Non-Filing Of GST Return Due To Technical Glitch, Bank Can't Be Penalised: Telangana High Court
The Telangana High Court has held that the petitioner bank could not file its return in the GST portal because of a technical glitch and cannot be saddled with demand, penalty, and interest.
The bench of Justice Sujoy Paul and Justice Namavarapu Rajeshwar Rao has observed that it was the duty of the department to keep their portal functional. If the portal was not functional or had a technical glitch, and because of that, the petitioner was compelled to file a return in the portal of Telangana. The department cannot take advantage of its own wrong.
The headquarters of the petitioner's bank is in Mumbai, Maharashtra, and the centralized registration of the petitioner's bank is also in Maharashtra under the service tax as well as under the goods and services tax, 2017.
The Goods and Services Tax came into being with effect from 01.07.2017, and the petitioner was entitled to enjoy the credit of Rs. 1,41,26,69,646. The petitioner made efforts to file the return in the official GST portal of Maharashtra, but because of a technical glitch in the Maharashtra portal, his efforts went in vain. The petitioner has a branch in Telangana. On 18.10.2017, he filed the returns in the portal of Telangana, took credit on the same day, and transferred it on the same day to the portal of Maharashtra.
The petitioner was served with a pre-show cause notice. The pre-show cause notice alleged that the credit availed by the petitioner through the TRAN-I return filed by the Telangana registration is ineligible and requires to be reversed along with applicable interest and penalty. The petitioner promptly filed a reply and made it clear that total transitional credit was transferred to Maharashtra GST registration on the same day of filing the TRAN-1 and only the differential balance of ITC was available in the State of Telangana.
The respondents issued a show-cause notice dated 29.12.2021, and in turn, the petitioner filed his detailed reply. The respondents were not satisfied with the reply to the show-cause notice and passed the order confirming the demand of Rs. 1,41,26,69,646, being the irregularly availed transitioned credit through TRAN-1 in the State of Telangana.
The petitioner contended that the show-cause notice shows that there were technical glitches in the Maharashtra GST portal, and the petitioner filed its return before the due date in the Telangana GST portal and transferred the credit to the Maharashtra portal on the same date. Thus, the petitioner did it under compelling circumstances, and there is no prohibition under the Act for filing such a return electronically in another state where the branch of the petitioner exists. More so, when the petitioner has not derived any undue benefit from the act nor revenue suffered any loss. In these circumstances, the order is bad in law.
The department contended that the petitioner's centralized registration is in the State of Maharashtra. Thus, the petitioner should have filed the return on the GST portal of Maharashtra and not in Telangana. Even assuming that the portal of Maharashtra had any technical glitch, the petitioner was not remediless, and he should have approached the higher authorities of the GST Regime of Maharashtra for redressal of his grievance. The petitioner should not have filed the return on the GST portal of Telangana, and for this reason alone, no fault can be found in the action of the respondents. It is submitted that in a plain reading of Section 140(1)(4)(8) of the Act, it is clear that the intention of lawmakers is that the return should be filed in the same state where the registration exists. Thus, the petition is meritless and may be dismissed. The purpose of centralized registration is to ensure that the facility is not misutilized by the parties.
The court failed to establish that there exists any prohibition or bar in filing the return through electronic mode in the GST portal of Telangana, where the petitioner's branch admittedly exists.
The court held that the very foundation of show cause notice itself is bad in law, and the assumption of the respondent that a return could not have been filed in the GST portal of Telangana is not flowing from Section 140 of the Income Tax Act. Therefore, the action founded upon such a notion is bad in law and deserves interference.
Counsel For Petitioner: Lakshmi Kumaran Sridharan
Counsel For Respondent: B.Narayan Reddy
Case Title: M/s. Standard Chartered Bank Vs. The Principal Commissioner of Central Tax & others.
Case No.: Writ Petition No.648 Of 2024