GST Registration And Payment Of Tax After Inspection Is Not Voluntary Conduct: Madras High Court

The Bench of Justice K. Kumaresh Babu observed that “there is a deliberate attempt to evade payment of tax by not registering himself under the Act and also issuing receipts as donation to the Trust. Only after the inspection they have agreed to pay the tax by registering themselves. This conduct cannot be said to be a voluntary conduct.”

In this case, the assessee/petitioner is the charitable trust having registered office at Karur. Under the said trust assessee runs a marriage hall. The CGST department preventive unit visited marriage hall and asked to handover entire accounts and records.

The GST authority of Preventive Unit arrived at a receipt of Rs.3,86,36,410/- for the marriage hall from July, 2017 to January, 2020. In the meanwhile, the assessee paid a sum of Rs. 58,93,702/- as GST liability and a sum of Rs.8.84,056/- as penalty liability under cum-tax basis method applying Rule 35 of CGST Rules.

The Assistant Commissioner issued show cause notice arriving a sum of Rs.69,54,554/- as GST liability for the total value of Rs.3,86,36,410/- and rejected the cum-tax basis benefit claimed by the assessee. Further, demanded balance GST liability of Rs.10,60,852/- along with interest and full amount of GST liability as penalty ie.Rs.69,54,554/.

The assessee gave a reply, to justify the application of cum-tax basis method and objected the interest and to invoke Section 74(1) CGST Act that the assessee neither suppressed any payments nor willfully misrepresented.

The Assistant Commissioner passed an order in original, demanding balance GST liability of Rs.10,60,852/- along with interest and full amount of GST liability as penalty ie.Rs.69,54,554/.

Aggrieved by the order of Assistant Commissioner the assessee filed an appeal before the Joint Commissioner which confirmed the order passed by the Assistant Commissioner.

The department submitted that the assessee had received huge amount of rents without obtaining GST registration, not paid GST, not filed statutory GST returns during July, 2017 to January, 2020 and hence cum-tax benefit was not extendable for the assessee.

The bench observed that the entire claim against the Assessee had arisen of its own failure to register itself under the GST Act as required under law. Only pursuant thereto, the Assessee had remitted the tax that he is liable to pay.

The bench opined that “Even though, such action is claimed to be a voluntary payment by the Assessee, it should be seen that the Assessee had attempted to evade payment of tax which is liable to be taxed and only pursuant to the inspection effected by the respondent, the Assessee had submitted himself for payment of tax and hence, the same cannot be said to be a voluntary payment and has been made only to wriggle out of the penal consequences.”

The bench further stated that the conduct of the Assessee to evade tax will also fall under suppression and fraudulent activities envisaged under Section 74 of the GST Act. Hence, the contention that Section 74 cannot have been invoked against the Assessee cannot be countenanced.

In view of the above, the bench dismissed the petition.

Case Title: M/s.Annai Angammal Arakkattalai v. The Joint Commissioner or GST (Appeals), Coimbatore

Citation: 2025 LiveLaw (Mad) 38

Case Number: W.P.(MD)No.28502 of 2022

Counsel for Petitioner/ Assessee: Joseph Prabhakar

Counsel for Respondent/ Department: R. Gowri Shankar