2025(07)LCX0355

Gujarat High Court

Bhavani Tractor

Versus

Union of India

R/SPECIAL CIVIL APPLICATION NO. 13787 of 2024 decided on 10-07-2025

New Page 1

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO. 13787 of 2024

M/S BHAVANI TRACTOR
Versus
UNION OF INDIA & ORS.

Appearance:
UCHIT N SHETH(7336) for the Petitioner(s) No. 1
DEEPAK N KHANCHANDANI(7781) for the Respondent(s) No. 1
MS HETVI H SANCHETI(5618) for the Respondent(s) No. 2,3

CORAM: HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
 HONOURABLE MR. JUSTICE PRANAV TRIVEDI

Date : 10/07/2025

ORAL ORDER

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1 Heard learned advocate Mr.Uchit Sheth for the petitioner and learned advocate Ms.Hetvi Sancheti for the respondents.

2 By this petition under Article 227 of the Constitution of India, the petitioner has prayed for the following reliefs:

“A This Hon’ble Court may be pleased to issue a writ of certiorari or writ in the nature of certiorari or any other appropriate writ or order quashing and setting aside impugned order dated 14.06.2024 (annexed at Annexure A) as well as order dated 20.10.2023 (annexed at Annexure J) as being wholly without jurisdiction, arbitrary and illegal;

B. This Hon’ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order directing the Respondents to forthwith refund the amount of penalty deposited under Section 74(5) of the GST Acts along with approprite interest on such refund;”

3 The brief facts of the case are as under:

3.1 The petitioner is an authorised dealer of Mahindra Tractors and is duly registered under the provisions of the Central / State Goods & Services Tax Act, 2017 (for short ‘the GST Act’).

3.2 It is the case of the petitioner that for the year 2019-20, there was outstanding tax liability of Rs.51,12,570/- and there was input tax credit available of higher amount and offset of such liability against input tax credit was pending to be made. Pursuant to the Audit of the records of the petitioner for the period from July 2017 to March 2020, a query memo was raised regarding the alleged outstanding liability on 21.12.2022 which was responded by the petitioner stating that it was only a technical error as input tax credit was very much available in the electronic credit ledger of the petitioner.

3.3 The petitioner, thereafter, filed Form GST DRC-03 dated 05.01.2023 under Sec.73(5) of the GST Act offsetting the input tax credit balance against the output tax liability. The petitioner also paid the principal amount of tax along with the penalty under Sec.74(5) of the GST Act to avoid the litigation as in view of the remark made by the Auditor, the tax under the GST Act was also payable by the petitioner in respect of the items shown in “other income” which was in nature of commission, sale of oil, spares, workshop income etc.

3.4 The petitioner, therefore, made a prayer that since the entire tax liability has been discharged through electronic credit ledger, no interest was leviable by virtue of sec.50 of the GST Act and no penalty was leviable on the petitioner as the petitioner has made the payment of tax and penalty prior to issuance of any intimation or show-cause notice by the competent authority.

3.5 The contention of the petitioner for non levy of interest and penalty was not accepted by the GST authority in audit. As per their letter dated 11.04.2023, an intimation was issued in Form GST DRC-01A demanding interest and penalty under the GST Act. The petitioner by reply dated 20.04.2023, submitted that no interest was leviable since the entire tax penalty was made by debiting the electronic credit ledger. It was also contended that no penalty under Sec.74 of the GST Act can be levied as there was no malafide intention to evade payment of tax by the petitioner as it was only a delayed offset of output tax liability against available input tax credit.

3.6 However, a show-cause notice in Form DRC01 was issued on 25.05.2023 under sec.74 of the GST Act proposing to demand interest and penalty from the petitioner which was replied by the petitioner on 22.09.2023 objecting to the same. The adjudicating authority, however, passed the Order-in-Original dated 20.10.2023 confirming the demand of interest and penalty. Being aggrieved, the petitioner preferred an appeal under Sec.107 of the GST Act. The Appellate Authority by order dated 14.06.2024 confirmed the levy of penalty and interest on the petitioner by rejecting the appeal in view of the Rule 88B of the Central Goods & Services Tax Rules, 2017, on the ground that the tax was paid by the petitioner only after initiation of the audit proceedings.

3.7 Being aggrieved, the petitioner has preferred this petition with the aforesaid prayers.

4 Learned advocate Mr.Ucit Sheth, at the outset, has submitted that after filing of the petition, the legislature has inserted Sec.128A by Finance(No.2)Act, 2024, with effect from 01.11.2024 for waiver of interest or penalty or both relating to demand raised under Sec.73 for the tax period from 01.07.2017 to 31.03.2020.

4.1 It was submitted that the impugned Orderin-Original as well as the Order-in-Appeal passed by the Appellate Authority are only for the purpose of imposition of interest and penalty.

4.2 Learned advocate Mr.Uchit Sheth, submitted that when the petition was filed the only contention available with the petitioner was to challenge the impugned orders on the ground that no interest and penalty could have been levied when there is sufficient balance in the electronic credit ledger of the petitioner which could not be offset by the petitioner at the relevant point of time. It was submitted that in view of the insertion of the provisions of Sec.128A of the GST Act and more particularly the proviso of the sub-section(1) of sec.128A which provides that where a notice has been issued under sub-section(1) of section 74 the order is required to be passed by proper officer in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a Court in accordance with the provision of Sub-section(2) of Sec.75 of the GST Act. Such notice or order shall be considered to be notice or order as the case may be referred to in Clause (a) or Clause (b) of the said sub-section. It was, therefore, submitted that if the petitioner convinced the Court that there was no wilful suppression or mis-statement by the petitioner so as to invoke the provision of Sec.74 for levy of interest and penalty, the respondent authority ought to have issued the notice under Sec.73 of the GST Act, then as per sub-section (2) of sec. 75 of the GST Act, the Court may direct the respondents to pass a fresh order as per the provision of Sec.73 of the GST Act. It was submitted that if such order is passed, then petitioner will be entitled to the waiver of interest and penalty in view of the provisions of Sec.128A(1)(b) of the GST Act.

