GSTAT Restores ₹1.19-Crore GST Demand Against Company That Collected Invoice Tax, Holds Section 76 Applies Despite GST Registration

The Department alleged that Harji Engineering Works Pvt. Ltd. declared outward supplies and tax liability of ₹1,19,04,300 in GSTR-1 for March–November 2019 but did not file the corresponding GSTR-3B returns or pay the tax.

Its registration was cancelled, and the Department issued a notice under Section 76(1) of the CGST Act.

The adjudicating authority confirmed the demand, appropriated ₹55,19,464 paid in cash, disallowed ₹63,84,836 of ITC as time-barred under Section 16(4), and imposed an equivalent penalty under Section 76(2).

The First Appellate Authority set aside that order, reasoning that Section 76 did not apply to a registered taxpayer’s non-payment of self-assessed tax.

The Department appealed.

The respondent did not appear despite repeated notices, and the Tribunal proceeded ex parte.

Section 76(1) of the CGST Act requires any person who has collected an amount from another person as representing tax, but has not paid it to the Government, to pay that amount, irrespective of whether the underlying supply is taxable; the Tribunal treated the provision’s non-obstante wording and reference to “every person” as broad in scope.

Section 76(2) provides for penalty, while Section 76(4), read with Section 50, concerns interest on the amount retained.

Section 16(4) limits the time within which ITC may be availed.

The Tribunal relied on R.K. Transport Private Limited v. Union of India for Section 76’s independent recovery function, and referred to GAIL (India) Limited v. Commissioner of C.Ex. on remittance of amounts collected as tax.

It also relied on Sangram Singh v. Election Tribunal and Collector of Customs v. K.A. Anwar for proceeding ex parte after a respondent fails to appear despite notice.

The Tribunal rejected the First Appellate Authority’s view that Section 76 was confined to cases involving unregistered persons, composition dealers, exempt supplies, or excess tax collection.

It considered the statutory language broad enough to cover any person who collected amounts represented as tax and retained them.

The Department’s invoices and bank-verification material were treated as establishing that the respondent collected customer payments against tax invoices and passed on ITC, but failed to remit the tax collected.

The Tribunal therefore found Section 76 attracted.

It also upheld the ITC disallowance, reasoning that the credit had been claimed outside the time limit in Section 16(4).