Demand and Recovery Forms (DRC) in GST

Among plenty of forms in GST, DRC forms are forms which are related to demands and recovery proceedings. Few of DRC forms has already came to use like DRC – 03, DRC – 01 DRC – 01A etc. but most of the forms have not came to use till date, which will come near in future. As per provisions of the Central Goods and Service Tax Act, 2017 (hereinafter referred to as the Act) read with Central Goods and Service Tax Rules, 2017 (hereinafter referred to as the Rules) there are 28 DRC Forms till date. In this article I will try to discuss about different DRC forms.

GST law authorizes the proper officer to determine and demand the following amounts:

1. Tax not paid (Sec. 73 & Sec.74)

2. Tax Short paid (Sec. 73 & Sec.74)

3. Tax erroneously refunded (Sec. 73 & Sec.74)

4. Input Tax Credit Wrongly Availed (Sec. 73 & Sec.74)

5. Input Tax Credit Wrongly Utilized (Sec. 73 & Sec.74)

6. Tax Collected but not paid (Sec. 76)

7. Tax Collected under Wrong head (Sec.77)

Now, these demands evolves from some orders or from some proceedings initiated by the proper officers. Let us discuss in brief the sections on which orders can be issued, proceedings can be done and which results in demand.

Section 52 – This section deals with provisions of tax collected at source. The proper officer can issue notice as per this section and on failure to do the same he can impose penalty.

Section 62 –For non-filers of returns by any Registered Taxable Person, the proper officer can issue notice under Section 46 of the Act. On non-receipt of any reply he can pass an assessment order.

Section 63 –The proper officer may assess and pass assessment order to any taxable person who is unregistered under this law but is liable to take registration, or any person whose registration has been cancelled as per Section 29(2) but who is liable to pay tax.

Section 64 –If the proper officer on any evidence, notices any tax payable by any taxable person then he can after taking prior permission of the Additional Commissioner or the Joint Commissioner can assess the tax liability and pass the assessment order to that person.

Section 73 –This section is very much similar to Section 74 of this Act, but the key difference is the presence of intention. After Assessment or audit or any other proceedings the proper officer can determine the tax payable, abiding the provisions of this section, for non-payment, for short payment,for erroneous refund, or for excess availment and utilization of ITC where there is no wilful intention.

Section 74 – After Assessment or audit or any other proceedings the proper officer can determine the tax payable abiding the provisions of this section, for not paying tax, for short payment, for erroneous refund, or for excess availment and utilization of ITC where there is some wilful intention.

Section 75–This section speaks about general provisions relating to the determination of tax.

Section 76 – When a taxpayer collects Tax but he fails to pay the same to the government treasury the proper officer can raise demand against such tax abiding the provisions of this section.

Section 122 – Apart from demand in tax, penalty can also be demanded. As per this sections there are many circumstances, when penalty can be imposed on a taxable person.

Section 123 – If a taxable person liable to furnish information return as per Section 150 of the Act, fails to do so within the prescribed period, then the proper officer can impose penalty on that person as per provisions of this section.

Section 124 – If a taxable person fails to furnish or furnishes any false intentionally, any information or return as per section 151 of the Act, then the proper officer can impose penalty against such person, who is liable to do so.

Section 125 – This is a general penalty provision. If any taxable person contravenes any provisions of this Act, and the penalty provision for which is not provided in any other sections of this Act, then the proper officer can impose penalty on him abiding provisions of this Section.

Section 127 – If any proper officer thinks that a person is liable to a penalty but the same is not covered under any proceedings under section 62 or section 63 or section 64 or section 73 or section 74 or section 129 or section 130he can impose penalty as per this section.

Section 129 – Demand can be raised in this section for any detention, seizure and release of goods and conveyance in transit.

Section 130 – This section deals with confiscation of goods or conveyance and imposition of penalty.

Demand Forms

DRC – 01A–“Intimation of tax ascertained as being payable under section 73(5)/74(5)”. This form has been inserted in the Rules through Notification no. 49/2019 – Central Tax dated 09^th October, 2019. Through the notificationtwo new sub-Ruleshas been inserted,sub rule (1A) and sub rule (2A) in Rule 142 of the Rules. According to the new rulethe officer before charging the Show cause notice (SCN) as per Section 73(1) or Section 74(1) shall intimate the details of demand ascertained in Part A of this Form. According to Sub rule (2A) the recipient of Part Aof DRC – 01A can intimate the officer about the partial payment which the taxpayer has made and can file reply against Part A of DRC – 01A through Part B of DRC – 01A.

