Facts of the Case

The petitioner, M/s Munna Traders, a proprietorship represented by Manoj Kumar, an assessee under the Bihar Goods and Services Tax Act, 2017 ("BGST Act"), challenged interest and penalty of Rs. 3,51,532/- imposed for an excess claim of Input Tax Credit for the assessment year 2017-18. On scrutiny under Section 61 of the BGST Act, discrepancies were noticed: ITC claimed under GSTR-1 exceeded that reflected in GSTR-2A/2B by Rs. 4,62,542/-, and there was a variance in turnover as per GSTR-9C and RT-1 GTO. The petitioner paid the differential ITC amount of Rs. 4,71,290/- on 08.12.2021 but did not pay the interest due under Section 50, despite a notice under Section 73(1) of the BGST Act, leading the Assessing Officer to impose interest and penalty. The petitioner's first appeal, filed with an eleven-month delay, was rejected as beyond the period condonable under Section 107(4) of the BGST Act.

Issues Involved

  1. Whether the delay in filing the first appeal could be condoned, and whether a further appeal to the Tribunal (not yet constituted) was available.
  2. Whether the interest and penalty imposed for the admitted excess ITC claim were sustainable, and whether the payment of the differential tax was made under coercion.

Petitioner's Arguments

  • The payment of the excess ITC claim amount was made only under coercion of the respondent-assessing authority, and there was, in fact, no excess claim, as the petitioner held invoices which the Assessing Officer was bound to consider per the CBIC Circular dated 27.12.2022 (F.No.CBIC-20001/2/2022-GST).
  • Relying on Price Waterhouse Coopers Pvt. Ltd. v. Commissioner of Income Tax, Kolkata-I, (2012) 11 SCC 316, it was argued that no penalty ought to be levied in the facts and circumstances of the case.
  • Since the Tribunal under Section 109 of the BGST Act had not been constituted, the petitioner was deprived of a further appellate remedy, and courts had in other cases granted a stay of recovery on deposit of 20% of the balance tax pending the Tribunal's constitution.

Respondent's Arguments

  • The discrepancies were noticed on scrutiny of returns for July 2017 to March 2018, and although the petitioner paid the differential tax, it did not pay the interest due under Section 50 despite notice, attracting penalty under Section 122 of the BGST Act.
  • The first appeal was filed with an eleven-month delay, well beyond the period condonable under Section 107(4), including after accounting for the Supreme Court's pandemic-related limitation extension (up to 28.02.2022, plus 90 days); a second appeal from an order rejecting a belated first appeal was not maintainable at all.

Court Order / Findings

  • The Court found no basis for the coercion plea, particularly since it was raised only after two years in the writ petition and the appeal itself had been delayed by eleven months; applying the Supreme Court's suo motu limitation-extension order, the appeal, even on the most liberal computation, ought to have been filed by 28.06.2022, but was filed only on 31.01.2023 — well beyond even the extended period — leaving no scope for further appeal from a first-appeal rejection on delay grounds.
  • The Court held that since the assessee had admitted the excess ITC claim and paid the differential tax without the interest due under Section 50, the resultant penalty under Section 122 was properly attracted, and the CBIC Circular dated 27.12.2022 — issued only to address difficulties in the nascent GST regime and confined to ongoing scrutiny/audit/investigation or pending adjudication/appeal for FY 2017-18 and 2018-19 — did not apply to a case where the claim had already been admitted and paid up, with no proceeding pending.
  • Distinguishing Price Waterhouse Coopers, the Court found the present case involved an admitted default in tax payment attracting a civil penalty, unlike the "silly mistake" scenario in that decision; the writ petition was dismissed as devoid of merit.

Important Clarification

The CBIC's transitional-difficulty circular (dated 27.12.2022) permitting rectification of ITC discrepancies for FY 2017-18/2018-19 applies only to ongoing scrutiny, audit, investigation, adjudication or appeal proceedings — it cannot be invoked where the taxpayer has already admitted the excess ITC claim and paid the differential tax without contest, since there is then no live proceeding to which the circular's rectification procedure can attach; in such a case, interest under Section 50 and penalty under Section 122 for the admitted default stand on their own footing.

Sections Involved

  • Section 61 of the BGST Act, 2017 – provides for scrutiny of returns filed by a registered person.
  • Section 50 of the BGST Act, 2017 – provides for interest on delayed payment of tax.
  • Section 73 of the BGST Act, 2017 – governs determination of tax not paid/short paid other than by reason of fraud.
  • Section 107(4) of the BGST Act, 2017 – prescribes the outer limit for condonation of delay in filing a first appeal.
  • Section 109 of the BGST Act, 2017 – provides for constitution of the GST Appellate Tribunal.
  • Section 122 of the BGST Act, 2017 – prescribes penalty for specified offences, including non-payment of tax due.

Decision – In Favour of

The decision was in favour of the Department, with the writ petition challenging the interest, penalty, and the limitation-based rejection of the appeal dismissed on merits.

Case Details

  • Court: High Court of Judicature at Patna
  • Case Number: Civil Writ Jurisdiction Case No.9032 of 2023
  • Coram: Hon'ble the Chief Justice K. Vinod Chandran and Hon'ble Mr. Justice Partha Sarthy
  • Date of Order: 08 August 2023

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