GSTAT Says Section 76 Covers Registered Service Provider Who Collected GST But Filed Nil Returns, Restores Penalty

In brief

The question

Whether Section 76 of the CGST Act applies to a registered taxpayer who collected GST under invoices but failed to remit it to the Government

The court held

The Tribunal allowed the departmental appeal, set aside the portion of the first appellate order that had deleted the Section 76 penalty, and restored and confirmed the penalty imposed in the original order.

It also directed

It directed payment of the penalty, subject to adjustment for any pre-deposits, within eight weeks.

01Facts

The respondent supplied taxable services, issued invoices charging GST, and collected GST from its service recipient during April 2018–March 2021, but filed nil or no GSTR-3B returns and did not remit the collected amounts when due.

¶ 2–5

Following an investigation, a show-cause notice proposed recovery and penalty under Section 76 of the CGST Act. The adjudicating authority confirmed the demand, interest and penalty; the first appellate authority credited the respondent’s DRC-03 payments but set aside the Section 76 penalty.

¶ 4–5

The Tribunal’s substantive order treats the matter as a departmental appeal against the deletion of that penalty.

¶ 5, 20 · Order

02Issues

i.Whether Section 76 of the CGST Act applies to a registered taxpayer who collected GST under invoices but failed to remit it to the Government

¶ 16–17

ii.Whether the penalty imposed under Section 76, and later set aside by the first appellate authority, should be restored

¶ 20 · Order

03Law Applied

Section 76(1) of the CGST Act requires “every person” who collects an amount representing tax and does not pay it to the Government to pay that amount, irrespective of whether the underlying supply is taxable; the Tribunal read this language as covering registered as well as unregistered persons.

¶ 16–17

It also relied on Section 76(2), concerning notice and penalty, as quoted in M/s R.K. Transport & Constructions Ltd. v. State of Jharkhand (W.P.(T) No. 1624 of 2024, decided 13 June 2025), which the Tribunal treated as supporting Section 76’s application to any person who collects and retains tax.

¶ 17

The Tribunal read GAIL (India) Ltd. v. Additional Commissioner [2026 VIL 372 MAD] as distinguishing a case where tax had already reached the exchequer from one where collected tax remained unpaid.

¶ 18

It also relied on the fiduciary principle concerning tax collections, referring to Commissioner of Central Excise v. Solar Pesticides (P) Ltd. (2000) 2 SCC 705 and Sahakari Khand Udyog Mandal Ltd. v. Commissioner of Central Excise (2005) 3 SCC 738.

¶ 19

Provisions in the judgment · 7 · Linked ones open on LawLens

Central Goods and Services Tax Act, 2017 Section 76 Section 50 Section 73 Section 74 Section 107

Jharkhand Goods and Service Tax Act, 2017 Section 76

Central Excise Act, 1944 Section 11

04Reasoning

The Tribunal considered the respondent’s registration and the fact that the GST was charged on valid invoices insufficient to exclude Section 76.

¶ 16–17

It reasoned that the statutory phrase “every person” contains no registration-based exception, and that the respondent’s collection of GST followed by non-remittance fell within the provision’s terms.

¶ 16–17

The Tribunal distinguished GAIL (India) Ltd. because, unlike a case where tax had already been paid to the Government through another registration or business vertical, the respondent had retained the collections and filed nil or no returns. It therefore found the first appellate authority’s exclusion of registered suppliers from Section 76 legally unsustainable.

¶ 18–20