Shrikrishna Subray Hegde vs K M B FACILITY MANAGEMENT SERVICES

GSTAT
State Bench Bengaluru
Court No. Court II
APL/17/BUR/2026
SHRIKRISHNA SUBRAY HEGDE .............Appellant
Versus
K M B FACILITY MANAGEMENT SERVICES, PARTNER, 73 AKASH PARK
KUSUGAL ROAD KESHWAPUR HUBLI KADHA 580023 .............Respondent
Quorum
Hon’ble Sudha Koka, Member (Technical)
Hon’ble Srikanth Venkatraman, Member(Judicial)
Counsel for Appellant
PRABHAT KUMAR AC AR CGST
PRABHAT KUMAR AC AR CGST
RAHUL , SUPTD AR CGST
Counsel for Respondent
COMPANY EMPLOYEE OF
RESPONDENT
VENKATESH
Form GST APL-04A
[See rules 113(1) & 115]
Summary of the order and demand after issue of order by the GST Appellate Tribunal
whether remand order : No
Order reference no. : ZN570171026000150H Date of order : 29/10/2026
1. GSTIN/Temporary ID/UIN -
Appeal Case Reference no. -
2. Date - 30/04/2026
APL/17/BUR/2026
3. Name of the appellant - Shrikrishna Subray Hegde , [email protected] , 9448463600
Name of the respondant -
4.
1. K M B FACILITY MANAGEMENT SERVICES , [email protected] , 8151991888
5. Order appealed against -
(5.1) Order Type - Demand Order
(5.2) Ref Number - BGM-JJ-ADC-119-2023-24GST Date - 14/03/2024

6. Personal Hearing - 29/10/2026 13/10/2026 06/10/2026 17/09/2026
7. Status of Order under Appeal - Reject - Order under Appeal is annulled
Order in brief - 1. Core Subject & Legal Issue Main Legal Question: Whether Section
76 of the CGST Act, 2017 can be lawfully invoked against a registered taxpayer who collected Goods
and Services Tax (GST) from service recipients under valid invoices but filed nil/no GSTR-3B returns
and withheld/pocketed those public monies instead of remitting them to the State exchequer. 3.
Tribunal’s Analysis & Findings Scope of "Every
Person": The Tribunal rejected the Respondent’s argument that Section 76 applies
exclusively to unregistered persons or collections made without legal authority. Section 76(1) opens
with a sweeping non-obstante clause covering "every person who has collected from
any other person any amount as representing the tax... irrespective of whether the supplies... are
taxable or not". Judicial Precedent & Fiduciary Duty: Relying on the
Jharkhand High Court ruling in M/s R.K. Transport & Constructions Ltd. v. State of
Jharkhand and the principles in GAIL (India) Ltd., the Tribunal affirmed that an entity collecting tax
holds public revenue in a strict fiduciary capacity as a custodian for the State. Retaining such
collections while filing nil returns constitutes a direct breach of this fiduciary trust. No Immunity for
Registered Defaulters: Shielding registered taxpayers who issue legal invoices and collect money from
clients while skipping return filings would create an absurd statutory immunity, rewarding registration
status over actual compliance. 4. Final Order Departmental Appeal: ALLOWED. Appellate Order:
The portion of the Order-in-Appeal setting aside the penalty under Section 76 of the CGST Act is SET
ASIDE. Penalty Restored: The penalty equivalent to the tax amount imposed under Section 76 of the
CGST Act vide the Order-in-Original dated 15.11.2022 is RESTORED and CONFIRMED.
8.
Summary of Order
9. If demand order then whether demand quantified: Yes
Section-I
Particulars Central tax State/UT tax Integrated tax Cess Total
Disputed