DRC – 01– “Summary of Show Cause Notice”. This form can be electronically uploaded by the proper officer as per provisions of rule 100(2) and rule 142(1)(a) of the Rules, as a summary of the notice issued under Section 52, Section 63, Section 73, Section 74, Section 76, Section 122, Section 123, Section 124, Section 125, Section 127, Section 129, Section 130. As per Notification No. 16/2019 – Central Tax, dated 29^th March, 2019, the old format of DRC – 01 was substituted by a new format w.e.f1^st April, 2019.

DRC 02 – “Summary of Statement”. After issuing the SCN as per Section 73(1) or Section 74(1) if the proper officer wants to issue details of tax unpaid or short paid for the same ground but for any other period, then he can issue a statement abiding section 73(3) or Section 74(3) of the Act. The summary of that statement is uploaded electronically in this form. Alike DRC 01 new form of DRC 02 was also came into effect from 1^st April, 2019 as notified through Notification No. 16/2019 – Central Tax, dated 29^th March, 2019.

DRC 03 –“Intimation of payment made voluntarily or made against the show cause notice (SCN) or statement”. I think mostly used DRC formfiled by the taxpayers till date in GST regime is DRC – 03. As per Rule 142(2) and Rule 142(3) of the Rules the payment of admitted tax either voluntarily, before service of any notice or after getting SCN or statement along with DRC – 01 and DRC – 02 respectively is done through DRC – 03.

As a time limit for filing DRC-03 rule 142(3) stated some time limit within which payment can be made to conclude the proceedings. For voluntary payment through DRC – 03, Payment can be done at any time before issuance SCN or statement.  After the issuance of the SCN or the statement as per section 73(1) or 73(3) of the act respectively payment can be done within 30 (thirty) days from the date of issuance of the SCN no penalty will be charged by the officer and the proceedings will be concluded. For show cause notice or statement issued u/s 74(1) or 74(3) a penalty of twenty five percent of the demanded tax will be payable if DRC – 03 if filed within 30(thirty) days of issue of notice. For demands raised u/s 129 of the act the time period for filing DRC – 03 is fourteen days from the date of the detention or seizure the proceedings will be concluded.If the payment is made against any SCN, then DRC – 03 should be filed electronically within 30(thirty) days from the date of issue of the SCN.

DRC – 04 – “Acknowledgement of acceptance of payment made voluntarily”. As per rule 142(2) the proper officer after getting the payment made through DRC – 03 shall issue an acknowledgment accepting the payment. Such acceptance is done through this form. Acceptance for one payment by the proper officer will not restrict the taxpayers to make another payment through DRC – 03.

DRC– 05 – “Intimation of conclusion of proceedings”. This form is issued by the proper officer after being satisfied with the payments made by the registered taxable persons as per the provisions of rule 142(3) of the Rules, intimating him the closure of proceedings initiated by the officer.

DRC – 06 – “Reply to the Show Cause Notice”. As per Rule 142(4) of the Rules this form can be filed by the taxpayers for giving reply of the SCN issued and the summary uploaded electronically in DRC – 01. If the taxpayer opts for personal hearing then he can communicate the same to the adjudicating authority through this form.

DRC – 07 – “Summary of the order”. As per Rule 142(5) of the Rulesthis form is electronically uploaded by the proper officer after issuance of the final order under section 52 or section 62 or section 63 or section 64 or section 73 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. The amount of tax payable along with interest and penalty is specified in this form.On submission of the DRC-07 to the GSTN through an API, a demand ID is generated with acreation of liability in the Liability register part II (Other than returns related liability).

DRC – 07A– “Summary of the order creating demand under existing laws”. This form has been included in the Rulesw.e.f 30^th October, 2018 through Notification No. 60/2018 – Central Tax dated 30^th October, 2018. In the said notification a new sub-rule, sub-rule (A) has been added in rule 142. As per rule 142(A)(1) if any amount is recoverable for any of the proceedings launched under any existing law before or after the appointed day, which has not been recovered under that law can be recovered under this act, and the summary of that order is uploaded by the proper officer in DRC – 07A, and the demand of that order is posted in part II of the electronic liability register in form GST PMT-01.

DRC – 08 –“Summary of Rectification /Withdrawal Order”. The proper officer can upload this form electronically after passing the final order if he opts to rectify or withdraw the final order which he has passed and uploaded the summary in DRC – 07. An order can be rectified under section 161 of the Act. The time limit for rectification of order is 6(six) months from the date of issue of order. Where the rectification is purely in the nature of correction of a clerical or arithmetical error arising from any accidental slip or error, there is no time limit for rectification of that error. The summary of rectification order or the withdrawal order is issued is this form.

