M/s Sriba Nirman Company vs. Commissioner (Appeals) & Others
(Andhra Pradesh High Court)
(Non-Filing
of Monthly GST Returns Can Amount to Wilful Suppression Attracting Section 74
Penalty)
Introduction
The Andhra Pradesh High
Court, in its judgment dated 29 January 2025, examined the scope and
applicability of penalty provisions under Section 74 of the CGST Act, 2017, in
cases involving non-filing of monthly GST returns and delayed payment of tax.
In M/s Sriba Nirman Company vs. Commissioner (Appeals) & Others, the
Court upheld the levy of penalty equivalent to tax, holding that prolonged
non-filing of returns and non-payment of tax can amount to wilful suppression
of facts, even where tax is subsequently paid before issuance of show cause
notice.
Case
Details
The writ petition was
filed as W.P. No. 25826 of 2023 before the High Court of Andhra Pradesh
at Amaravati. The petitioner was M/s Sriba Nirman Company, a partnership
firm engaged in works contract services. The respondents included the
Commissioner (Appeals), Joint Commissioner of Central Tax, Directorate General
of GST Intelligence (DGGI), and the Assistant Commissioner (State Tax). The
matter was decided by a Division Bench comprising Hon’ble Justice R.
Raghunandan Rao and Hon’ble Justice Harinath N.
Facts of
the Case
The petitioner was
registered under GST and was executing EPC works contracts as a sub-contractor
for M/s Vijay Nirman Company Ltd. During the period from July 2017 to March
2018, the petitioner raised invoices amounting to approximately ₹20.92 crore,
which included GST of about ₹3.19 crore. Although partial payments were
received from the principal contractor, the petitioner did not file GSTR-3B
returns or pay GST within the prescribed monthly timelines.
On 31 July 2018, officers
of DGGI conducted an inspection at the petitioner’s premises and recorded
statements. Subsequently, the petitioner paid the entire GST liability in
instalments between July and September 2018 and filed all pending returns.
Despite this, show cause notices were issued in August and September 2020
proposing demand of tax, interest, and penalty under Section 74 and other penal
provisions. The adjudicating authority confirmed the demand and imposed penalty
equivalent to tax. The appellate authority upheld the penalty, leading to
recovery proceedings and the filing of the present writ petition.
Petitioner’s
Arguments
The petitioner contended
that Section 74 could not have been invoked since the entire tax liability was
paid much before issuance of the show cause notice. It was argued that mere
non-payment or delayed payment of tax cannot automatically be treated as fraud
or wilful suppression. The petitioner also submitted that under Section 44 of
the CGST Act, the time for final compliance extended till the due date for
filing annual return and, therefore, non-payment before that date could not be
treated as suppression.
The petitioner further
relied on judicial precedents under the pre-GST regime to argue that once tax
and interest are paid, penalty proceedings should not be initiated, and that
Section 74 should be invoked only in exceptional cases involving clear mens rea.
Stand of
the Department
The department argued
that GST law mandates monthly filing of returns under Sections 37 to 39 of the
CGST Act and that non-filing of such returns amounts to suppression of material
facts required to be disclosed. It was contended that the petitioner neither
filed returns nor paid tax for several months, and payment was made only after
departmental inspection. According to the department, such conduct clearly
justified invocation of Section 74.
Issues
Before the Court
The primary issue before
the Court was whether prolonged non-filing of monthly GST returns and
non-payment of tax could amount to wilful suppression of facts so as to attract
penalty under Section 74 of the CGST Act. The Court also examined whether payment
of tax prior to issuance of show cause notice automatically bars proceedings
under Section 74.
Analysis by
the Court
The Court undertook a
detailed analysis of Sections 73 and 74 of the CGST Act and highlighted the
fundamental distinction between the two provisions. It observed that Section 74
applies only where non-payment of tax is by reason of fraud, wilful misstatement,
or suppression of facts with intent to evade tax, whereas Section 73 applies to
other cases.
The Court noted that GST
is a return-based self-assessment system, and monthly returns are a statutory
obligation. Non-filing of GSTR-3B returns results in non-disclosure of turnover
and tax liability to the department. Referring to Explanation-2 to Section 74,
the Court held that suppression includes non-declaration of information
required to be furnished in returns.
Finding on
Wilful Suppression
While accepting that mere
non-payment of tax may not amount to fraud, the Court held that the facts of
the present case went beyond a simple delay. The petitioner neither filed
returns nor paid tax for a prolonged period and did so only after inspection by
DGGI. The explanation that the principal contractor did not release payments
was rejected, as partial payments had admittedly been received.
The Court concluded that
the petitioner’s conduct demonstrated wilful suppression of turnover and tax
liability, thereby justifying invocation of Section 74. The appellate
authority’s finding on wilful suppression was held to be reasonable and not
perverse.
Rejection
of Pre-GST Case Law Reliance
The Court distinguished
the judgments relied upon by the petitioner under the Service Tax regime,
observing that the statutory language of Sections 73 and 74 of the CGST Act is
materially different. Unlike the earlier law, GST does not provide blanket immunity
from penalty merely because tax is paid before issuance of notice unless the
specific conditions under Section 74(5) are fulfilled, including payment of
interest and 15% penalty.
Final
Decision of the Court
The High Court held that
the penalty imposed under Section 74 was legally valid and justified on facts.
It found no infirmity in the adjudication or appellate orders and dismissed the
writ petition. The recovery proceedings initiated by the department were held
to be lawful. No order as to costs was passed.
Conclusion
This judgment is a
significant ruling clarifying that non-filing of monthly GST returns is not
a procedural lapse but a serious statutory violation. Where such
non-compliance is prolonged and corrected only after departmental action, it
can amount to wilful suppression attracting Section 74 penalty. The decision
sends a clear message that payment of tax alone is not sufficient; timely
filing of returns is equally critical under GST. Taxpayers must ensure strict
monthly compliance to avoid severe penal consequences.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
Press On Click Here To Download Order File
Click here
