CBIC has issued guidelines for initiation of recovery proceedings before three months from the date of service of demand order. CBIC has clarified vide Instruction No. 1/2024-GST dated 30.05.2024, that such proposal for recovery at shorter period of less than 3 months shall be examined by jurisdictional Principal Commissioner or Commissioner of Central tax and order / direction shall be issued after his satisfaction for the reasons to be recorded in writing.
Section 78 of the CGST Act, 2017 provides for the time for initiation of such recovery proceeding. Section 79(1) of the CGST Act, 2017 provides that where any amount payable by a person to the Government under any of the provisions of CGST Act or Rules made thereunder is not paid, the proper officer shall proceed to recover the amount by one or more of the modes specified.
The general rule for initiating recovery proceedings is that, where any amount payable by a taxable person in pursuance of an order passed under the CGST Act is not paid within a period of three months from the date of service of such order, recovery proceedings shall be initiated by the proper officer only after the expiry of the said period of three months.
The Instructions inter alia, provides for as under:
- Only in exceptional cases, where it is necessary in the interest of revenue, the proper officer may require the said taxable person to pay the said amount within a period less than the period of three months from the date of service of the order, as may be specified by him, after recording the reasons for doing so in writing.
- The proper officer for recovery under Section 79 of the CGST Act, 2017 is the jurisdictional Deputy or Assistant Commissioner of Central Tax.
- To ensure uniformity in implementation, the new instructions stipulate that:
- Proper officer is empowered to initiate recovery before the 3 months period in specific cases only where revenue is at risk after proper justification and approval.
- Such initiation of recovery must be expedient in the interest of revenue.
- Where it is felt that recovery need to be initiated in the interest of revenue before completion of three months from the date of service of order, the matter shall be placed by the jurisdictional Deputy or Assistant Commissioner of Central Tax before the jurisdictional Principal Commissioner/ Commissioner of Central Tax, along with the reasons justification for such an action.
- Jurisdictional Principal Commissioner/ Commissioner of Central Tax shall examine the reasons/ justification given by the jurisdictional Deputy or Assistant Commissioner at the earliest and if he is satisfied that it is expedient in the interest of revenue to ask the said taxable person to pay the said amount before completion of three months from the date of service of the order, he must record in writing, the reasons as to why the concerned taxable person is required to make payment of such amount within such period, less than a period of three months, as may be specified by him.
- After recording such reasons in writing, he may issue directions to the concerned taxable person to pay the said amount within the period specified by him in the said directions.
- Copy of such directions must also be sent to the jurisdictional Deputy or Assistant Commissioner of Central Tax for information.
- Jurisdictional Principal Commissioner/ Commissioner of Central Tax should provide the specific reason(s) for asking the taxable person for early payment of the said amount, clearly outlining the circumstances prompting such early action.
- Reasons to believe for the apprehension of risk to revenue should be based on credible evidence, which may be kept on record to the extent possible.
- The proper officer must duly consider the financial health, status of business operations, infrastructure, and credibility of the taxable person, and strike a balance between the interest of the revenue and ease of doing business.
- Such directions for early payment of the confirmed demand should not be issued in a mechanical manner, and must be issued only in cases where interest of revenue is required to be safeguarded due to specific apprehension/ circumstances in the said case.
- Where the taxable person fails to make payment of the said amount within the period specified in the said directions, the jurisdictional Deputy or Assistant Commissioner of Central Tax shall proceed to recover the said amount as per the procedure specified in section 79(1) of CGST Act, 2017.
Conclusion: The CBIC’s new guidelines for the initiation of recovery proceedings before the standard three-month period reflect a balanced approach to revenue protection and taxpayer consideration. By ensuring that such actions are taken only in exceptional cases and with proper justification, the CBIC aims to safeguard revenue interests while maintaining fairness and transparency. These measures, which involve careful assessment and approval by senior tax officials, underscore the importance of credible evidence and the need to balance revenue interests with the ease of doing business.
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