2026-VIL-280-GSTAT-HYD
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  2. 2026-VIL-280-GSTAT-HYD

SGST Tribunal

GST - Imposition of penalty under a provision different from the one proposed in the SCN - Invocation of Section 74 along with Section 122(2)(a) - The SCN invoked Section 74(1) to propose recovery of transitional credit and proposed penalty under Section 122(2)(a). The Adjudicating Authority and the FAA imposed and confirmed a penalty under Section 74 read with Section 122(2)(b) - Appellant contended that the SCN was internally inconsistent and that the orders travelled beyond the proposals in the SCN - Whether the FAA was correct in imposing penalty under Section 122(2)(b) when the SCN proposed it under Section 122(2)(a) - HELD - Section 122(2)(a) applies to cases other than fraud, wilful misstatement or suppression of facts, whereas Section 122(2)(b) and Section 74 apply to cases involving those ingredients, so the two cannot go together and the proposal in the SCN is itself self-contradictory. Both the Order-in-Original and the Order-in-Appeal travelled beyond the specific proposal in the SCN, which is contrary to Section 75(7) – Further, even in SCN, there is an inherent contradiction. While the SCN has invoked Sec.74(1), which is invoked when ingredients such as fraud, misstatement etc. are alleged, Sec 122(2)(a) is for situations which do not contain these ingredients. Thus, both Sec 74(1) and Sec 122(2)(a) do not go together. Hence, the proposal in SCN itself is self-contradictory and bad in law - The imposition of penalty under Section 74 read with Section 122(2)(b) cannot be sustained and set aside – The ground of appeal is allowed - Disallowance of transitional credit under the proviso to Section 140(1) of the CGST Act, 2017 for non-filing of one return under the existing law due to technical glitches in the departmental portal - The Appellant did not file the ER-1 return for April 2017 due to technical glitches in the ACES portal, although it had written to the Department, lodged tickets with the helpdesk and filed the returns for the subsequent months in which the closing balance was carried forward. The return was ultimately filed at the first available opportunity. The Department disallowed the credit under clause (ii) of the first proviso to Section 140(1) - Whether undisputed CENVAT credit can be disallowed solely for the failure to file ER-1 return before the appointed date due to technical glitches - HELD - The legislative intent behind clause (ii) is to deny transitional credit to negligent taxpayers who abandon their filing obligation for a continuous period of six months and not a diligent taxpayer who faced systemic blockages and informed the Department - The maxim that law does not compel a person to do what is impossible applies, and the technical glitch of the Government's own portal cannot be used to disallow vested transitional credit. When substantial compliance was done, though belatedly, at the first opportunity, insistence on an absolute and literal timeline is misdirected - The transitional credit is to be allowed - Invocation of Section 74 of the CGST Act, 2017 for wrong availment of transitional credit without foundational facts of fraud, wilful misstatement or suppression - The SCN invoked Section 74(1), and the FAA perceived an element of wilfulness merely because the Appellant availed the credit despite knowing that one return was not filed - Whether the Department was legally correct in invoking Section 74(1) - HELD - Section 74 requires fraud, wilful misstatement or suppression of facts to evade tax, and the SCN did not set out any foundational facts for the same. Mechanical use of these words without discussion indicates non-application of mind. Suppression cannot be alleged when the facts are within the knowledge of the Department - Section 74(1) can be invoked only where there is material evidence of fraud, wilful misstatement or suppression made part of the SCN. Wilfulness to take ineligible credit cannot be equated with failure to file a single return due to circumstances beyond control, and no mens rea can be attributed to the Appellant - The elements of Section 74 are not established and the order of the FAA is set aside.
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