Best judgment assessment cannot be made for non-filing of GSTR-3B

The Hon’ble Appellate Authority, GST,Andhra Pradesh, in the case ofOmsai Professional Detective & Security Services Pvt. Ltd. [Order No. 5132 of 2020 (dated, March 16, 2020)]held that best judgment assessment under Section 62(1) of Central Goods and Services Tax Act, 2017 ("CGST Act") cannot be made in respect of non-filers of returns in Form GSTR-3B, wherein Assessing Authority ("AA") issued notices for filing of returns in Form GSTR-3B and passed best judgment assessment orders under Section 62 of CGST Act, on failure to file the same.

Facts

M/s. Omsai Professional Detective & Security Services Pvt. Ltd. ("Appellant"), is engaged in the business of supplying the security services. This appeal has been filed against the tax orders passed by the AA for the tax periods from January, 2019 to February, 2019 under CGST Act, vide orders dated April 23, 2019, disputing the levy of tax of Rs. 6,96,22,979/-. The AA stated that the Appellant has been filing the returns in Form GSTR-1 by declaring the outward taxable supplies under the CGST Act, but not filed the returns in Form GSTR-3B for the above tax periods, and not paid liable tax on its outward supplies as declared in the returns in Form GSTR-1.

Further, AA issued notices for filing of the returns in Form GSTR-3B, but the Appellant failed to file the same, and therefore, AA was left with no other option other than to pass the best judgment assessment orders.

The AA has estimated the Appellant's outward taxable supplies, by enhancing the returned outward taxable supplies in the returns in Form GSTR-1 by 50% towards probable supplies. Thus, the AA has best judged the turnovers of the Appellant @ 150% of the returned outward supplies and levied tax thereon @ 18%. The AA also invoked Section 50 of the CGST Act and computed the interest liability of the Appellant.

Besides, the AA also levied penalty @ 100% under Section 122 of the CGST Act holding that the Appellant has willfully suppressed such 150% of the returned turnovers in Form GSTR-1, in such default.

Issues

· Whether the best judgment orders through estimating the outward taxable supplies by AA, are based on any dependable and authentic evidence/basis or not?

· Whether the Appellant's contention that Section 62 of the CGST Act cannot be invoked as GSTR-3B is not any return prescribed under Section 39 of the CGST Act, hence these orders are legal or not?

· Whether the willful suppression aspect and resultant levy of 100% penalty, is found to be having any basis and such willfulness, has been established by AA or not?

· Whether the interest levied by AA, is in tune with the provisions of the CGST Act or not?

Held

The Hon’ble Appellate Authority, GST,Andhra Pradesh, in Order No. 5132 of 2020 dated March 16, 2020 held as under:

· That, the best judgment assessment under Section 62 of CGST Act, can be made only when the dealer fails to file the return specified in Section 39(1) of the CGST Act, read with Rule 61(1) of the Central Goods and Services Tax Rules, 2017 ("CGST Rules"), that is the return in Form GSTR-3. Nothing else.

· Observed that, the best judgment assessment under Section 62 of CGST Act can be made by taking into account all the relevant material which are already available and/or the material available which is gathered from the other sources. It is also clear from the settled judicial principles on best judgment assessment that the estimations involved in the best judgment assessment should not be based on mere surmises and/or conjectures and therefore, this cannot be treated as the correct basis for the estimation. The court further observed that, no attempt was made by the tax officer to gather any material to indicate or establish that the quantum of the outward supplies declared by the dealer/supplier in Form GSTR-1 for that month is incorrect and incomplete. The best judgment of the quantum of the outward supplies is made declaring uniformly for all the months that the dealer has suppressed 50% of its declared outward supplies in the relevant months. Thus, the estimations involved in the best judgment assessment herein are not sustainable. They are whimsical and have no basis. It is declared accordingly and the same are deleted.

