GST Regime very prominently exhibits the concept of self assessment and virtually accepts the return filed by any person on the basis of self assessment as the assessment order for that period under this innovative law . It also incorporates the concept of scrutiny of returns and assessment of non-filers of returns in the stipulated time . However where it is found that the concerned person has not paid the requisite tax in time or has short paid the due tax , or has availed or utilised input tax credit wrongly, or has been refunded any amount erroneously , the GST regime envisages the provisions for determination of tax in such cases irrespective of the fact that such event has been a result of malafide or fraudulent intention or has been a result of any reason other than such intent . Naturally such a determination follows after the filing of return by such concerned person who makes misstatement or suppression of facts which results in the aforesaid events .

            Section 73 and 74 of the CGST Act , 2017 ( hereinafter referred to as the Act )(similar provisions are embodied in  UPGST Act , 2017) embody provisions regarding determination of tax in the aforesaid scenario . It is pertinent to note that such a scenario to determine the tax may arise as a result of –

            (i) scrutiny of returns ,or

            (ii) search and seizure ,or

            (iii) audit or special Audit ,or

           (iv) information from any relevant source .

A- Determination of Tax where there does not exist  malafide or fraudulent intention in default :

            Section 73 of the Act embodies extremely significant provisions relating to determination of  tax liabilities under this Act where , for any reason other than fraud or any willful misstatement or suppression of facts , the tax has not been paid or has been short paid or has been erroneously refunded or input tax credit has been wrongly availed or utilized .This section embodies following provisions :

“73. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful misstatement or suppression of facts :

(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any willful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.

(2) The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.

(3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under subsection (1), on the person chargeable with tax.

(4) The service of such statement shall be deemed to be service of notice on such person under subsection (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice.

(5) The person chargeable with tax may, before service of notice under sub-section (1) or, as the case may be, the statement under sub-section (3) pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.

(6) The proper officer, on receipt of such information, shall not serve any notice under subsection (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.

(7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable.

(8) Where any person chargeable with tax under subsection (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.

(9) The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue an order.

(10) The proper officer shall issue the order under sub-section (9) within three years from the due date for filing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund.

(11) Notwithstanding anything contained in subsection (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.”

            Thus from a comprehensive study of the aforesaid provisions it is quite evident that Sub-section (1) of section 73 envisages that where it appears to the proper officer that –

  1. any tax has not been paid, or
  2. any tax has been short paid, or
  3. any tax has been erroneously refunded, or
  4. input tax credit has been wrongly availed, or
  5. input tax credit has been wrongly utilized,

for any reason other than the reason of fraud or any willful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilized input tax credit, requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder. Thus it is quite evident that a notice under section 73 shall be issued in the aforesaid scenario even if the concerned person has no malafide intention in respect of such default .

            Thus it is abundantly clear that notice under sub-section (1) shall mention the amount which will include –

  1. the tax not paid or short paid ,
  2. the amount of refund erroneously made ,
  3. the amount of input tax credit wrongly availed or utilized ,
  4. the amount of interest payable as per the provisions embodied in section 50 of the Act ,
  5. the amount of penalty payable under the Act in respect of aforesaid scenario .

            It is also pertinent to note that section 50 of the Act embodies following   provisions :

“50. Interest on delayed payment of tax :

(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder,  fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council.

(2) The interest under sub-section (1) shall be calculated, in  such manner as may be prescribed from the day succeeding the day on which such tax was due to be paid.

(3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43,  shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent., as may be notified by the Government on the recommendations of the Council.”

            It is pertinent to note that the Government of India has issued Notification No. 13/2017 – Central Tax New Delhi, the 28th June, 2017  which embodies following provisions –

“G.S.R. …..(E).—In exercise of the powers conferred by sub-sections (1) and (3) of section 50, sub-section (12) of section 54 and section 56 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby fixes the rate of interest per annum, for the purposes of the sections as specified in column (2) of the Table below, as mentioned in the corresponding entry in column (3) of the said Table.

Table

Serial Number Section Rate of interest

(in per cent)

(1) (2) (3)
1. Sub-section (1) of section 50 18
2. Sub-section (3) of section 50 24
3. Sub-section (12) of section 54 6
4. Section 56 6
5. Proviso to section 56 9

 

  1. This notification shall come into force from the 1st day of July, 2017. ”

            It is also to be noted that Rule 142(1)(a) of CGST Rules , 2017 ( similar provisions have been envisaged by UPGST Rules , 2017 ) embodies following provisions regarding notice to be issued under sub-section (1) of section 73 :

“142 : Notice and order for demand of amounts payable under the Act.- (1) The proper officer shall serve, along with the –

(a) notice issued under section 52 or section 73 or section 74 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130, a summary thereof electronically in FORM GST DRC-01,

specifying therein the details of the amount payable  “

            Sub-section (2) of section 73 envisages that the proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.

