The Bombay High Court, in the case of Arun Krishnachandra Goswami v. Union of India, Writ Petition No. 2963 of 2022 decided on 05.09.2022, held that when there is a mistake of paying the Goods and Services Tax (“GST”) to the wrong Government Authority, the same is not an attempt to evade tax and would not attract the levy of penalty and interest.
Mr. Arun Krishnachandra Goswami (hereinafter referred to as the “Petitioner”), the Director of an advertising agency namely Agya OOH Media Solutions Private Limited, bid on a Tender floated by the Ministry of Railways, Government of India (hereinafter referred to as the “Railways”).
As per Clause 2.14 of General Conditions of Contract (hereinafter referred to as the “Contract”) for the Tender, the Petitioner was liable for payment of Service Tax at applicable rate as and when notified on the amount of license fee to the Railway Administration.
In July 2017, the tax regime was replaced by GST and the Petitioner continued to pay GST at the rate of 18% to the Railways. Subsequently, the Petitioner received a Notice from the Deputy Commissioner of State Tax (hereinafter referred to as “Respondent”) on 21.12.2020 directing to attend the audit in person or through authorized representative along with books of accounts for the Financial Year 2017-18.
During the audit, the Petitioner realized that the issue was relating to the GST paid to Railways. The Petitioner informed the Respondent that the entire amount of GST was paid to the Central Government through the Railways, and further realized that the portion of 9% GST was not being paid by the Railways to the State Government.
The Respondent in its Affidavit-in-Reply submitted that the GST was paid by the Petitioner to the Railways. However, under Section 9(3) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”) and State Goods and Services Tax Act, 2017 (hereinafter referred to as the “SGST Act”), and Section 5(3) of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the “IGST Act”), the Petitioner was liable to pay GST directly to the Central Government and State Government on reverse charge basis.
Aggrieved, the Petitioner filed the present Writ Petition seeking appropriate relief from the Bombay High Court (hereinafter referred to as the “High Court”).
ISSUES BEFORE THE HIGH COURT
Whether the mistake of paying GST to the Central Government, instead of the State Government, amounts to evasion of tax?
CONTENTIONS OF THE RESPONDENT
The Respondent contended that when the tax is paid on reverse charge basis, it is the obligation on the Petitioner to pay the tax directly to the State Government and Central Government.
It was further submitted by the Respondent that the Tax Invoices raised on the Petitioner clearly stated that GST is payable on Reverse Charge Basis, and also mentioned the amount payable as CGST and SGST.
DECISION AND FINDINGS
The High Court observed that the Petitioner had paid the entire amount of SGST and CGST to the Railways only, instead of paying it directly to the State and Central Government respectively.
Thus, the High Court noted that the present case was not that of an attempt to evade any tax, but a clear case of mistakenly paying the entire amount of GST to the Railways, instead of paying the component of SGST to the SGST Authority, and the component of CGST to the CGST Authority.
The High Court directed the Railways to repay the GST collected to the Petitioner and directed the Petitioner to pay the same to the concerned CGST Authority and SGST Authority. Similarly, the High Court ordered the CGST Authority and SGST Authority to open their Portal for the Petitioner to make the payments of CGST and SGST, respectively.
The High Court stated that for the calculation of the amount of CGST and SGST to be repaid by the Petitioner to the CGST Authority and SGST Authority respectively, no interest and penalty shall be levied on the Petitioner. Additionally, the High Court directed the CGST and SGST Authorities to provide the Input Tax Credit to the Petitioner within one week of deposition.
In the present case, the Petitioner was required to discharge its GST liability on Reverse Charge Basis, by making the payments of GST directly to the SGST Authority and CGST Authority. However, the Petitioner paid the entire amount of GST to the Railways.
The High Court held that the Petitioner made the bona fide payment of true amount of GST to the Railways, which does not indicate the intention to evade taxes. Thus, the High Court emphasized on the principle that penalty and interest cannot be imposed when the intent to evade taxes is absent.
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