GST Best Judgment Assessment Upheld — Late Return Filer Loses Benefit of Section 62(2)

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Case Name

Amani Machine Centre v. The State Tax Officer, State Goods and Service Tax Department, Vadakara

Court Name: High Court of Kerala at Ernakulam

Case No.: WP(C) No. 2757 of 2020(T)

Decided on: 30th July 2020

Before: The Honourable Mr. Justice A.K. Jayasankaran Nambiar

Key Takeaways

1. Section 62(1) of the GST Act allows the tax officer to pass a best judgment assessment when a taxpayer fails to file returns even after receiving a notice under Section 46.

2. Section 62(2) provides a lifeline — if the taxpayer files the valid return within 30 days of the assessment order, the order is deemed automatically withdrawn (except for interest under Section 47 and late fees).

3. The 30-day window is strict — if you miss it, you lose the benefit of Section 62(2), and the assessment order stands.

4. The court clarified that the reference to Section 44 (annual returns) in Section 62(1) is only for determining the outer 5-year time limit for completing the assessment — it does NOT mean the tax officer must wait until December of the financial year before initiating the assessment.

5. The tax officer can act immediately after detecting the failure to file returns (post notice under Section 46), and the 5-year period from the Section 44 date is merely the outer boundary for completing the assessment.

Issue

The central legal question here is:

Can the GST assessing authority pass a best judgment assessment order under Section 62 immediately after the taxpayer fails to file returns (post notice), OR must it wait until after 31st December following the end of the financial year (as referenced in Section 44)?

And a secondary question:

Can the petitioner get the benefit of Section 62(2) (deemed withdrawal of assessment orders) even though the returns were filed more than 30 days after the assessment orders?

Facts

• Amani Machine Centre is a business (a partnership firm) based in Vatakara, Kerala, registered under the GST Act.

• The firm failed to file its monthly GST returns (GSTR-3B) for multiple months — specifically from August 2018 to June 2019 — that’s 11 months of missing returns!

• The GST department issued notices under Section 46 of the GST Act, asking the firm to file the returns. The firm still didn’t comply in time.

• As a result, the State Tax Officer passed best judgment assessment orders (in Form GST ASMT-13) under Section 62 of the GST Act — these were passed on 20th September 2019 and 23rd September 2019 for the various months.

• The demands raised were substantial — ranging from approximately ₹4,10,450 to ₹5,25,390 per month, totalling a significant amount across 11 months.

• After receiving the assessment orders, the petitioner did eventually file the GSTR-3B returns — but these were filed between November and December 2019, which was well beyond the 30-day window from the date of the assessment orders.

• Since the returns were not filed within 30 days, the petitioner could not claim the benefit of Section 62(2) (which would have automatically withdrawn the assessment orders).

• The petitioner then approached the High Court of Kerala by filing this writ petition, challenging the assessment orders.

Arguments

Petitioner’s Argument (Amani Machine Centre):

The petitioner’s lawyer made a creative legal argument:

• Section 62(1) of the GST Act makes a reference to Section 44 of the Act, which deals with the filing of annual returns.

• Under Section 44 of the CGST Act, a taxpayer has time until 31st December following the end of the financial year to file annual returns.

• Therefore, the petitioner argued that the best judgment assessment under Section 62 could only be initiated AFTER 31st December of the financial year — meaning the assessment orders passed in September 2019 were premature.

• In other words, the petitioner was saying: “You couldn’t have assessed us yet — we still had time till December to file our annual returns!”

Respondent’s Argument (State Tax Officer):

The Government Pleader (Thushara James) appeared for the respondent and essentially defended the assessment orders, arguing that:

• The assessment orders were validly passed under Section 62 after the petitioner failed to file returns even after notice under Section 46.

• The petitioner did not file returns within 30 days of the assessment orders, so Section 62(2) relief is not available.

Key Legal Provisions Referenced

(Note: No prior case law precedents were cited in this judgment — the court relied purely on statutory interpretation)

Here are the key legal provisions discussed:

Section 39, GST Act

Requires registered persons to file monthly returns

Section 44, CGST ActDeals with annual returns — to be filed by 31st December following the financial year

Section 46, GST Act

Allows the officer to issue a notice to a defaulter to file returns

Section 47, GST Act

Deals with late fees for delayed filing of returns

Section 62(1), GST Act

Empowers the officer to pass best judgment assessment if returns not filed even after Section 46 notice; must be done within 5 years from the date specified under Section 44

Section 62(2), GST Act

If the taxpayer files a valid return within 30 days of the assessment order, the order is deemed withdrawn (except for interest/late fee)

Judgment

The Respondent (State Tax Officer) won. The writ petition was dismissed.

The Court’s Reasoning:

Justice A.K. Jayasankaran Nambiar gave a clear and logical interpretation:

1. The court rejected the petitioner’s argument that the assessment could only begin after 31st December of the financial year.

2. The court held that the reference to Section 44 in Section 62(1) is only for the purpose of calculating the 5-year outer time limit within which the assessing officer must complete the best judgment assessment. It does not mean the officer must wait until December to start the process.

3. The court clarified: “While the best judgment assessment can be done immediately after detection of the failure to file the returns despite service of notice, the outer time limit for completing the best judgment assessment is five years from the date specified under Section 44 of the Act.”

4. Since the petitioner admittedly did not file returns within 30 days of the assessment orders, the benefit of Section 62(2) (deemed withdrawal) was not available.

