Lalit Industries, registered in Assam, is engaged in making inter-state supplies of hosiery garments. The aggregate turnover of Lalit Industries in the preceding financial year is ₹72 Lakh. It has opted for composition l

As per section 10(1) of the Central Goods and Services Tax Act, 2017, a registered person, whose aggregate turnover in the preceding financial year did not exceed ₹1.5 crore in a State/Union Territory [₹75 Lakh in case of Special Category States except Assam, Himachal Pradesh and Jammu and Kashmir], may opt for composition scheme. However, he shall not be eligible to opt for composition scheme if, interalia, he is engaged in making any inter-State outward supplies of goods or services. In the given case, since Lalit Industries is engaged in making inter-State supplies of hosiery garments, it is not eligible to opt for composition scheme in current year irrespective of its turnover not exceeding the threshold limit of ₹75 Lakh in the preceding financial year. Further, if the proper officer has reasons to believe that a taxable person has paid tax under composition scheme despite not being eligible, such person shall, in addition to any tax payable, be liable to a penalty and the provisions of section 73 or section 74 shall, mutatis mutandis, apply for determination of tax and penalty. Thus, the action taken by the proper officer of levying the penalty for wrongly availing the composition scheme is valid in law.