DRC – 08A –“Amendment/Modification of summary of the order creating demand under existing laws”. Like DRC – 07A this for has also been included in the Rules through Notification No. 60/2018 – Central Tax dated 30^th October, 2018. This form came into effect from 30^th October, 2018. As per the new rule, rule 142(A)(2) if any order of demand uploaded with summary in DRC – 07A is rectified or modified or quashed in any proceeding including proceedings in any of the redressal forum like appeal, review or revision, or the recovery is made under the existing law then the proper officer issue the rectified order. Summary of the order is uploaded electronically in this form. Parallelly with upload of this form part II of Electronic liability register is updated in form GST PMT-01.

Recovery Forms

DRC – 09 –“Order for recovery through specified officer under section 79”. This form is issued as a part of recovery proceedings as stated in Section 79(1)(a) of the Act. Recovery is done for Government dues, i.e for any amount which has been payable to the Government under any provisions of the act or the Rules and which has not been paid. Recovery proceedings is done against the defaulter of that amount. The proper officer can issue this notice to a “specified officer” for recovery of the amount by way of deducting the amount from any money owing to the defaulter as per section 79(1)(a). Now, for specified officer explanation has been given in rule 143 as

“specified officer shall mean any officer of the Central Government or a State Government or the Government of a Union territory or a local authority, or of a Board or Corporation or a company owned or controlled, wholly or partly, by the Central Government or a State Government or the Government of a Union territory or a local authority.”.

DRC – 10 – “Notice for Auction of Goods under section 79(1)(b) of the Act”.  There are many ways of recovery of Government dues from any defaulter. One of such process is by way of selling the goods of the defaulter, which are under the control of the proper officer, as per provisions of Section 79(1)(b) of the Act. The said goods can be sold through auction, including e-auction. As per rule 144(2) of the Rules this form is issued by the proper officer to the defaulter clearly indicating him the goods to be sold and the purpose of the sale along with few other details.

DRC – 11 – “Notice to successful bidder”. After issuing DRC – 10 the proper officer can conduct the public auction in accordance with rule 144. The proper officer can also call for public auction as per rule 147 of the Rule. The proper officer may specify the amount of pre deposit to be submitted and the manner of submission to make the bidders eligible for participating the auction. Among the eligible bidders one of the bidder will come to be the successful bidder. The proper officer can issue a notice to the successful bidder through this Form as per rule 144(5) or rule 147(12) of the Rules, directing the successful bidder to make the payment of the auction within a period of 15(fifteen) days from the date of auction.

DRC – 12 – “Sale Certificate”.This form is issued by the proper officer to the successful bidder after receiving the payment of the successful bidder in the manner as specified in the Rules. The certificate should include the details of goods, the date of transfer, the details of bidder and the amount paid upon issuance of such certificate.

DRC – 13 – “Notice to a third person under section 79(1)(c)”. Anotherway of recovery of amount is by realising it from the debtors or any other person from whom money is due or may become due or who holds or may subsequently hold money for or on account of the defaulter. Such persons has been abbreviated as “the third person” in the Rules. The proper officer can serve a notice to any third person as mentioned above directing him to pay the amount of his whole liability to the defaulter or to the extent of the liability of the defaulter to the Government, whichever is less. This form is issued as per rule 145(1) of the Rulesfor serving such notice to the third person as specified above.

DRC – 14 – “Certificate of Payment to a Third Person”. Aftergetting notice in DRC – 13 a person is bound to comply with that notice, and if he fails to make the payment he deems to be the defaulter to the Government as per section 79 of the Act. As per rule 145(2) of the Rulesif the third person pays the amount as was mentioned in DRC – 13, the proper officer issues a certificate to him clearly indicating the amount of liability so discharged.

DRC – 15 – “Application before the Civil Court requesting execution for a decree”. Another way of recovery proceedings is recovery through execution of a civil decree.As per Rule 146 of the Rules, where the defaulter under this act is likely to receive any amount in execution of a decree of civil court, for payment of money, or for sale in enforcement of mortgage or charge, the proper officer can request the Magistrate/Judge of therelevant court to execute the decree and to credit the net proceeds from that decree to the Government for settlement of the amount recoverable from the default person. The court can follow the request abiding the provisions of Code of civil procedure, 1908 (5 of 1908). To request the court the proper officer issues this form.

DRC – 16 –“Notice for attachment and sale of immovable/movable goods/shares under section 79”. As a recovery proceedings of any default amount movable and immovable property belonging to or under the control of the defaulter can be attached or distrained and detained by the proper officer until the Government due is paid as per provisions of Section 79(d) of the Act. For doing such attachment or distraint the proper officer should prepare a list of movable and immovable property which is being attached or distrained along with its valuation as per the prevalent market price. On non-recovery of the amount after such attachment or distraintand after a period as specified in the section, the proper officer can recover the amount by way of selling the property. The list of the assets along with notice of sale is issuedby the proper officer in this form abiding provisions of Rule 147(1) or Rule 151(1) of the Rules. The purpose of this form is also to encumbrance on any transaction with respect to the property mentioned in the notice which may be required to recover the default amount.

