63 or the penalty order under Section 122 on merits.

The High Court also did not finally adjudicate the correctness of the petitioner’s grievance regarding the alleged lack of comprehensive opportunity to produce books of accounts.

The substantive relief granted was specifically linked to the fact that the further appellate remedy before the GST Appellate Tribunal was unavailable because the Tribunal had not been constituted.

The Court therefore provided a conditional protective arrangement against recovery rather than deciding the underlying tax and penalty disputes on merits.

A further important aspect is that the Court expressly directed that credit must be given for amounts already paid by the petitioner while determining compliance with the requirement of payment equivalent to 20% of the amounts demanded.

Sections Involved

Section 63 of the CGST/SGST Acts – Assessment of unregistered persons. The assessment order dated 05.10.2020, identified as Exhibit P-1 in the judgment appendix, was passed under this provision.

Section 122 of the CGST/SGST Acts – Penalty for specified offences. The penalty order dated 04.12.2020, identified as Exhibit P-2, was passed under this provision.

GST Appellate Remedy – The petitioner stated that the further remedy lay before the Appellate Tribunal, which had not been constituted at the relevant time.

Link to download the order -

https://mytaxexpert.co.in/uploads/1783334513_1139compressed.pdf

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