Amount
Determined
Amount
Disputed
Amount
Determined
Amount
Disputed
Amount
Determined
Amount
Disputed
Amount
Determined
Amount
Disputed
Amount
Determined
Amount
1
2 3 4 5 6 7 8 9 10 11
(a) Tax 0 0 0 0 0 0 0 0 0 0
(b)
0 0 0 0 0 0 0 0 0 0
Interest
(c) Penalty 2181624 0 2181624 0 0 4363248 0 0 4363248 4363248
(d) Fees 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0
(e) Others
(f) Refund 0 0 0 0 0 0 0 0 0 0
10. For Other orders and Demand orders which are not quantified:

Issues
as
raised
by
proper
officer
Order
by
GST
Appellat
Tribunal
Issues as determined by Appellate/Revisional authority
On review of the records, the impugned order dated 15.11.2022 was received on 19.11.2022,
whereas the appeal was filed on 27.07.2023, beyond the period prescribed under Section 107,
including the condonable period. However, since limitation was not discussed earlier, an additional
hearing was granted. The appellant submitted that the entire tax liability was voluntarily paid
through DRC-03 and sought waiver of interest and penalty, contending that the case falls under
Section 73 and not Section 76, thereby seeking benefit of Notification No. 53/2023-CT dated
02.11.2023. The issue is whether the appeal is eligible for condonation under the notification and
whether penalty and interest under Section 76 are sustainable. The notification permits delayed
appeals in cases involving demands under Sections 73/74 for orders issued before 31.03.2023,
subject to conditions. It is undisputed that the appellant, a registered taxpayer, provided taxable
services, collected GST of Rs. 43,63,247/-, but failed to remit it on time. Returns were filed as NIL
or not filed. The appellant later discharged Rs. 42,00,413/- (including an overlooked DRC-03
payment), which is appropriated. The tax liability is not disputed; only interest and penalty are
contested. Section 76 applies to amounts collected as tax without authority of law, whereas
Sections 73/74 apply to non-payment or short payment of tax. In this case, the appellant was
authorized to collect GST and did not collect any excess or unlawful amount. The adjudicating
authority also treated the issue as non-payment of tax. Hence, the case falls under Section 73/74
and not Section 76. The appeal qualifies under Notification No. 53/2023-CT and is deemed filed
within time. Penalty under Section 76 is set aside. However, interest under Section 50 is payable as
it is compensatory for delayed payment.
Short
or
non-
payment
of
tax
Revenue
appeal
allowed
Place :BENGALURU
Signature
Date : 29.10.2026
BENGALURU Sudha Koka
Designation : Member
Jurisdiction :Bengaluru

ORDER
Order Per: Sudha Koka, Member Technical (Centre)
TABLE OF CONTENTS
Section Description
1. Introduction
2. Chronology of Events
3. Brief Facts of the Case
4. Department’s Grounds of Appeal
5. Respondent’s Reply & Additional Submissions
6. Department’s Rebuttal & Counter-Arguments
7. Tribunal’s Reasoning & Analysis
8. Conclusion
9. Order
I. INTRODUCTION page1image273085648 page1image273085856
1. At the heart of this dispute lies a simple yet fundamental question of commercial integrity and statutory
interpretation: When a registered commercial entity collects money from its service recipients under the
explicit banner of the Goods and Services Tax, but chooses to pocket or withhold those public monies instead
of remitting them to the State exchequer, does the conduct fall within the punitive and remedial sweep of
Section 76 of the CGST Act, 2017? The respondent-taxpayer would have us believe that Section 76 is a
narrow, esoteric provision reserved exclusively for unauthorized actors or shady fly-by-night

