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2025-VIL-540-ALH
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SGST High Court Cases

GST - Penalty, Offence, Interpretation of Statutes - Demand-cum-show cause notice to the petitioner under Sections 74 and 122 of the CGST Act, 2017 alleging that the petitioner had indulged in circular trading of tax invoices only on paper without actual supply of goods - Petitioner challenged the imposition of exorbitant penalty under Section 122(1)(ii) and (vii) of the CGST Act - Whether the "Proper Officer/Adjudicating Officer" has the power to adjudicate on the penalty provision provided under Section 122 of the CGST Act – HELD - The proceedings under Section 122 of the CGST Act are to be adjudicated by the adjudicating officer and do not require prosecution. The Section 122 is a penal provision aimed at discouraging tax payers from indulging in unlawful activities and the penalty imposed under this section is a civil liability. The scheme of the CGST Act, read with the CGST Rules, clearly indicates that the proper officer is required to issue a show cause notice and thereafter adjudicate and pass an order under Section 122 – There is no merit in petitioner's contention that Section 122 has to be read with Section 134 of the CGST Act, which requires the proceedings to be carried out by a criminal court, as the language of Section 134 refers to "offences punishable under this Act" and not just "offences" mentioned in the heading of Section 122 - The exclusion of certain offences under Section 132 of the CGST Act does not lead to the inference that proceedings under Section 122 are relatable to a civil liability only, as the legislature may have intended to provide for harsher punishment for some offences. The proper officer/adjudicating officer has the power to adjudicate on the penalty provision provided under Section 122 of the CGST Act - the proceeding under Section 122 of the CGST Act is to be adjudicated by the adjudicating officer and is not required to undergo prosecution and also abatement of proceedings under Section 74 of the CGST Act does not ipso facto abate the proceedings under Section 122 which are for completely different offences - the respondent authorities were directed to continue with the proceedings under Section 122 of the CGST Act in line with the show cause notice issued – The writ petition is dismissed - Whether dropping of proceedings under Section 74 of the CGST Act, 2017 will ipso facto abate the proceedings under Section 122 of the CGST Act - HELD - The abatement of proceedings under Section 74 of the CGST Act does not ipso facto abate the proceedings under Section 122 of the CGST Act. The contravention under Section 73/74 need not necessarily be a contravention covered under Section 122 of the CGST Act - The Explanation 1(ii) to Section 74 provides for the abatement of proceedings against other persons liable to pay penalty under Sections 122 and 125 when the proceedings against the main person under Sections 73 or 74 are concluded. However, in a case where a SCN is issued against the main person under both Section 73/74 and Section 122, the dropping of proceedings under Section 73/74 would not automatically result in the dropping of proceedings under Section 122 against the main person, as the proceedings are with respect to contravention of two different offences. The abatement of proceedings under Section 74 of the CGST Act does not ipso facto abate the proceedings under Section 122 of the Act.
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