            It is pertinent to note that according to sub-section (10) an order under this section may be passed within three years from the due date for filing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilized relates to or within three years from the date of erroneous refund.

            It is pertinent to note that sub-section (1) of section 44 of the Act embodies following provisions regarding filing of annual return :

“44. Annual return :

(1) Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a nonresident taxable person, shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.”

            Thus from the aforesaid provisions it is abundantly clear that every registered person excluding-

(i) an Input Service Distributor,

(ii) a person paying tax under section 51 ,

(iii) a person paying tax under section 52,

(iv)a casual taxable person and

(v) a nonresident taxable person,

shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.

            Sub-section (3) of section 73 envisages that where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement on the person chargeable with tax . Such statement shall contain the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under subsection (1) . 

            Thus where any notice has been issued under sub-section (1) for any particular tax period and the proper officer finds that the related default exists or is continued in other tax periods also , he shall issue a statement to such concerned person which will have the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for such periods other than those covered under subsection (1) . 

            It is also to be noted that Rule 142(1)(b) of CGST Rules , 2017 ( similar provisions have been envisaged by UPGST Rules , 2017 ) embodies following provisions regarding statement to be issued under sub-section (3) of section 73 :

“142. Notice and order for demand of amounts payable under the Act.- (1) The proper officer shall serve, along with the –

(b) statement under sub-section (3) of section 73 or sub-section (3) of section 74, a summary thereof electronically in FORM GST DRC-02,

specifying therein the details of the amount payable. “

            Sub-section (4) of section 73 envisages that the service of such statement shall be deemed to be service of notice on such person under subsection (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice.

            Thus if the grounds relied upon in the statement for the aforesaid default relating to various tax periods are the same as that embodied in the notice issued for aforesaid default relating to different tax periods under section (1) , then there shall be no need to issue fresh notice in respect of tax periods covered by the statement issued under the provisions of sub-section (3) .

            Sub-section (5) of section 73 envisages that the person chargeable with tax may, before service of notice under sub-section (1) or, as the case may be, before the service of the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 .

            It is also envisaged that such amount of tax alongwith the requisite interest may be paid by the concerned taxable person on the basis of his own ascertainment of such tax or the basis of the tax as ascertained by the proper officer . After paying this amount , the concerned taxable person shall inform the proper officer in writing of such payment.

            It is pertinent to note that sub-rule (2) of rule 142 of the CGST Rules , 2017 (similar sub-rule is provided in UPGST Rules , 2017 ) envisages that –

“142 (2) Where, before the service of notice or statement, the person chargeable with tax makes payment of the tax and interest in accordance with the provisions of sub-section (5) of section 73 or, as the case may be, tax, interest and penalty in accordance with the provisions of sub-section (5) of section 74, or where any person makes payment of tax, interest, penalty or any other amount due in accordance with the provisions of the Act he shall inform the proper officer of such payment in FORM GST DRC-03 and the proper officer shall issue an acknowledgement, accepting the payment made by the said person in FORM GST DRC–04.”

            Sub-section (6) of section 73 envisages that on receipt of such information,  the proper officer shall not serve any notice under subsection (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder .

            Sub-section (7) of section 73 envisages that in case where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such balance amount .

            Sub-section (8) of section 73 envisages that if any person chargeable with tax under subsection (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.

            It is pertinent to note that sub-rule(3) of rule 142 of CGST Rules , 2017 ( similar sub-rule is provided in UPGST Rules , 2017 ) envisages that –

“142(3) Where the person chargeable with tax makes payment of tax and interest under sub-section (8) of section 73 or, as the case may be, tax, interest and penalty under sub-section (8) of section 74 within thirty days of the service of a notice under sub-rule (1), or where the person concerned makes payment of the amount referred to in sub-section (1) of section 129 within fourteen days of detention or seizure of the goods and conveyance, he shall intimate the proper officer of such payment in FORM GST DRC-03 and the proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in respect of the said notice.”

            Sub-section (9) of section 73 envisages that if the person chargeable with tax does not pay the requisite payable amount of tax , the proper officer shall, after considering the representation or reply , if any, made by such person, determine the amount of tax and requisite interest and shall also impose a penalty equivalent to ten per cent of tax or ten thousand rupees, whichever is higher, due from such person and issue an order accordingly .

