Facts of the Case

The petitioner, M/S Rathore Building Material, was issued a notice dated 28.01.2023 by the department in purported exercise of powers under Section 46 of the GST Act, requiring it to furnish returns within 15 days. The notice itself recited that if the returns were tendered within the time stated, the proceedings would be withdrawn. The petitioner furnished the returns on 07.02.2023, well within time. Despite this, the authorities went on to impose a penalty under Section 125 of the GST Act by an order dated 10.02.2023, followed by a further order dated 14.03.2023. The impugned order itself recorded the petitioner's reply dated 07.02.2023 in one part, but elsewhere returned an internally inconsistent finding that no reply had been tendered by the petitioner at all.

Issues Involved

  1. Whether a penalty under Section 125 of the GST Act could lawfully be imposed where the petitioner had complied with the terms of a Section 46 notice by furnishing returns within the stipulated time.
  2. Whether the impugned order suffered from non-application of mind by recording contradictory findings as to whether the petitioner had filed a reply.
  3. Whether the consequential order dated 14.03.2023 was sustainable once the underlying penalty order was found defective.

Petitioner's Arguments

  • The show cause notice dated 28.01.2023 expressly stated that if returns were furnished within the time given, the proceedings would be withdrawn, and the petitioner complied by filing the returns on 07.02.2023.
  • Since the terms of the notice were fully met, the proceedings ought to have been dropped, and there was no lawful basis for imposing any penalty under Section 125.
  • The impugned order itself acknowledged the petitioner's reply dated 07.02.2023 in one place while inconsistently recording elsewhere that no reply had been tendered, demonstrating non-application of mind by the assessing authority.
  • Both the penalty order dated 10.02.2023 and the subsequent order dated 14.03.2023 were contrary to law and liable to be set aside.

Respondent's Arguments

  • The learned Additional Chief Standing Counsel for the State appeared but could not dispute the facts placed on record by the petitioner regarding timely compliance with the Section 46 notice.
  • No substantive justification was offered for imposing the penalty once the petitioner's timely compliance with the notice was not disputed.

Court Order/Findings

  • The Court found that the petitioner had complied with the terms of the show cause notice by furnishing the returns within the time stipulated, on 07.02.2023.
  • The impugned order recorded the petitioner's reply dated 07.02.2023 in one part while elsewhere finding that no reply was tendered — an internal inconsistency.
  • The finding was vitiated on account of non-application of mind to the facts on record; since the petitioner had complied with the terms of the show cause notice, there was no lawful justification to impose the penalty.
  • The orders dated 10.02.2023 and 14.03.2023 were held to be contrary to law and were set aside; the writ petition (tax) was allowed.

Important Clarification

  • Where a Section 46 GST Act notice itself promises withdrawal of proceedings upon timely filing of returns, and the taxpayer complies within the stipulated time, a penalty under Section 125 imposed thereafter cannot be sustained.
  • An order that records internally contradictory findings on whether a reply or return was filed reflects non-application of mind and is liable to be set aside on that ground alone, without the need to examine the merits any further.
  • Taxpayers who comply with the express terms of a return-defaulter notice should preserve proof of timely filing, since this alone can be dispositive in challenging a subsequent penalty order.

Sections Involved

  • Section 46, CGST/UP GST Act, 2017 — empowers the proper officer to issue notice to registered persons who default in furnishing returns.
  • Section 125, CGST/UP GST Act, 2017 — general penalty provision for contravention of the Act's provisions where no specific penalty is prescribed.
  • Article 226, Constitution of India — writ jurisdiction invoked to challenge the penalty and consequential orders.

Decision – In Favour of

The decision is in favour of the Assessee: the writ petition (tax) was allowed, and both the penalty order dated 10.02.2023 and the consequential order dated 14.03.2023 were set aside as contrary to law and vitiated by non-application of mind.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: Allahabad High Court
  • Case No.: WRIT TAX No. 1361 of 2023 (Neutral Citation 2023:AHC:227550)
  • CNR: Not available on record
  • Coram: Hon'ble Justice Ajay Bhanot
  • Decision Date: 01-12-2023
  • Disposal Nature: Allowed

Link to Download the Order

Download the full judgment (PDF)

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.