While upholding the imposition of interest and penalty on M/s Munna Traders (assessee) under the Bihar Goods and Services Tax Act (BGST Act) for claiming excessive input tax credit, the Patna High Court held that the assessee has defaulted tax payment, based on an excessive claim of input tax credit, later deposited the input tax credit without interest due under Section 50, which attracted the penalty under Section 122 of the BGST Act.

The Division Bench of Chief Justice Vinod Chandran and Justice Partha Sarthy observed that “In the present case, there is no proceeding of scrutiny or appeal pending and there cannot be any revision of the input tax credit since the allegation of excess claim has been admitted and differential amount paid by the assessee. The penalty levied was proper and a civil liability, attracted on the failure to pay the tax due, on a wrong claim of input tax credit”.

Advocate Manoj Kumar Keshri appeared for the Petitioner, whereas Advocate Vivek Prasad appeared for the Respondent.

The brief background of the case was that the petitioner, an assessee under the BGST Act, had challenged the imposition of interest and penalty due to an excessive input tax credit claim. These penalties were enforced after a notice was issued under the BGST Act. The petitioner's appeal, filed with a delay, was rejected as it exceeded the allowable timeframe for condonation according to Section 107(4) of the BGST Act. The petitioner's counsel argued that an alternative recourse was available before the Tribunal, which had not been established. They also stated that the Court often issued a stay on recovery upon payment of 20% of the outstanding tax, pending the formation of the Tribunal and the initiation of an appeal. The counsel contended that their excessive input tax credit claim was unfounded. He further claimed that their payment had been made under duress from authorities.

On the other hand, the Government Advocate countered by highlighting that the discrepancies had surfaced during the scrutiny of their return, leading to the issuance of a notice. Although the petitioner paid the differential tax amount, they neglected to pay the corresponding interest despite being served a notice under Section 73(1) of the BGST Act. Consequently, the Assessing Officer imposed both interest and penalty.

After considering the submission, the Bench found that the assessee has admitted the discrepancy with respect to the excess claim of input tax credit and paid the amounts due on which interest was also due under Section 50 of the BGST Act.

The non-payment of tax due and the failure to pay interest attracted the penalty imposed, added the Bench.

The Bench observed that Section 107 of the BGST Act had established a specific timeframe during which a delayed appeal could be considered by the first appellate authority if valid reasons for the delay were presented.

Further, the Bench pointed out that the Circular F. No. CBIC-20001/2/2022- GST specifically outlined that the directives within that Circular were exclusively applicable to ongoing procedures encompassing scrutiny, audit, investigation, etc., pertaining to the financial years 2017-18 and 2018-19, but it did not extend to concluded proceedings.

Thus, finding that there were no ongoing scrutiny or appeal processes, the Bench clarified that there could not be any revision of the input tax credit as the allegation of an excessive claim had been admitted, and the differential amount had been paid by the petitioner.

Thus, the Bench deemed the imposed penalty as appropriate, representing a civil liability arising from the failure to pay the due tax, due to a wrong claim of the input tax credit.

Cause Title: M/s Munna Traders v. The State of Bihar through and Ors.

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