GSTAT Holds Section 76 Covers Registered Taxpayers Who Fail To Remit Collected GST, Restores ₹25.18 Lakh Penalty

Pavitra Associates, a registered supplier, provided services to South Western Railway and collected GST of ₹30,60,658. It declared only part of its turnover in its returns and failed to file returns from November 2019, leaving ₹25,18,205 of collected GST unpaid.

The adjudicating authority confirmed the tax demand, interest and an equivalent penalty under Section 76 of the CGST Act. Pavitra Associates later paid the tax; the First Appellate Authority upheld the tax and interest but set aside the penalty, holding Section 76 inapplicable to a registered supplier’s failure to remit tax on taxable supplies.

The Department appealed the deletion of the penalty.

Section 76(1) of the CGST Act requires “every person” who collects any amount as representing tax and does not pay it to the Government to pay that amount, irrespective of whether the underlying supply is taxable.

The Tribunal relied on M/s R.K. Transport & Constructions Ltd. v. State of Jharkhand, which it understood to hold that Section 76 can apply to registered and unregistered persons who collect GST and fail to remit it.

It also referred to GAIL (India) Ltd. v. Additional Commissioner for the distinction between tax already paid to the Government and collections not remitted, and to Commissioner of Central Excise v. Solar Pesticides (P) Ltd. and Sahakari Khand Udyog Mandal Ltd. v. Commissioner of Central Excise for the fiduciary character of amounts collected as tax.

The Tribunal rejected the argument that Section 76 is limited to unauthorised collections or unregistered persons. It read “every person” and “any amount” broadly, finding that the provision covers GST collected under valid invoices but withheld from the Government.

Because Pavitra Associates had collected GST and failed to remit ₹25,18,205, the Tribunal considered the case distinguishable from one in which the collected tax had already reached the exchequer.

It concluded that the First Appellate Authority had wrongly excluded registered suppliers from Section 76 and that the penalty should be restored.

It restored and confirmed the penalty of ₹25,18,205 and directed Pavitra Associates to pay it within eight weeks, with adjustment for any pre-deposit.