operators who collect taxes without legal standing, leaving registered defaulters safely tucked away under
general assessment provisions. This Tribunal is called upon to examine whether the text, texture, and
teleology of Section 76 permit such an artificial immunity. An indirect tax regime is built on trust,
transparency, and a strict fiduciary compact between the citizen and the state. When that compact is broken
by collecting tax and filing nil returns, the law must speak with clarity and firmness. It is through this prism
that we examine the competing arguments of the Revenue and the Respondent.
II. CHRONOLOGY OF EVENTS
April 2018 – March 2021: The Respondent provided taxable output services (security, cleaning, and
maintenance) to South Western Railways, issued valid tax invoices charging GST, and collected the
tax from the recipient, but filed nil or no GSTR-3B returns.
23.11.2021: Intelligence authorities issued a Show Cause Notice (SCN) proposing recovery of
unremitted tax under Section 76 of the CGST Act, along with interest under Section 50/76 and an
equivalent penalty under Section 76.
14.09.2022 & 21.09.2022: The Respondent discharged the admitted GST liability through six
voluntary payments via Form GST DRC-03 totaling Rs. 43,63,237/-.
15.11.2022: The Adjudicating Authority passed the Order-in-Original confirming the demand, interest,
and penalty under Section 76, while inadvertently omitting one DRC-03 payment of Rs. 1,62,824/- in
the appropriation table.
27.02.2026: The First Appellate Authority passed the Order-in-Appeal (GST AP: 28/2024-25),
rectifying the payment ledger to include all six DRC-03 challans, but erroneously setting aside the
penalty under Section 76 on the premise that Section 76 does not apply to registered suppliers who
defaulted on admitted tax collections.
• October 2026: The Department filed the present appeal before this Tribunal challenging the deletion of
the penalty, followed by written submissions, rebuttals, and final hearings.
III. BRIEF FACTS OF THE CASE
3. The Respondent is a registered taxpayer under the CGST Act, 2017, engaged in supplying taxable
services (security, cleaning, and maintenance) to South Western Railways. For the period spanning

April 2018 to March 2021, the Respondent duly issued tax invoices charging GST and collected the
same from service recipients. However, due to inadvertence and incorrect professional advice, the
Respondent filed nil GSTR-3B returns for June 2018 to February 2019 and failed to file returns for
subsequent periods, omitting to remit the collected tax to the Government.
4. Intelligence authorities detected the anomaly upon cross-verifying GSTR-7 returns filed by South
Western Railways (reflecting tax deducted at source and consideration paid) against the Respondent's
nil/unfiled GSTR-3B returns. Consequently, a Show Cause Notice dated 23.11.2021 was issued under
Section 76.
5. During adjudication, the Respondent did not dispute the tax liability and deposited the entire admitted
tax of Rs. 43,63,237/- via six voluntary Form GST DRC-03 challans in September 2022. The
Adjudicating Authority confirmed the tax demand, interest, and penalty under Section 76, but missed
one DRC-03 entry. The First Appellate Authority corrected the payment ledger to give full credit for
all six DRC-03 challans, but erroneously held that Section 76 was inapplicable, leading to the deletion
of the penalty. Hence, the Department is in appeal before this Tribunal.
IV. DEPARTMENT’S GROUNDS OF APPEAL
6. Misinterpretation of Section 76(1): The Appellate Authority erred in law by reading down Section
76(1) to exclude registered taxpayers who have collected tax under valid invoices but failed to deposit
it.
7. Textual Mandate Ignored: Section 76(1) explicitly employs the words “every person who has collected
from any other person any amount as representing the tax under this Act, and has not paid the said
amount to the Government, shall forthwith pay the said amount to the Government, irrespective of
whether the supplies in respect of which such amount was collected are taxable or not.” The statute
does not condition the operation of Section 76 on the collection being unauthorized or performed by an
unregistered person.
8. Harmonious Construction Violated: The concluding non-ambiguous phrase "irrespective of whether
the supplies... are taxable or not" makes the taxability or the validity of the initial invoice collection
non-determinative for the immediate deposit obligation.
V. RESPONDENT’S REPLY & ADDITIONAL SUBMISSIONS