· In view of the emerged anomalies involving invoking of Section 62 of CGST Act, unlawfully, because the relevant Section 39 of the CGST Act does not speak of GSTR-3B in the listed returns for the disputed period, and in view of the erroneous method adopted by AA for estimating outward taxable supplies through best judgment without mentioning reasons/evidence, hence the tax so levied by the AA of Rs. 3,43,96,432/- is annulled and modified as per actual tax liability of the Appellant for the period from January, 2019 to February, 2019.

· Struck down theadditions made by the AA towards the probable suppressions that formed the basis for the levy of penalty, as the levy is not justifiable asthere is not even an iota of evidence established by the AA pointing out the willfulness in the omission to file the return in Form GSTR-3B and/or in the determined suppression of outward tax. Hence, the total penalty of Rs. 3,43,96,432/- annulled.

· Upheld the levy of interest, but the AA is directed to compute leviable interest as on date against the actual tax to be paid by the Appellant as discussed.

Relevant Provisions

Section 39 of CGST Act

"Furnishing of returns

39. (1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, and within such time, as may be prescribed:

Provided that the Government may, on the recommendations of the Council, notify certain class of registered persons who shall furnish a return for every quarter or part thereof, subject to such conditions and restrictions as may be specified therein.

(2) A registered person paying tax under the provisions of section 10, shall, for each financial year or part thereof, furnish a return, electronically, of turnover in the State or Union territory, inward supplies of goods or services or both, tax payable, tax paid and such other particulars in such form and manner, and within such time, as may be prescribed.

(3) Every registered person required to deduct tax at source under the provisions of section 51 shall furnish, in such form and manner as may be prescribed, a return, electronically, for the month in which such deductions have been made within ten days after the end of such month.

(4) Every taxable person registered as an Input Service Distributor shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, within thirteen days after the end of such month.

(5) Every registered non-resident taxable person shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, within twenty days after the end of a calendar month or within seven days after the last day of the period of registration specified under sub-section (1) of section 27, whichever is earlier.

(6) The Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit for furnishing the returns under this section for such class of registered persons as may be specified therein:

Provided that any extension of time limit notified by the Commissioner of State tax or Union territory tax shall be deemed to be notified by the Commissioner.

(7) Every registered person who is required to furnish a return under subsection (1), other than the person referred to in the proviso thereto, or subsection (3) or sub-section (5), shall pay to the Government the tax due as per such return not later than the last date on which he is required to furnish such return:

Provided that every registered person furnishing return under the proviso to sub-section (1) shall pay to the Government, the tax due taking into account inward and outward supplies of goods or services or both, input tax credit availed, tax payable and such other particulars during a month, in such form and manner, and within such time, as may be prescribed:

Provided further that every registered person furnishing return under subsection (2) shall pay to the Government the tax due taking into account turnover in the State or Union territory, inward supplies of goods or services or both, tax payable, and such other particulars during a quarter, in such form and manner, and within such time, as may be prescribed.

(8) Every registered person who is required to furnish a return under sub-section (1) or sub-section (2) shall furnish a return for every tax period whether or not any supplies of goods or services or both have been made during such tax period.

(9) Subject to the provisions of sections 37 and 38, if any registered person after furnishing a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (4) or sub-section (5) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in such form and manner as may be perscribed, subject to payment of interest under this Act:

Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of return for the month of September or second quarter following the end of the financial year to which such details pertain, or the actual date of furnishing of relevant annual return, whichever is earlier.

(10) A registered person shall not be allowed to furnish a return for a tax period if the return for any of the previous tax periods has not been furnished by him."

Section 62 of CGST Act

"Assessment of non-filers of returns

62. (1) Notwithstanding anything to the contrary contained in section 73 or section 74, where a registered person fails to furnish the return under section 39 or section 45, even after the service of a notice under section 46, the proper officer may proceed to assess the tax liability of the said person to the best of his judgement taking into account all the relevant material which is available or which he has gathered and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates.

(2) Where the registered person furnishes a valid return within thirty days of the service of the assessment order under sub-section (1), the said assessment order shall be deemed to have been withdrawn but the liability for payment of interest under sub-section (1) of section 50 or for payment of late fee under section 47 shall continue."