4.3 Learned advocate Mr.Uchit Sheth, therefore submitted that in facts of the case, there is no wilful mis-statement or suppression by the petitioner so as to invoke the provisions of Sec.74 in the facts of the case. The only fault on the part of the petitioner was that the petitioner did not offset the outstanding tax liability from the electronic credit ledger at the relevant point of time and once it was pointed out in the audit, wherein, the petitioner has filed Form DRC-03 to offset the tax liability from the balance which in the electronic ledger. It was, further submitted that the petitioner has also paid the tax and penalty on the other income which was raised by the Audit Query.

4.4 It was therefore submitted that as per the provision of Sec.75(2) of the GST Act, the Court may direct the respondent authority to pass a fresh de novo order under the provisions of Sec.73 of the Act so as to enable the petitioner to get the benefit of sec.128A of the GST Act. In support of his submission, learned advocate Mr.Uchit Sheth, referred to and relied upon the Agenda for 53rd GST Council Meeting held on 22.06.2024, wherein, in Agenda Item 3(vii), it was proposed for insertion of sec.128A in the GST Act to provide for conditional waiver of interest of penalty or both relating to demand raised under Sec.73 for Financial Year 2017-18 to Financial Year 2019-20.

4.5 Learned advocate Mr.Sheth, invited the attention of the Court to para 3.5 of the Agenda to point out that if any order is passed under Sec.75(2) and the proper officer passes an order under Sec.73 pursuant to such order, then the benefit of Sec.128A would be available to the assessee. Learned advocate Mr.Sheth, also pointed out the paragraph Nos.

4.91 and 4.93 of the Minutes of the 53rd Meeting of the GST Council to submit that the GST Council has agreed with the agenda and the recommendations made in the agenda of the Law Committee along with the suggestion of the Secretary regarding the date to be notified for the payment of tax liability.

4.6 Learned advocate Mr.Sheth also referred to Circular No.238/32/2024-GST dated 15.10.2024 and pointed out paragraph No. 3.1.5 thereof to submit that by the Circular the CBIC has considered the proviso to sec.128A(1) of the GST Act and has also taken note of the subrule(6) of Rule 164 which is inserted along with the provision of Sec.128A in the CGST Rules to provide the procedure to be followed for implementation of sec.128A of the GST Act. It was submitted that once an order is passed under sec.75(2) of the GST Act, the proper Officer has to pass an order under Sec.73, and thereafter, the petitioner will be entitled to file Form GST SPL–02 as per Rule 164 of the GST Rules within six months from the date of communication of the order of the proper officer redetermining the amount of tax to be paid under Sec.73 of the GST Act by the petitioner.

4.7 It was submitted that in the facts of the case, that the petitioner is saddled with the liability of payment of interest and penalty, and therefore, the proper officer has to pass an order under Sec.73 of the GST Act for levy of interest and penalty only as per the provisons of Sec.73 of the GST Act redetermining the interest and penalty as per the provision of Sec.73 of the GST Act.

5 On the other hand, learned advocate Ms.Hetvi Sancheti for the respondent submitted that the respondent authority has issued the notice under Sec.74 of the GST Act only considering the fact that, but for the Audit of query, the petitioner would not have filed the Form DRC-03 voluntarily to offset the tax liability from the balance in the electronic credit ledger. It was therefore submitted that there is an implied suppression by the petitioner with regard to not offsetting the tax liability from the electronic credit ledger and therefore the provision of Sec.75(2) cannot be pressed into service so as to hold that there is no wilful mis-statement or suppression by the petitioner.

6 Having heard the learned advocates appearing for the respective parties and having considered the facts of the case and on perusal of the impugned orders passed by the adjudicating authority as well as the Appellate Authority it is apparent that the petitioner inadvertently did not offset the tax liability from the credit balance in the electronic ledger. It is not even the case of the respondent that there was no credit balance in the electronic credit ledger and the petitioner did not pay the outstanding tax liability. The only fault on the part of the petitioner was that the petitioner did not offset the tax liability from credit balance in the electronic ledger. Be that as it may, it is apparent from the facts of the case emerging from the record that there is no wilful mis-statement or suppression on the part of the petitioner to attract the provisions of sec.74 of the GST Act.

7 In view of such facts, we deem it fit to pass an order under Sec.75(2) of the GST Act by directing the respondent-Assessing Officer to pass a fresh de novo order under provision of section 73 of the Act instead of invoking the provision of Sec.74(1) of the GST Act.

The respondent – Assesing Officer shall pass such order after providing an opportunity of hearing to the petitioner within a period of three months from the date of receipt of copy of this order.

In view of the above directions, the impugned orders passed under sec.74 and confirmed by the Appellate Authority are hereby quashed and set aside and the matter is remanded to the Adjudicating Authority for compliance of this order so as to enable the petitioner to avail the benefit of the newly inserted provision of Sec.128A of the Act considering the proviso to sec.128A(1) read with the minutes of the 53rd Meeting of the GST Council held on 22.06.2024 as well as the Circular No.238/32/2024-GST dated 15.10.2024

8 With the aforesaid directions, the petition is disposed of with no orders as to costs.

(BHARGAV D. KARIA, J)

(PRANAV TRIVEDI,J)