9. Special Provisions vs. General Provisions: The Respondent contended that Sections 73 and 74 constitute
the specific machinery for "tax not paid or short paid" by a "person chargeable with tax," whereas Section 76
is a special anti-unjust-enrichment code meant for collections made without authority or by persons not
authorized to levy tax (akin to Section 11D of the Central Excise Act, 1944).
10. Distinct Legislative Terminology: Section 73(11) uses the phrase "amount collected as tax," whereas
Section 76(1) uses "amount as representing the tax." This variance proves that Section 76 targets colorable or
unauthorized collections, not genuine output tax defaulted by a registered person.
11. Exclusionary Doctrine: Relying on doctrines like generalia specialibus non derogant and strict
interpretation of fiscal statutes (A.V. Fernandez v. State of Kerala, AIR 1957 SC 657; Nazir Ahmad v. King
Emperor, AIR 1936 PC 253), the Respondent argued that the Department cannot arbitrarily invoke Section
76 when the default pertains to registered output tax squarely covered under Section 74.
VI. DEPARTMENT’S REBUTTAL & COUNTER-ARGUMENTS
12. Demolishing the "Anti-Unjust-Enrichment Only" Fallacy : The Respondent attempted to restrict
Section 76 of the CGST Act by drawing historical parallels to Section 11D of the Central Excise Act,
1944,and Section 73A of the Finance Act, 1994, arguing that Section 76 is exclusively an anti-unjust-
enrichment mechanism meant for collections made without authority of law or by unregistered persons. The
Department countered that importing unstated historical or legacy limitations into a completely new,codified
statute like the CGST Act is a cardinal rule of misinterpretation. Unlike old excise provisions that hinged
strictly on "excess collections" or "exempt goods," the text of Section 76(1) of the CGST Act uses wide,
sweeping, and unambiguous language: “Every person who has collected from any other person any amount
as representing the tax under this Act, and has not paid the said amount to the Government, shall forthwith
pay the said amount...” The provision does not contain any qualifying words restricting its operation only to
"unauthorized" or "illegal" collections. If a registered person collects tax under valid invoices but pockets or
withholds the money by filing nil returns, the amount collected squarely fits the definition of "an amount
representing the tax".
13. Dismantling the Legislative Intent Distinction (Section 73(11) vs. Section 76(1)) : The Respondent
argued that the legislature used different terminology—employing “amount collected as tax” under Section
73(11) while using “amount as representing the tax” under Section 76(1)—thereby carving out a separate
niche where Section 76 excludes genuine output tax. The Department demolished this argument by
emphasizing that the linguistic variation actually broadens, rather than restricts, the scope of Section 76.The
phrase “representing the tax” encompasses everything collected under the color, label, or
guise of tax—whether it is self-assessed tax, wrongly calculated tax, or invoiced output tax that was collected
from clients (such as South Western Railways) and subsequently withheld from the exchequer. To read a

