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The Hon’ble Andhra Pradesh High Court in Godway Furnicrafts vs. the State of AP [Writ Petition No.10350 of 2020, dated November 11, 2020] confirmed the demand for recovery of Goods and Services Tax (“GST”) by Revenue Department and held that merely because the assessee has exercised an option under the composite scheme and that it took time for the Revenue Authorities to verify the genuineness, it cannot prevent them from directing the assessee to pay tax, if the option exercised was found to be incorrect.
Facts:
Godway Furnicrafts (“the Petitioner”) is engaged in the business of furniture. The Petitioner’s claim for payment of tax under the composite scheme was rejected on the ground that the turnover of the Petitioner for the “previous year” under the Value Added Tax (“VAT”) regime was INR 2.09 crores. Revenue Department (“the Respondent”) issued a Show Cause Notices (“SCNs”) in terms of Section 74 and Section 10(5) of the Central Goods and Services Tax Act, 2017 (“CGST Act”), stating that the Petitioner was liable to pay GST @28% from the date of initial registration.
Further, an explanation to the SCNs were given twice by the Petitioner, but the same was rejected by the Respondent, confirming the demand along with interest and penalty. Subsequently, the Petitioner preferred an appeal, challenging the order passed by the Respondent, but the same was also rejected. Being aggrieved by the order passed, the present writ petition has been filed.
The Petitioner has contended that the Respondent having accepted the option exercised by the Petitioner in the GST portal and having permitted him to pay tax at 1% of the total turnover in terms of the composite scheme, cannot now turn around and reject the option exercised and consequently direct the Petitioner to pay GST as per the regular rates.
While the Respondent has contended that, merely because the Petitioner has exercised an option, which was on his own, and that the authorities have collected the taxes for four quarters based on self-declaration, the same does not by itself mean that the authorities have accepted the scheme opted by the Petitioner. Further, the GST regime came into effect from July 1, 2017, it took some time for the officials to process all the options exercised and in the process accepted the tax paid.
Issues:
Held:
The Hon’ble Andhra Pradesh High Court in Writ petition no. 10350 of 2020 dated November 11, 2020, held as under:
Relevant provisions:
Section 10 of CGST Act –
“Composition levy
(1) Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees may opt to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not exceeding,-
Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding one crore rupees, as may be recommended by the Council.”
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