In a significant GST-related ruling, the Supreme Court has upheld the imposition of a 100% GST penalty for wilful suppression of facts arising from the non-filing of mandatory monthly GST returns. The Apex Court affirmed the earlier judgment of the Andhra Pradesh High Court, which had validated the penalty imposed under Section 74 of the CGST Act, holding that consistent failure to file returns and remit tax amounts to deliberate suppression with intent to evade tax. The writ petition challenging the penalty, along with subsequent recovery proceedings initiated by tax authorities, was dismissed, bringing finality to the dispute.
Apex Court Rejects Special Leave Petition and Review
Aggrieved by the High Court’s decision, the taxpayer approached the Supreme Court by filing a Special Leave Petition. After examining the matter, the Court found no valid grounds to interfere with the High Court’s findings and dismissed the petition, clearly stating that there was no merit in the challenge. The same view was reiterated when the assessee filed a review petition, which was also dismissed after the Court carefully considered the records and arguments. This reinforced the position that penalties under Section 74 are justified when statutory compliance is knowingly ignored.
Background of the Case
The case involved a registered works contractor operating under the GST regime and engaged in executing EPC works as a subcontractor. During the period from July 2017 to March 2018, the taxpayer raised nine invoices amounting to ₹920.92 crore, inclusive of GST of ₹93,19,12,234, all issued in March 2018. Despite issuing these invoices, the taxpayer failed to file GSTR-3B monthly returns within the prescribed timelines. The primary justification offered was delayed payments from the principal client, which, according to the taxpayer, created financial constraints and made it difficult to pay GST while continuing project execution.
DGGI Inspection and Subsequent Compliance
On 31 July 2018, officials of the Directorate General of GST Intelligence conducted an inspection at the taxpayer’s premises, during which records were seized and statements recorded. Following this inspection, the taxpayer deposited the outstanding tax in instalments between 31 July 2018 and 29 September 2018 and filed all pending GST returns for the financial year 2017-18. However, this post-detection compliance did not prevent further proceedings under the law.
Show Cause Notices and Penalty Proceedings
In August and September 2020, GST authorities issued two show cause notices proposing demand of interest and imposition of penalty on the ground of wilful suppression. The adjudicating authority, through an order dated 24 December 2021, confirmed the penalty under Section 74 of the CGST Act. This order was upheld by the appellate authority, following which recovery proceedings were initiated, demanding an amount of ₹93,20,72,233 from the taxpayer.
Key Arguments Raised by the Taxpayer
The penalty was challenged mainly on the grounds that Section 74 should not apply because the entire tax amount had been paid nearly two years before issuance of the show cause notices, that the non-payment resulted from genuine financial hardship rather than intent to evade tax, and that the extension of the due date for filing annual returns under Section 44 up to 7 February 2020 meant there was no basis for early action by the department. The courts, however, did not accept these submissions.
Court’s Interpretation of Section 74 and Monthly Return Obligations
The Court clarified that Section 37 of the CGST Act mandates the filing of monthly returns and that failure to comply with this requirement constitutes suppression of facts as explained under Explanation 2 to Section 74. It was further observed that immunity under Section 74(5) is available only when tax, interest, and a 15% penalty are paid before issuance of the notice. In this case, although tax was paid prior to the notice, interest was paid later and the 15% penalty was never deposited, making the conditions for immunity unfulfilled.
Finding on Wilful Suppression and Intent
The Court noted that the taxpayer had received partial payments from the client but still chose not to file returns or remit GST, which pointed towards a conscious decision to avoid statutory compliance. In light of these facts, the argument that there was no wilful intention to suppress turnover or conceal tax liability was found to be untenable. The consistent non-filing of returns, despite taxable supplies having been made, was treated as clear evidence of wilful suppression.
Case Details
| Particulars | Details |
|---|---|
| Case Title | M/S Sriba Nirman Company vs. The Commissioner (Appeals) |
| Case No. | Diary No. 38833/2025 |
| Date of Judgment | 18.11.2025 |
| Court | Supreme Court of India |
This ruling serves as an important reminder for GST-registered persons that timely filing of monthly returns is a statutory obligation and that post-detection payment of tax does not automatically shield taxpayers from penalties where wilful suppression and intent to evade tax are established.