            It is pertinent to note that sub-rule(4) of rule 142 of CGST Rules , 2017 ( similar sub-rule is provided in UPGST Rules , 2017 ) envisages that –

“142 (4) The representation referred to in sub-section (9) of section 73 or sub-section (9) of section 74 or sub-section (3) of section 76 or the reply to any notice issued under any section whose summary has been uploaded electronically in FORM GST DRC-01 under sub-rule (1) of this rule shall be furnished in FORM GST DRC-06. “

            Sub-section (10) of section 73 envisages that the proper officer shall issue the order under sub-section (9)-

(i) within three years from the due date for filing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or

(ii) within three years from the date of erroneous refund.

as the case may be .

            Sub-section (11) of section 73 envisages that irrespective of anything contained in subsection (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.

            Thus mere admission or acceptability of liability to pay tax shall not suffice , the concerned person shall have to deposit the due tax within a period of thirty days from the due date of payment of such tax to avoid penalty .

B- Determination of Tax where there exists  malafide or fraudulent intention in default :

            Section 74 embodies extremely significant provisions relating to determination of  tax liabilities under this Act where , by reason of fraud or any willful misstatement or suppression of facts , the tax has not been paid or has been short paid or has been erroneously refunded or input tax credit has been wrongly availed or utilized . This section embodies following provisions :

“74. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts :

(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any willful misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice.

(2) The proper officer shall issue the notice under sub-section (1) at least six months prior to the time limit specified in sub-section (10) for issuance of order.

(3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under subsection (1), on the person chargeable with tax.

(4) The service of statement under sub-section (3) shall be deemed to be service of notice under subsection (1) of section 73, subject to the condition that the grounds relied upon in the said statement, except the ground of fraud, or any willful misstatement or suppression of facts to evade tax, for periods other than those covered under subsection (1) are the same as are mentioned in the earlier notice.

(5) The person chargeable with tax may, before service of notice under sub-section (1) pay the amount of tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent. of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.

(6) The proper officer, on receipt of such information, shall not serve any notice under subsection (1) in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.

(7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable.

(8) Where any person chargeable with tax under subsection (1) pays the said tax along with interest payable under section 50 and a penalty equivalent to twenty five per cent. Of such tax within thirty days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded.

(9) The proper officer shall, after considering the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order.

(10) The proper officer shall issue the order under sub-section (9) within a period of five years from the due date for filing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilized relates to or within five years from the date of erroneous refund.

(11) Where any person served with an order issued under sub-section (9) pays the tax along with interest payable thereon under section 50 and a penalty equivalent to fifty per cent. of such tax within thirty days of communication of the order, all proceedings in respect of the said notice shall be deemed to be concluded.

Explanation 1.– For the purposes of section 73 and this section ,–

(i) the expression “all proceedings in respect of the said notice” shall not include proceedings under section 132;

(ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122, 125, 129, and 130 are deemed to be concluded .

Explanation 2.––For the purposes of this Act, the expression “suppression” shall mean non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer.”

            A comprehensive study of the aforesaid provisions makes it quite evident that sub-section (1) of section 74  envisages that where it appears to the proper officer that –

  1. any tax has not been paid, or
  2. any tax has been short paid, or
  3. any tax has been erroneously refunded, or
  4. input tax credit has been wrongly availed, or
  5. input tax credit has been wrongly utilised,

by reason of fraud or any willful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice.

            Thus it is abundantly clear that notice under sub-section (1) shall mention the amount which will include –

  1. the tax not paid or short paid ,
  2. the amount of refund erroneously made ,
  3. the amount of input tax credit wrongly availed or utilized ,
  4. the amount of interest payable as per the provisions embodied in section 50 of the Act ,
  5. the amount of penalty equivalent to tax specified in the notice .

            It is reiterated that section 50 of the Act embodies following   provisions :

“50. Interest on delayed payment of tax :

(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder,  fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council.

(2) The interest under sub-section (1) shall be calculated, in  such manner as may be prescribed from the day succeeding the day on which such tax was due to be paid.

(3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43,  shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent., as may be notified by the Government on the recommendations of the Council.”

            It is reiterated that the Government of India has issued Notification No. 13/2017 – Central Tax New Delhi, the 28th June, 2017  which embodies following provisions –

“G.S.R. …..(E).—In exercise of the powers conferred by sub-sections (1) and (3) of section 50, sub-section (12) of section 54 and section 56 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby fixes the rate of interest per annum, for the purposes of the sections as specified in column (2) of the Table below, as mentioned in the corresponding entry in column (3) of the said Table.

