Supreme Court Upholds Penalty for Non-Filing of GST Returns and Non-Payment

The Supreme Court has dismissed a Special Leave Petition (SLP) filed by a construction company, confirming the ruling of the Andhra High Court which upheld the penalty imposed for non-filing and non-payment of Goods and Services Tax Returns (GSTR). The case, involving Sriba Nirman Company, a partnership construction firm, highlights the stringent measures taken to ensure GST compliance.

The Andhra High Court had previously ruled that the failure to file monthly returns and remit taxes, despite receiving payments, amounted to wilful suppression. The court confirmed the imposition of penalty under Section 74(1) and associated penalties under Sections 122 and 125 of the CGST Act, rejecting the petitioner’s claim of bona fide default.

Justice J.B. Pardiwala and Justice R. Mahadevan of the Supreme Court ruled, “Having heard the learned Senior counsel appearing for the petitioner and having gone through the materials on record, we see no good reason to interfere with the impugned order passed by the High Court of Andhra Pradesh at Amaravati. The Special Leave Petition is, accordingly, dismissed.”

Sriba Nirman Company, established in January 2017, had executed works as a sub-contractor for M/s. Vijay Nirman Company Ltd. during the period from July 2017 to March 2018. The firm raised nine invoices totaling over ₹20.92 crores, including GST of ₹3.19 crores, all billed in March 2018. Despite receiving partial payments from its client, the petitioner failed to discharge its GST liability or file GSTR-3B returns for the said period, citing inadequate funds.

The firm’s failure to file returns was attributed to the GST portal’s restriction against filing without accompanying tax payment. A subsequent inspection by the Directorate General of GST Intelligence (DGGI) on 31.07.2018 prompted the petitioner to realize its lapse, following which it paid ₹3.36 crores towards tax dues and filed all pending returns by 29.09.2018.

The GST department issued show cause notices in August and September 2020, demanding tax (already paid), interest, and penalty under various provisions, including Section 74(1), Section 122, and Section 125 of the CGST Act. Despite submitting a detailed reply and availing a personal hearing, the adjudicating authority passed an order on 24.12.2021 confirming the demands, which was later upheld by the appellate authority. A recovery notice dated 19.08.2023 followed, demanding payment of ₹3.20 crores, submitted by the petitioner.

The Andhra High Court held that the failure to file monthly returns and remit taxes, despite receiving payments, amounted to wilful suppression. It confirmed the imposition of penalty under Section 74(1) and associated penalties under Sections 122 and 125, rejecting the petitioner’s claim of bona fide default. The apex court found nothing to interfere with the Andhra High Court, thus upheld its ruling and confirmed the penalty for non-filing of GST returns and its non-payment.

This ruling serves as a crucial reminder for businesses to ensure timely and accurate filing of GST returns and payment of dues to avoid penalties and legal repercussions. The stringent measures taken by the courts aim to maintain the integrity of the tax system and ensure fair compliance with the law.