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27 May 2021

Arbitrary determination of tax liability alongwith 100% penalty in the guise of Best Judgement Assessment is bad in law

M/S Golden Mesh Industries


Assistant Commissioner State Tax


[W.P. No. 7789 of 2021]

Petition Allowed

In the present matter, the department issued a show cause notice under Section 46 of the TGST Act upon M/s Golden Mesh Industries (“the Petitioner”) on account of non-filing of return (Form GSTR-3B) for the month of November 2018 directing the Petitioner to file the pending return within the prescribed time limit.

The Petitioner failed to comply with the requirements of the above SCN resulting in issuance of the present Order by the department determining the tax liability equivalent to 3 times the monthly average TGST under Section 62 of the TGST Act alongwith 100% penalty.

Though, Section 62 talks about the ‘Assessment of non-filers of returns’ and allows the department to adopt best judgement methodology, however, in the present matter the method adopted by the department in multiplying by 3 times the monthly TGST tax of Rs. 50,000/- was arbitrary. Moreover, the imposition of 100% penalty for failure to furnish return was contrary to the provisions of the TGST Act.

The Hon’ble Telangana High Court observed that neither the department was able to determine the principle followed in doing above said best judgement nor could indicate the provisions of the TGST Act for levy of 100% penalty upon the Petitioner. Henceforth, considering the above Order to be prima facie arbitrary and contrary to the provisions of the TGST Act, the Hon’ble Court remanded the matter back for afresh consideration.