 Table

Serial Number Section Rate of interest

(in per cent)

(1) (2) (3)
1. Sub-section (1) of section 50 18
2. Sub-section (3) of section 50 24
3. Sub-section (12) of section 54 6
4. Section 56 6
5. Proviso to section 56 9

 

  1. This notification shall come into force from the 1st day of July, 2017. ”

            It is also to be noted that Rule 142(1)(a) of CGST Rules , 2017 ( similar provisions have been envisaged by UPGST Rules , 2017 ) embodies following provisions regarding notice to be issued under sub-section (1) of section 74 :

“142 : Notice and order for demand of amounts payable under the Act.- (1) The proper officer shall serve, along with the –

(a) notice issued under section 52 or section 73 or section 74 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130, a summary thereof electronically in FORM GST DRC-01,

specifying therein the details of the amount payable  “

            Sub-section (2) of section 74 envisages that the proper officer shall issue the notice under sub-section (1) at least six months prior to the time limit specified in sub-section (10) for issuance of order.

            It is pertinent to note that according to sub-section (10) an order under this section may be passed within five years from the due date for filing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous refund.

             Sub-section (3) of section 74 envisages that where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement on the person chargeable with tax . Such statement shall contain the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under subsection (1) . 

            Thus where any notice has been issued under sub-section (1) for any particular tax period and the proper officer finds that the related default exists or is continued in other tax periods also , he shall issue a statement to such concerned person which will have the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for such periods other than those covered under subsection (1) . 

            It is also to be noted that Rule 142(1)(b) of CGST Rules , 2017 ( similar provisions have been envisaged by UPGST Rules , 2017 ) embodies following provisions regarding statement to be issued under sub-section (3) of section 74 :

“142. Notice and order for demand of amounts payable under the Act.- (1) The proper officer shall serve, along with the –

(b) statement under sub-section (3) of section 73 or sub-section (3) of section 74, a summary thereof electronically in FORM GST DRC-02,

specifying therein the details of the amount payable. “

            Sub-section (4) of section 74 envisages that the service of statement under sub-section (3) shall be deemed to be service of notice under subsection (1) of section 74, subject to the condition that the grounds relied upon in the said statement are the same as are mentioned in the earlier notice ,except the ground of fraud, or any willful misstatement or suppression of facts to evade tax, for periods other than those covered under sub- section (1) .

          Thus if the grounds relied upon in the statement for the aforesaid default relating to various tax periods are the same as that embodied in the notice issued for aforesaid default relating to tax period under section (1) except the ground of fraud, or any willful misstatement or suppression of facts to evade tax, then there shall be no need to issue fresh notice in respect of tax periods covered by the statement issued under the provisions of sub-section (3) .

           Sub-section (5) of section 74 envisages that the person chargeable with tax may, before service of notice under sub-section (1) pay the amount of tax along with interest payable thereon under section 50 and a penalty equivalent to fifteen percent of such tax . Such amount may be paid by the concerned taxable person on the basis of his own ascertainment of such tax or on the basis of the tax as ascertained by the proper officer . After paying this amount , the concerned taxable person shall inform the proper officer in writing of such payment.

            The all important condition for the applicability of sub-section (5) is that the requisite amount of tax alongwith the payable interest and penalty must have been paid prior to issue of notice under sub-section (1) .

            It is pertinent to note that sub-rule (2) of rule 142 of the CGST Rules , 2017            ( similar sub-rule is provided in UPGST Rules , 2017 ) envisages that _

“142 (2) Where, before the service of notice or statement, the person chargeable with tax makes payment of the tax and interest in accordance with the provisions of sub-section (5) of section 73 or, as the case may be, tax, interest and penalty in accordance with the provisions of sub-section (5) of section 74, or where any person makes payment of tax, interest, penalty or any other amount due in accordance with the provisions of the Act he shall inform the proper officer of such payment in FORM GST DRC-03 and the proper officer shall issue an acknowledgement, accepting the payment made by the said person in FORM GST DRC–04.”

            Sub-section (6) of section 74 envisages that on receipt of such information , the proper officer shall not serve any notice under subsection (1) in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.

            Sub-section (7) of section 74 envisages that where the proper officer is of the opinion that the amount paid under sub-section (5) by the person chargeable with tax falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of the balance amount .

            Sub-section (8) envisages that where any person chargeable with tax under subsection (1) pays the said tax along with interest payable under section 50 and a penalty equivalent to twenty five per cent of such tax within thirty days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded.

