The GST Appellate Tribunal, Bengaluru restored penalties of ₹4,28,42,308 each under Sections 122(1)(vii) and 122(1)(x) on an arecanut trader, holding that Circular 171/3/2022‑GST does not bar penalty under clause (x).

A taxpayer’s own unretracted statements under Section 70 of the CGST Act can sustain penalties for fake invoicing without further corroboration, and Circular No. 171/03/2022-GST does not limit the clauses of Section 122(1) that may be invoked [Shekhar Basappa Wali v. Shrinivasa Traders, 2026-juristway.com-3200-GSTAT(Bengaluru)-GST].

Srikanth Venkatraman, Member (Judicial), wrote the order for a Bench that included Sudha Koka, Member (Technical). The department challenged an appellate order of 3 May 2024; the trader did not appear.

Investigators traced a fake-invoice network in arecanut. Searches found the proprietor’s registered premises nearly empty. The suppliers’ and recipients’ registrations had been cancelled before the invoice dates, and vehicle numbers on e-way bills belonged to scooters, tankers and three-wheelers or did not exist.

In statements recorded on several dates, the proprietor admitted issuing invoices without supply. Following the circular, the adjudicating authority dropped the tax demand under Section 74. It imposed a penalty of ₹4,28,42,308 each under Section 122(1)(vii) and Section 122(1)(x).

The appellate authority deleted both penalties. It read the circular as allowing penalty only under clauses (ii) and (vii), and it held that the statements needed corroboration.

On clause (x), the Tribunal noted that the circular nowhere says penalty may be levied “only” under clauses (ii) and (vii). It held that “A Board circular cannot be interpreted contrary to a statutory provision.” The proprietor’s contradictory statements and fabricated records justified the clause (x) penalty.

On clause (vii), the Tribunal held that statements under Section 70, an inquiry deemed a judicial proceeding, bind their maker. It relied on Commissioner of Customs (Imports), Mumbai v. Ganpati Overseas ((2023) 11 Centax 101) and the Karnataka High Court in Commissioner of Customs, Mangaluru v. Imtiaz Ahmed ((2023) 8 Centax 2).

The Tribunal distinguished Habib Uz Zaman v. Commissioner of Customs, New Delhi (2021 (376) ELT 666) and J.P. Iscon Private Limited v. Commissioner of Central Excise, Ahmedabad (2022 (63) GSTL 64). It held that Gargo Traders v. Joint Commissioner of Commercial Taxes (State Tax) ((2023) 7 Centax 136) did not help, because the registrations here were cancelled before the invoices, not retrospectively.

It also found Commissioner of Central Excise v. CERA Boards and Doors, Kannur (2020 (373) ELT 794) misread. Circular No. 64/38/2018-GST on vehicle-number errors applies under Sections 129 and 130, where the vehicle’s existence is not in doubt.

Bank documents produced first before the appellate authority were barred by Rule 112 and were in any case only a ledger copy. The burden of proving genuine receipt and tax payment under Sections 155 and 16(2)(b) and (c) lay on the taxpayer, who did not discharge it.

The appeal was allowed and both penalties were restored, along with the appropriation of ₹22,00,400 and the attached bank balances.

2026-juristway.com-3200-GSTAT(Bengaluru)-GST