The Madras High Court in the case of M/S. ALAMELU CONSTRUCTION VERSUS THE ASSISTANT COMMISSIONER OF GST & CENTRAL EXCISE, PUDUCHERRY vide W. P. No. 9681 of 2024 And W. M. P. Nos. 10706 & 10707 of 2024 dated 12.04.2024, has held that where the petitioner discharged the GST liability before the show cause notice was issued, imposition of a 100% penalty was not justified. The Court ruled in favor of allowing the petitioner, to file a statutory appeal against the interest and penalty imposed. This was conditioned on the payment of Rs. 2.5 lakhs towards the interest liability. The appellate authority was directed to accept and dispose of the appeal on its merits, without considering the issue of limitation.

Facts of the Case:-  The petitioner, received a show cause notice for not remitting its GST liability. The department asserted that the petitioner collected taxes on the outward supply of goods and services but failed to remit the tax. However, the petitioner had already discharged the GST liability before the issuance of the show cause notice, leading to the levying of interest by the department.

Submissions of the Petitioner:-  The petitioner argued that they were entitled to the benefit of the proviso to Section 50(1) of the Central Goods and Services Tax (CGST) Act, 2017. This proviso potentially exempts them from paying interest since the tax liability was settled before the show cause notice was issued.

They further contended that since the tax liability was settled before the issuance of the show cause notice, the petitioner should not be liable for any penalty. The petitioner expressed a willingness to approach the appellate authority through a statutory appeal and sought permission to do so

Submission of the Respondent:-  The petitioner paid the due taxes only after the proceedings had started, thus disqualifying them from the benefit under the proviso to Section 50(1).

Held;- The Court noted that the petitioner had indeed discharged the GST liability on the specified dates in 2019 i.e. before the issuance of the show cause notice. The Court found that the imposition of a 100% penalty was not justified given that the liability had been settled prior to the notice.

The Court noted that the statutory time limit for filing an appeal had expired. However, considering the circumstances and the petitioner’s willingness to remit Rs. 2.5 lakhs towards the interest liability, the Court found it appropriate to allow the petitioner to file a statutory appeal.

The court directed that the petitioner could file the statutory appeal on the condition that they remit Rs. 2.5 lakhs towards the interest liability within three weeks from the receipt of the order. If this condition is met, the appellate authority is instructed to accept and adjudicate the appeal on its merits, disregarding the issue of limitation.

The complete judgment can be accessed at 2024 Taxo.online 791