Central Goods and Services Tax 2017, Uttar Pradesh Goods and Services Tax Act 2017, and Integrated Goods and Services Tax Act 2017 were brought into force on 01.07.2017, through which various central taxes and state taxes were subsumed under the Goods and Services Tax. Moreover, a streamlined procedure was provided in case of any discrepancy on the part of the taxpayer which is in line with the Principles of Natural Justice.
In this article, we discuss the procedure streamlined in the Goods and Services Tax Laws in case of any discrepancy on the part of the taxpayer.
Scrutiny of Returns – Section 61 of the CGST Act
When a registered person furnishes his returns through self-assessment, the first line of scrutiny of such returns is composed of Section 61 of the GST Act.
Section 61 of CGST Act provides for Scrutiny of returns, and it is as follows:
(1) The proper officer may scrutinize the return and related particulars furnished by the registered person to verify the correctness of the return and inform him of the discrepancies noticed, if any, in such manner as may be prescribed and seek his explanation thereto.
(2) In case the explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard.
(3) In case no satisfactory explanation is furnished within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine the tax and other dues under section 73 or section 74.
As is statutorily provided, in case of failure on the part of the registered person to take corrective measures vis-à-vis his returns for the said month, the proper officer may initiate action as is appropriate.
Under Section 65 of the Act, the Proper Officer can undertake an audit after informing such person by means of notice under Section 65(3) of the Act at least 15 days before the day on which such audit is to be conducted.
Under Section 66 of the Act, a special audit may also be conducted. This audit is special by virtue of two properties, firstly, the audit is in light of the nature and complexity of the case and the interest of revenue, and secondly, the examination or audit shall be done by a Chartered Accountant or a Cost Accountant as nominated by the Proper Officer.
Section 67 of the Act provides for the powers of inspection, search and seizure. The provisions of Criminal Procedure Code are applicable mutatis mutandis on the proper officer.
Powers under Sections 65, 66, and 67 of the Act are in addition to Section 61 of the Act, so that the scrutiny of the returns is strengthened, and correct determination be made.
Demand Orders under Sections 73 and 74 of CGST Act
Before the demand order, a Show cause notice is issued as stipulated under Sections 73 and 74 of the GST Act. Notice under Section 73(1) or 74(1) of the GST Act is drastically different from Notice under Section 61 of the Act. Section 73(1) or 74(1) of the GST Act provides for a Notice to show cause as to why the amount should not be paid along with interest payable under Section 50 and the Penalty stipulated under the provisions of the Act.
Section 73 provides for Orders where tax has been not paid, short paid or erroneously paid by reasons other than fraud, willful misstatement, or suppression of facts to evade tax. The Orders for determination of tax, interest, and penalty where tax has not been paid or short paid or erroneously paid with malice in fact and not mere malice in law are dealt with under Section 74 of the Act. Time limits for orders and show cause notice are more than those under Section 73 of the GST Act.
In addition to the Notice to show cause under Section 73(1) or 74(1) of the GST Act, a Statement containing the details of the discrepancy in payment of tax or availing Input Tax Credit for periods other than those covered under Notice may also be served under Section 73(3) or 74(3) of the GST Act.
The person chargeable with tax can file a representation against the said Show Cause Notice under Section 73(1) or 74(1) of the GST Act, and the proper officer must consider the said representation, and thereafter order under Section 73(9) of GST Act through which he shall determine the amount of tax, interest, and penalty @10% of tax or Rs. 10000/- whichever is higher, to be paid, or Order under Section 74(9) of the GST Act determining the amount of tax, interest, and penalty due from the person chargeable with tax.
Penalty Provisions
Section 122 of the GST Act provides for penalties for certain offences which are laid down including tax not paid to the government, fraudulently obtaining a refund of tax under the Act, etc.
Section 127 of the GST Act further provides that where the proper officer is of the view that a person is liable to a penalty and the same is not covered under any proceedings under section 62, section 63, section 64, section 73, section 74, section 129, or section 130, he may issue an order levying such penalty after giving a reasonable opportunity of being heard to such person. General penalty is provided under Section 125 of the GST Act i.e. any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to twenty-five thousand rupees.
Section 107 of CGST Act – Appeal Provisions
An appeal under Section 107 of the GST Act can be filed against the Orders under Sections 73 or 74 of the GST Act within three months from the date on which the order is communicated to such person. Order under Section 107(12) of the GST Act provides that the order in an appeal must be in writing and state the points of determination, the decisions thereon, and the reasons for such decision.
Writ (Tax) Petitions before Allahabad High Court
Writ Petitions may be filed challenging the Orders in Appeal under Section 107 of the GST Act or even Orders under Section 73 or 74.
In the case of Ganga Prasad Agarwal vs. State of U.P. and two others, the Hon’ble Allahabad High Court, where the remedy of Appeal was not available as three months had lapsed from the date of order, held as follows:
“However, taking into consideration the nature of the issue before us, we direct the petitioner to file an appeal before the authority concerned within a period of two weeks from date. In the event such an appeal is filed within the specified period, the authority concerned is directed to condone the delay in filing the appeal and hear the matter on merits.”
In the case of M/s Shiv Kumar Sanjeev Kumar vs. State of U.P. and another, the Hon’ble Allahabad High Court held that where the original order is completely non-reasoned and suffers from complete non-application of mind, the same was set aside.
In the case of M/s Anmol Traders vs. Deputy Commissioner, Auraiya held that:
“It is basic to procedural law under taxing statutes that opportunity of personal hearing must be provided to an assessee before any assessment/adjudication order is passed against him. Thus, we find it strange and wholly unacceptable merely because the substantive law has changed, the revenue authorities have changed their approach and are failing to observe the mandatory requirement of procedural law. They have thus denied opportunity of hearing to the assessee.”
Section 75(4) further stipulates as follows:
(4) An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.
Hence, Writ petitions can be filed challenging the orders under Section 107 of the GST Act. In cases where the appellate remedy is not available due to passage of time, writ petitions may be filed challenging the original orders under sections 73 or 74 of the GST Act.