In a landmark ruling, the Kerala High Court recently delivered a significant judgment pertaining to penalties under the Central Goods and Services Tax Act/State Goods and Services Tax Act (CGST/SGST Act). The case, titled M/S Global Plasto Wares v. Assistant State Tax Officer & Ors. (W.A. No. 1874 OF 2023), centered on the imposition of penalties on a taxpayer for failure to remit taxes owed to the State under Section 73(11) of the GST Act.

Section 73(11) stipulates penalties when self-assessed or collected tax amounts remain unpaid beyond 30 days from the due date. Despite the absence of a specific mention of Section 73(11) in the notice, the Division Bench, comprising Justice A.K. Jayasankaran Nambiar and Justice Kauser Edappagath, asserted that the absence did not prejudice the taxpayer’s case. The court stressed that when admitted facts revealed the defaulter’s failure to remit taxes collected from customers, Section 73(11) took precedence in determining penalty liability over Section 73(8).

The appellant faced a penalty of Rs. 40,000 due to non-payment of the entire tax amount within 30 days from the issuance of the show cause notice, which notified the shortfall in tax payment. The crux of the appellant’s contention rested on the absence of explicit mention of Section 73(11) in the notice, which instead suggested liability solely under Section 73(8) of the CGST/SGST Act.

However, the court noted that the differential tax amount demanded from the appellant was linked to invoices detailing goods’ prices and the corresponding tax amounts owed by customers. The appellant failed to include these tax amounts while remitting state taxes along with filed returns, leading to the demand for the differential tax.

Despite the notice’s omission of specific reference to Section 73(11), the Division Bench concluded that the provision was applicable in determining the penalty. It highlighted that the omitted reference did not prejudice the appellant since the circumstances that invoked Section 73(11) were admitted by the appellant.

The court upheld the Single Judge’s decision, supporting the Assessing Authority’s interpretation and application of Section 73(11) to the case. It underlined that the absence of an explicit statutory mention in the notice did not create prejudice when the facts leading to the invocation of that provision were acknowledged by the appellant.

Advocates P.N. Damodaran Namboodiri and Hrithwik D. Namboothiri represented the appellant in the case, while Senior Government Pleader Dr. Thushara James appeared on behalf of the Respondent.This verdict holds immense significance in GST-related matters, highlighting the importance given to admitted facts and their alignment with statutory provisions. The ruling signifies that even in the absence of explicit statutory references in notices, courts may invoke relevant provisions based on admitted circumstances to determine liability.

The judgment emphasizes that courts focus on the substance of the matter – acknowledging admitted facts and aligning them with the applicable statutory provisions. This approach ensures that the essence of the law is upheld, maintaining the integrity and purpose of the legislation even in situations where explicit statutory references might be absent.The ruling provides clarity and sets a precedent for future cases in GST-related disputes, offering guidance on the courts’ interpretation and application of statutory provisions. It underscores the principle that acknowledging facts that lead to statutory implications is paramount, irrespective of the direct reference in the notice, thus ensuring a fair and equitable application of tax laws.

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