5. The writ petition challenging the assessment orders therefore failed and was dismissed.

Relief Granted (Partial):

Even though the petition was dismissed, the court showed some compassion:

• The court stayed the recovery proceedings for 6 weeks to give the petitioner time to file an appeal before the Appellate Authority.

• The petitioner was directed to produce a copy of the writ petition and this judgment before the respondents.

FAQs

Q1: What is a “best judgment assessment” under Section 62?

When a GST-registered taxpayer fails to file returns even after receiving a notice from the tax officer (under Section 46), the officer can assess the taxpayer’s tax liability based on the best available information/judgment. This is called a “best judgment assessment.”

Q2: What is the 30-day rule under Section 62(2)?

If a taxpayer receives a best judgment assessment order but then files the correct return within 30 days of that order, the assessment order is automatically treated as withdrawn — except for any interest or late fees payable. This is a second chance given by the law.

Q3: Why did the petitioner lose the Section 62(2) benefit?

Because the petitioner filed the returns in November–December 2019, which was well beyond 30 days from the assessment orders dated September 2019. The 30-day window had already expired.

Q4: What was the petitioner’s main legal argument, and why did it fail?

The petitioner argued that since Section 62 refers to Section 44 (annual returns due by 31st December), the tax officer couldn’t assess them before that date. The court rejected this, saying the Section 44 reference is only about the 5-year outer time limit for completing the assessment — not about when the officer can start the process.

Q5: Can the petitioner still challenge the assessment orders?

Yes! The court gave the petitioner 6 weeks to file an appeal before the Appellate Authority. The recovery of the assessed amounts was put on hold during this period.

Q6: What is the practical lesson from this case for GST taxpayers?

File your GST returns on time! If you receive a best judgment assessment order, you have only 30 days to file the correct return and get the order withdrawn. Missing this window means the assessment stands, and you’ll have to go through the appeals process.

Q7: Were there any prior case laws cited in this judgment?

No — the court decided this case purely based on the interpretation of the statutory provisions (Sections 39, 44, 46, 47, and 62 of the GST Act). No prior judicial precedents were cited.

The petitioner has approached this Court aggrieved by Exts.P12 to 22

assessment orders passed under Section 62 of the Goods and Services Tax Act('the Act' for short). In the writ petition, it is his case that after receipt of the said assessment order, he submitted the relevant returns viz. Exts.P23 to P33, on various date between November and December 2019. It is admitted though, that the returns were not filed within 30 days from the date of service of the assessment orders under Section 62 and, therefore, the petitioner will not get the benefit contemplated under Section 62(2) whereby the said orders would have been deemed withdrawn save for the payment of interest or payment of late fee under Section 47. The learned counsel for the petitioner would, however, contend that, in as much as the provisions of Section 62(1) make a reference to Section 44 of the Act, which deals with the furnishing of annual returns, and enables the assessing authority under Section 62 of the Act, to pass assessment orders on best

judgment basis within a period of five years from the date specified under Section 44 for furnishing of annual returns, the best judgment assessment itself could have been completed only after December of the financial year, which is the period mentioned in Section 44 of the CGST Act. The contention, in other words, is that in as much as the petitioner has a period till 31st of December, following the end of the financial year, for preferring the annual returns, the said period must also been seen as the date from which alone the respondents could proceed to complete the best judgment assessment, under Section 62 of the Act.

2.I have heard the learned counsel appearing for the petitioner and also the

learned Government Pleader appearing for the respondents.

3. On a consideration of the facts and circumstances of the case as also the

submissions made across the Bar, I find it difficult to accept the proposition canvassed by the learned counsel for the petitioner, with reference to Section 62 r/w Section 44 of the Act. In my view, the reference to Section 44 of the Act, in Section 62, is only for the purpose of determining the five year period within which the assessing officer has to complete the best judgment assessment. It does not, in my view, mandate that the steps for completing the best judgment assessment should be initiated only after 31st December, following the end of the financial year, in which the default as regards filing of monthly returns occured. In other words, Section 62 of the Act must be seen as enabling an Assessing Officer to

proceed to assess the tax liability of a person, who has not furnished the returns inter alia under Section 39, even after service of notice under Section 46, on best judgment basis, and thereafter issue the assessment order within a period of five years from the date indicated under Section 44 for furnishing of the annual returns. Hence, while the best judgment assessment can be done immediately after detection of the failure to file the returns despite service of notice, the outer time limit for completing the best judgment assessment is five years from the date specified under Section 44 of the Act. The time limit of five years indicated in S. 62

(i) has to be seen as the outer limit prescribed by the statute for the exercise of power by the assessing authority, and not as indicative of any particular point in time from when, after detection of the default committed by the assessee, the assessing authority can proceed to complete the assessment on best judgment basis.

In the instant case, it is not in dispute that the petitioner did not furnish a valid return within 30 days from the service of the assessment orders under Section 62(1) of the Act. That being the case, it would follow that the petitioner cannot obtain the benefit under Section 62(2) of the Act, for deeming the assessment orders already passed on best judgment basis as withdrawn. The writ petition in its challenge to the assessment orders therefore fails and is dismissed.

Taking note of the submission of the learned counsel for the petitioner that

he would require some time to prefer the appeals against the assessment orders in question, I direct that recovery proceedings for recovery of the amounts confirmed against the petitioner by Exts.P12 to P23 assessment orders shall be kept in abeyance for a period of six weeks so as to enable the petitioner to move the Appellate Authority, in its challenge against the said assessment orders, in the meanwhile. The petitioner shall produce a copy of the writ petition together with a copy of this judgment, before respondents, for further action.

Sd/-

A.K.JAYASANKARAN NAMBIAR

JUDGE