restriction into the phrase that excludes registered taxpayers would create an absurd statutory
immunity:unregistered fraudsters would be caught under Section 76, while registered corporate defaulters
who issue legal invoices and collect crores of rupees but fail to file returns would escape it. Tax statutes
cannot be interpreted to reward registration status while defaulting on actual remittances.
14. Eradicating the Myth of Mutual Exclusivity (Sections 73/74 vs. Section 76) : The Respondent relied
on generalia specialibus non derogant to argue that Sections 73 and 74 constitute exclusive special machinery
for registered persons, prohibiting the Revenue from invoking Section 76. The Department firmly established
that Section 76 functions as a special provision targeting the custody and immediate remittance of public
monies collected in the name of tax. Where a taxpayer collects money from a service recipient representing
GST, holds it in trust, and fails to deposit it, the primary wrong is the retention of collected tax. The non-
obstante and inclusive texture of Section 76— reinforced by the concluding mandate that it applies
“irrespective of whether the supplies in respect of which such amount was collected are taxable or
not”—ensures that the Department is not left helpless when defaults involve active collection coupled with
deceptive return filings (nil/unfiled returns).
15. Distinguishing the Respondent’s Case Law: While the Respondent cited A.V. Fernandez and Nazir
Ahmad to assert that taxation must fall strictly within the letter of the law, the Department retorted that the
strict letter of Section 76 explicitly covers the Respondent's exact conduct. The Respondent collected tax
from South Western Railways under valid invoices and failed to pay it over. The literal interpretation of
Section 76 captures this failure precisely. The Department did not stray outside the four corners of the statute;
rather, it invoked the exact provision designed to penalize the retention of unremitted tax collections.
VII. TRIBUNAL’S REASONING AND ANALYSIS
We have carefully evaluated the rival contentions, the statutory provisions, the written counter filed by the
Respondent, the rejoinder of the appellant in written on the counter of Respondent, and the judicial
precedents cited by both parties and the submissions of the Departmental AR and the respondents Counsel
during the oral hearings. Our considered legal findings are as below:
16. Scope and Interpretation of Section 76 of the CGST Act: We have heard both sides extensively and
perused the statutory provisions and judicial pronouncements. The foundational contention of the
Respondent—that Section 76 applies only to unauthorized collections by unregistered persons or amounts
collected without legal authority—is fundamentally flawed when tested against the literal text of Section
76(1). The provision mandates that every person who has collected any amount as representing the tax and
has not paid it to the Government shall forthwith pay the said amount, irrespective of whether the supplies in
respect of which such amount was collected are taxable or not.
The phrase "any amount" is of the widest possible amplitude. It includes tax collected by a registered entity
under valid invoices issued pursuant to taxable supplies, which is subsequently withheld (i.e., not remitted

via GSTR-3B). To hold that a registered supplier who collects tax from customers under the guise of GST
but fails to deposit it escapes Section 76 would create an anomalous immunity for registered defaulters over
unregistered ones, defeating the very object of preventing unjust enrichment.
17. Binding Judicial Authority and Scope Explicated in R.K. Transport & Constructions Ltd.: The
applicability of Section 76 to registered taxpayers who fail to deposit collected taxes has been authoritatively
settled by judicial pronouncements. In the landmark decision of the Jharkhand High Court in M/s R.K.
Transport & Constructions Ltd. v. State of Jharkhand (W.P.(T) No. 1624 of 2024, decided on 13.06.2025),
the Court undertook a meticulous examination of Section 76 and explicitly explained its scope in Paragraph
10, clarifying that the expression "every person" is all-encompassing. The
High Court clearly articulated that Section 76 applies universally to any person, which structurally includes
both unregistered persons and registered taxpayers who have collected tax under the color of law but failed to
deposit the same into the public exchequer. The Jharkhand High Court ruled in para 10:
"10. This stand taken by the official respondents is contrary to Section 76 (1) of the Jharkhand GST Act, 2017
which mandates that 'every person who has collected from any other person any amount as representing GST, and
had not paid the said amount to the Government, shall forthwith pay it to the Government' and if he does not do
so, under subsection (2) thereof, 'the proper officer may direct him through a notice to show cause as to why the
said amount as specified in the notice should not be paid by him to the Government, and why a penalty equivalent
to the amount specified to the notice should not be imposed on him under the Act'. Thus, action can be taken
under subsection (2) of section 76 against 'every person' including a person not registered under the JGST Act,
2017, if he does not, having received JGST from the petitioner, file any return under GSTR-01 and does not remit
the same to the official respondents."
Hence, from the statutory provisions of Sec 76 and judicial pronouncements, it is amply clear that the
expression 'every person' under Section 76(1) is of widest amplitude. It does not draw a distinction between a
person registered under the Act and an unregistered person. Where an amount is collected representing tax by
any person and withheld, Section 76 operates to mandate immediate deposit and penal consequences. Thus,
the authoritative interpretation in Paragraph 10 of R.K. Transport completely shatters the Respondent's
artificial construct that registered taxpayers are insulated from the reach of Section 76.
18. Examination of the Obiter Dicta and Ratio in GAIL (India) Ltd. v. Additional Commissioner: We
have also examined the judgment of the Madras High Court in GAIL (India) Ltd. v. Additional
Commissioner[2026 VIL 372 MAD]. The Madras High Court held that Section 76 cannot be invoked to
demand tax a second time where the tax has already been duly deposited with the exchequer, albeit through
another registration or business vertical of the same corporate entity. However, the ratio decidendi and obiter
dicta of GAIL India powerfully reinforce the Revenue's stance in cases where tax collected has not reached
the exchequer at all. GAIL India underscores that Section 76

