Supreme Court Upholds 100% GST Penalty for Wilful Suppression: AP High Court Order Confirmed
Apex Court Rules Non-Filing of Returns Amounts to Suppression Under Section 74 of CGST Act
Case Highlights Strict Enforcement of GST Compliance and Limits of Financial Hardship Pleas
By Our Legal Reporter
New Delhi: December 09, 2025:
In a landmark ruling, the Supreme Court of India has upheld the Andhra Pradesh High Court’s decision confirming a 100% penalty under Section 74 of the Central Goods and Services Tax (CGST) Act, 2017 for wilful suppression of facts. The case involved M/s Sriba Nirman Company, a registered works contractor, which failed to file monthly GST returns despite raising invoices worth ₹920.92 crore (including GST of ₹93.19 crore) between July 2017 and March 2018.
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The Court dismissed the company’s appeal, ruling that non-filing of returns and non-payment of GST dues constituted wilful suppression with intent to evade tax, even if financial difficulties were cited as the reason.
Background of the Case
- The Contractor: M/s Sriba Nirman Company, engaged in EPC works as a subcontractor.
- Invoices Raised: Nine invoices totalling ₹920.92 crore, including GST liability of ₹93.19 crore, were issued in March 2018.
- Default: Despite raising invoices, the company failed to file GSTR-3B monthly returns and remit GST dues.
- Inspection: The Directorate General of GST Intelligence (DGGI) inspected records on July 31, 2018, seizing documents and recording statements.
- Delayed Compliance: The company deposited pending GST dues in instalments between July and September 2018, but only after inspection.
- Show Cause Notices: Issued in August and September 2020, demanding interest and imposing a 100% penalty under Section 74.
- High Court Ruling: The Andhra Pradesh High Court upheld the penalty, ruling that non-filing of returns amounted to wilful suppression.
- Supreme Court Appeal: The company challenged the ruling, but the apex court dismissed the petition, affirming the penalty.
Court’s Observations
The Supreme Court made several critical observations:
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- Suppression Defined: Explanation 2 to Section 74 of the CGST Act treats non-filing of returns as suppression of facts.
- Financial Hardship Not a Defence: The plea that delayed payments from clients caused non-compliance was rejected.
- Intent to Evade: The Court held that partial payments received could have been used to remit GST, but the company chose not to.
- Penalty Justified: Since tax, interest, and the mandatory 15% penalty were not paid before issuance of notice, immunity under Section 74(5) was unavailable.
- No Merit in Appeal: The Court found no grounds to interfere with the High Court’s order, dismissing both the appeal and review petition.
Wider Legal Context
- Section 74 of CGST Act: Provides for penalties in cases of fraud, wilful misstatement, or suppression of facts.
- GST Compliance: Monthly filing of GSTR-3B returns is mandatory under Section 37 of the Act.
- Judicial Precedents: Courts have consistently ruled that non-filing of returns amounts to suppression, even if tax is later paid.
- Policy Implications: The ruling strengthens enforcement of GST compliance and discourages defaults under the guise of financial hardship.
Implications of the Ruling
- For Taxpayers: Reinforces that financial difficulties cannot justify non-filing of GST returns.
- For Businesses: Highlights the importance of timely compliance to avoid severe penalties.
- For Tax Authorities: Strengthens their ability to impose penalties under Section 74 for defaults.
- For Judiciary: Sets a precedent for strict interpretation of GST compliance obligations.
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Industry and Expert Reactions
- Tax Professionals: Welcomed the ruling as a strong message against evasion.
- Legal Experts: Pointed out that the judgment clarifies the scope of “wilful suppression” under GST law.
- Businesses: Expressed concern that genuine financial hardships may not be considered, urging for policy reforms.
- Public Opinion: Many supported strict enforcement, arguing it ensures fairness and transparency in tax administration.
Conclusion
The Supreme Court’s decision to uphold the 100% GST penalty for wilful suppression marks a turning point in India’s GST jurisprudence. By affirming the Andhra Pradesh High Court’s ruling, the apex court has made it clear that non-filing of returns and delayed compliance will be treated as deliberate evasion, regardless of financial hardship claims.
This judgment strengthens the enforcement framework of GST, ensuring that taxpayers comply with statutory obligations and that defaults are met with strict penalties.
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