GST Act | Authority's Failure To Mention Statutory Provision In Show Cause Notice Doesn't Prejudice Defaulter If Facts Stand Admitted: Kerala High Court

The Kerala High Court has made it clear that merely because the show cause notice issued to a defaulter under the GST Act did not refer to a particular statutory provision that may be attracted against such defaulter, the same cannot be said to have caused prejudiced when the facts leading to the invocation of the statutory provision concerned were admitted.

The Court was dealing with a case where penalty was imposed under Section 73(11) of the Central Goods and Services Tax Act [CGST Act]/State Goods and Services Tax Act [SGST Act] ('CGST/SGST Act') for non-payment of tax due to the State.

Section 73(11) of the GST Act states, "notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax". 

"While it may be a fact that Ext.P1 notice issued to the appellant did not specifically refer to Section 73(11) of the CGST/SGST Act, when we find that, on the admitted facts, the appellant had not paid tax due to the State despite collecting the same from its customers, then, as per the statutory provisions, it is the provision of Section 73(11) and not the provision of Section 73(8) that will apply to determine the penal liability of the appellant," the Division Bench comprising Justice A.K. Jayasankaran Nambiar and Justice Kauser Edappagath observed. 

A penalty of Rs.40,000/- was imposed on the appellant on the ground that it had failed to pay the entire tax dues within 30 days from the date of the show cause notice that informed it of the fact that differential tax was due from it.

The appellant averred that the show cause notice intimating it of the differential tax dues did not mention Section 73(11) and only proceeded on the assumption what the appellant was liable only under Section 73(8) of the CGST/SGST Act. 

The Single Judge had upheld the action of the Assessing Authority, taking the view that Section 73(11) applied to the present case.

In appeal, the division bench observed it was undisputed that the differential tax amount demanded from the appellant pertains to transactions covered by invoices in which the appellant had shown the price of the goods, as well as the tax amounts due from the concerned customers. 

It noted that the appellant had failed to include the tax amounts covered by the invoices considered by the Assessing Authority for the issuance of the demand for differential tax, while paying the tax due to the State along with the returns filed. The Court discerned that it was in such circumstances that the demand for differential tax was made against the appellant. 

The Court was thus of the considered view that although the notice had not specifically referred to Section 73(11), the provision would still apply in determining the penal liability of the appellant.

"The Assessing Authority, having found that as per the provisions of Section 73(11) of the CGST/SGST Act, the appellant would be liable to penalty in view of the non-payment of tax collected from its customers, we see no reason to interfere with the findings of the learned Single Judge that upheld the order of the Assessing Authority laying down the correct position in law. Merely because the show cause notice issued to the appellant did not refer to a particular statutory provision, the appellant cannot be said to have been prejudiced when the facts leading to the invocation of the statutory provision concerned were admitted by the appellant," it observed, while dismissing the appeal. 

Counsel for the Appellant: Advocates P.N. Damodaran Namboodiri and Hrithwik D. Namboothiri

Counsel for the Respondent: Senior Government Pleader Dr. Thushara James

Citation: 2023 LiveLaw (Ker) 674 

Case Title: M/S Global Plasto Wares v. Assistant State Tax Officer & Ors. 

Case Number: W.A. No. 1874 OF 2023

Click Here To Read/Download The Judgment