targets the actual failure to remit collections to the Government. In the present case, unlike GAIL, the
Respondent admittedly collected tax from South Western Railways under valid invoices and completely
withheld it, filing nil returns and failing to remit any portion until departmental intelligence intervened and
forced the DRC-03 deposits long after the due dates. Thus, GAIL India confirms that where collections are
retained and unremitted to the exchequer,Section 76 applies with full force.
19. The Fiduciary Responsibility of Indirect Tax Collectors and the Hon’ble Supreme Court’s
Jurisprudence: It is a foundational principle of indirect taxation that an assessee who collects tax from a
recipient does so in a fiduciary capacity as an agent or custodian for the State. The money collected as tax
does not belong to the commercial entity; it is public revenue held in trust for the Government exchequer.
This fiduciary obligation inherent in indirect taxation finds robust endorsement in the landmark jurisprudence
of the Hon’ble Supreme Court. In the Constitution Bench ruling of Commissioner of Central Excise v. Solar
Pesticides (P) Ltd. (2000) 2 SCC 705, and subsequently reaffirmed in principles relating to unjust enrichment
and statutory remittances such as in Sahakari Khand Udyog Mandal Ltd. v. Commissioner of Central Excise
(2005) 3 SCC 738, the Supreme Court held that any amount collected by representing it as duty or tax is
collected under a statutory mandate, and the person collecting it holds it strictly in a fiduciary capacity for the
credit of the Consolidated Fund. Retaining such collections while filing nil returns constitutes a direct breach
of this fiduciary trust, attracting the immediate operation of special recovery and penalty provisions such as
Section 76.
VIII. CONCLUSION
20. The finding of the First Appellate Authority that Section 76 of the CGST Act excludes registered
suppliers who failed to remit collected output tax is legally unsustainable. The statutory language of Section
76(1) comprehensively covers any amount collected as tax and not paid over to the Government, irrespective
of the registration status of the
collector or the taxability of the underlying supply. Backed by the clear exposition of scope in Paragraph 10
of R.K. Transport, the principles clarified in GAIL India, and the fiduciary doctrine articulated by the
Hon’ble Supreme Court, the departmental appeal is well-founded, and the penalty imposed under Section 76
deserves to be fully restored.
ORDER
Accordingly, for the reasons stated above, we pass the following order:
1. The Departmental Appeal is allowed.

2. The portion of the Order-in-Appeal passed in GST AP: 28/2024-25 dated 27.02.2026 setting aside the
penalty imposed under Section 76 of the CGST Act is hereby set aside.
3. The penalty equivalent to the tax amount imposed under Section 76 of the CGST Act vide the Order-
in-Original dated 15.11.2022 is restored and confirmed.
4. The Respondent is directed to discharge the penalty dues, giving due adjustment to any pre-deposits
made, within Eight Weeks from the date of this order.
Sudha
Koka
Digitally signed
by Sudha Koka
Date: 2026.10.29
16:27:59 +05'30'
(Sudha Koka)
Digitally signed by
Srikanth Venkatraman
Date: 2026.10.29
16:27:04 +05'30'
Srikanth
Venkatraman
(Srikanth Venkatraman)
Dated: 29.10.2026