Facts of the Case

M/s. Global Plasto Wares, based in Thrissur and represented by its managing partner Davis John, filed Writ Appeal No.1874 of 2023 before a Division Bench of the High Court of Kerala at Ernakulam, against the judgment dated 17.10.2023 of a learned Single Judge dismissing its earlier writ petition, W.P.(C) No.33787 of 2023. The dispute concerned Ext.P5 order dated 14.09.2023, by which the appellant was imposed a penalty of Rs.40,000 under Section 73(11) of the CGST/SGST Act, 2017. The penalty followed a show-cause notice dated 28.02.2022 intimating a differential tax liability, which the appellant contended it had paid on 10.03.2022. The appellant's case was that it had issued invoices showing both the price of goods and the tax collected from customers, but had not remitted the full corresponding tax amounts to the Department along with its returns, and that the differential tax was ultimately paid only when demanded. The show-cause notice, according to the appellant, had referred only to the possibility of a penalty under Section 73(9) of the CGST/SGST Act, not Section 73(11). The appeal was heard and decided on 01.11.2023 by a Division Bench of Justice A.K. Jayasankaran Nambiar and Justice Kauser Edappagath.

Issues Involved

  1. Whether the penalty imposed under Section 73(11) of the CGST/SGST Act could be sustained when the show-cause notice referred only to Section 73(9).
  2. Whether the Assessing Authority's imposition of penalty under a provision not specifically cited in the show-cause notice violated the principles of natural justice.
  3. Whether the learned Single Judge was correct in upholding the penalty and dismissing the writ petition.

Petitioner's Arguments

  • Contended that Ext.P1 notice issued to the appellant mentioned only the possibility of a penalty under Section 73(9) of the CGST/SGST Act, and that it was therefore not open to the Assessing Authority to travel beyond the notice and impose a penalty under Section 73(11) instead.
  • Argued that this departure from the notice's stated basis breached the principles of natural justice, since the appellant was never specifically put on notice of the provision ultimately invoked against it.
  • Submitted that the learned Single Judge erred in confirming the demand of penalty on this ground.

Respondent's Arguments

  • Maintained that it was undisputed the differential tax amount pertained to transactions covered by invoices in which the appellant had clearly shown the price of goods and the tax amounts collected from customers.
  • Pointed out that while filing its returns, the appellant had failed to include the tax amounts covered by those specific invoices, and had paid the differential tax only when it was demanded — facts that squarely attracted Section 73(11), not Section 73(8) or 73(9), regardless of what the show-cause notice had cited.
  • Argued that the appellant suffered no real prejudice, since the underlying facts triggering the higher liability under Section 73(11) were admitted.

Court Order/Findings

  • The Division Bench found that while the appellant's natural-justice argument might appear persuasive at first blush, it could not be accepted on the facts of the case.
  • The Court held that once it is undisputed that the appellant had collected tax from customers via invoices but had failed to remit that tax to the State, it is the provision of Section 73(11) — not Section 73(8) — that governs penal liability as a matter of statute, and the mere fact that the show-cause notice did not specifically cite Section 73(11) does not cause prejudice or vitiate the penalty where the underlying facts are admitted.
  • The writ appeal was accordingly dismissed, upholding the judgment of the learned Single Judge and the penalty imposed under Section 73(11).

Important Clarification

  • Non-citation of the precise statutory sub-section in a show-cause notice is not fatal to the resulting order where the facts triggering that provision are admitted and undisputed by the taxpayer — natural justice requires a fair opportunity to meet the substance of the allegation, not a citation match between the notice and the eventual order.
  • Section 73(11)'s penalty for tax collected from customers but not remitted to the Department applies as a matter of statutory consequence once the underlying facts are established, and cannot be displaced merely because the show-cause notice referenced a different, more lenient sub-section such as Section 73(9).

Sections Involved

  • Section 73(8), CGST/SGST Act, 2017 – provides for a reduced or nil penalty where tax and interest are voluntarily paid before or within 30 days of the show-cause notice.
  • Section 73(9), CGST/SGST Act, 2017 – governs determination of the demand where the taxpayer's response to a show-cause notice is found inadequate; the provision cited in the notice issued to the appellant.
  • Section 73(11), CGST/SGST Act, 2017 – imposes a mandatory penalty where self-assessed tax, or tax collected from recipients, is not paid within 30 days, the provision ultimately applied against the appellant.

Decision – In Favour of

The decision is in favour of the Department: the writ appeal was dismissed and the penalty of Rs.40,000 imposed under Section 73(11) of the CGST/SGST Act was upheld, affirming the Single Judge's judgment.

Related Case Laws

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

Case Details

  • Court: High Court of Kerala at Ernakulam
  • Case No.: W.A.No.1874 of 2023 (against judgment in W.P(C).No.33787/2023)
  • CNR: Not available on record
  • Coram: Hon'ble Dr Justice A.K. Jayasankaran Nambiar and Hon'ble Dr Justice Kauser Edappagath
  • Decision Date: 1 November 2023
  • Disposal Nature: Dismissed; writ appeal dismissed upholding penalty

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