            It is pertinent to note that in the circumstances of section 74 , the amount of penalty is 15% of the tax if the requisite tax is paid prior to issue of notice and it is 25% of the tax if such amount of tax is paid within thirty days of issuance of notice .

            It is pertinent to note that sub-rule(3) of rule 142 of CGST Rules , 2017 ( similar sub-rule is provided in UPGST Rules , 2017 ) envisages that –

“142(3) Where the person chargeable with tax makes payment of tax and interest under sub-section (8) of section 73 or, as the case may be, tax, interest and penalty under sub-section (8) of section 74 within thirty days of the service of a notice under sub-rule (1), or where the person concerned makes payment of the amount referred to in sub-section (1) of section 129 within fourteen days of detention or seizure of the goods and conveyance, he shall intimate the proper officer of such payment in FORM GST DRC-03 and the proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in respect of the said notice.”

            Sub-section (9) envisages that if the person chargeable with tax fails to pay the balance amount along with interest and requisite amount of penalty , the proper officer shall, after considering the representation or reply submitted by such person, if any, determine the amount of tax, interest and penalty that is due from such person and shall issue an order accordingly .

            It is pertinent to note that sub-rule(4) of rule 142 of CGST Rules , 2017 ( similar sub-rule is provided in UPGST Rules , 2017 ) envisages that –

“142 (4) The representation referred to in sub-section (9) of section 73 or sub-section (9) of section 74 or sub-section (3) of section 76 or the reply to any notice issued under any section whose summary has been uploaded electronically in FORM GST DRC-01 under sub-rule (1) of this rule shall be furnished in FORM GST DRC-06. “

Sub-section (10) of section 74 envisages that the proper officer shall issue the order under sub-section (9)-

(i) within five years from the due date for filing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or

(ii) within five years from the date of erroneous refund.

as the case may be.

            Sub-section (11) of section 74 envisages that where any person served with an order issued under sub-section (9) pays the tax along with interest payable thereon under section 50 and a penalty equivalent to fifty per cent. of such tax within thirty days of communication of the order, all proceedings in respect of the said notice shall be deemed to be concluded.

            Thus the amount of penalty if paid within 30 days of communication of order under sub-section (9) of section 74 is 50% of the amount of tax in question .

            The First Explanation at the end of this section clarifies that for the purposes of section 73 and 74 –

(i) the expression “all proceedings in respect of the said notice” shall not include proceedings under section 132. It is pertinent to note that section 132 embodies provisions relating to punishment in respect of certain offences .

(ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122, 125, 129, and 130 shall be  deemed to be concluded .

            It is pertinent to note that section 122 embodies provisions relating to penalty for certain offences , section 125 embodies provisions relating to general penalty , section 129 embodies provisions relating to detention , seizure and release of goods and conveyance  when such goods are being transported by a conveyance  in contravention of provisions of the Act or rules made thereunder and section 130 embodies provisions relating to confiscation of goods or conveyances .

            The Second Explanation clarifies that for the purposes of this Act, the expression “suppression” shall mean-

  1. non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or
  2. failure to furnish any information on being asked for, in writing, by the proper officer

            It is pertinent to note that sub-rule (5) to (7) of rule 142 of the CGST Rules , 2017 (similar sub-rules have been provided in UPGST Rules , 2017) embody following provisions :

“142 (5) A summary of the order issued under section 52 or section 62 or section 63 or section 64 or section 73 or section 74 or section 75 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130 shall be uploaded electronically in FORM GST DRC-07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax.

(6) The order referred to in sub-rule (5) shall be treated as the notice for recovery.

(7) Where a rectification of the order has been passed in accordance with the provisions of section 161 or where an order uploaded on the system has been withdrawn, a summary of the rectification order or of the withdrawal order shall be uploaded electronically by the proper officer in FORM GST DRC-08.”

            Thus the determination of tax under section 73 and section 74 is quite different from annual assessment as existed in VAT Regime . Under the GST Regime the determination of tax is to be made for different tax periods separately whereas the VAT Regime envisaged a consolidated annual assessment order . Thus the identity of each tax period has gained more importance and significance than what it existed in VAT   Regime . Also whereas annual assessment of every dealer was a must in VAT Regime , the GST Regime exhibits , incorporates and envisages assessment only in specific circumstances i.e. in cases of –

  1. non-filers of return ,
  2. unregistered persons who despite being liable for registration have not done so ,
  3. persons whose registration has been cancelled but are liable to tax ,
  4. summary assessment to safeguard revenue and
  5. circumstances mentioned in section 73 and section 74 of the Act.

 

 

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