DRC – 17– “Notice for Auction of Immovable/Movable Property under section 79(1)(d)”. The selling of immovable property can be done by the proper officer by way of auction, including e-auction. As per rule 147(4) of the Rules this form is issued to the defaulter as a notice of such sale, clearly indicating the details of property to be sold and also the purpose of sales along with some other details like date of auction, time of auction etc. this form is very much similar to DRC – 10. The major difference between these two is DRC – 10 is governed by Section 79(b) of the act, the goods which will be sold in the auction are specified therein and DRC – 17 is governed by section 79(d) and the property which sold in the auction are specified therein.

DRC – 18 –“Certificate action under clause (e) of sub-section (1) section 79”. Section 79(1)(e) authorises the proper officer to recover the dues through land revenue authority. The proper officer can intimate the collector or Deputy Commissioner of the district in which the defaulter owes any property or resides or carries on his business or to any officer authorised by the government about the dues of the defaulter by issuing a certificate. The Certificate is issued by the proper officer in this form abiding provisions of rule 155 of the Rules.

DRC – 19 – “Application to the Magistrate for Recovery as Fine”.  As per provisions of section 79(1)(f) of the act, the dues of the defaulter can also be recovered by the magistrate as a fine imposed by him under the Code of Criminal Procedure, 1973 (2 of 1974). The proper officer can file an application to the appropriate magistrate for the same and the application is done in Form DRC – 19.

DRC – 20 –“Application for Deferred Payment/ Payment in Instalments”. This form is filed by the taxpayer electronically having any payment due under this Act. As per Section 80 of the Act, a taxable person can file application to the commissioner for extending the time for payment or for allowing payment of the due amount other than the amount due as per liability self-assessed in the returns of that taxpayer in monthly instalments. The number of instalments should not exceed 24(twenty four) and the amount in that case will be payable along with interest leviable as per section 50 of the Act. The filing of above mentioned application by the taxpayer to the commissioner is done through DRC – 20 as per Rule 158(1) of the Rules.

DRC – 21 –“Order for acceptance/rejection of application for deferred payment / payment in instalments”. After receiving the application from the taxpayer in Form DRC – 20 the Commissioner will call for a report from the Jurisdictional officer of the taxpayer about the financial ability of the taxpayer to pay the amount due. The commissioner if thinks fit after getting report of the jurisdictional officer, may accept the proposal of the taxpayer filed in DRC – 20. The order for allowance is issued by the Commissioner through DRC – 21.

DRC – 22 –“Provisional attachment of property under section 83”.As per Section 83 of the Act, the provisional attachment of any property of the taxpayer along with bank account may be done by the commissioner during pendency of any proceeding under section 62 or Section 63 or Section 64 or Section 67 or Section 73 or Section 74, if the commissioner thinks it necessary for the purpose of protecting the Government Revenue. The order of such attachment by the Commissioner is passed through DRC – 22. As per rule 159(1) the details of the property which is attached by the commissioner should be clearly mentioned in this form.

A copy of the order is also to be issued by the commissioner to the concerned revenue authority or Transport Authority, or any such authority to place impediment on the attached property. Attached property can only be removed on written instruction from the commissioner.

DRC – 23 –“Restoration of provisionally attached property / bank account under section83”. The commissioner can restore the property attached according to the Section 83 of the Act immediately if the attached property is either perishable or hazardous and if taxpayer has paid an amount equivalent to the market price of the property or the amount due whichever is lower. In such a situation the Commissioner can pass the order of restoration through this form as per provisions of Rule 159(3) of the Rules. On being failure in payment of tax for such perishable or hazardous property the government can dispose off abiding provisions of Rule 159(4) of the Rules. The taxpayers can also file objection against such attachment, the commissioner after giving opportunity of being heard to the taxpayer if thinks fit can restore the property as per Rule 159(5) of the Rules. If the commissioner thinks that the property was or is no longer liable for attachment can release the attached property as per Rule 159(6) of the Rules.

DRC – 24 –“Intimation to Liquidator for recovery of amount”. A person who is appointed to wind up the affairs of a company or firm is called a liquidator. As per Section 88(1) of the Act, it is a part of job of the liquidator to give intimation of his appointment to the Commissioner within 30 days from his appointment. As per section 88(2) the Commissioner within 3(three) months from the date of appointment of the liquidator, after thorough inquiry or calling for required information of the Commissioner will notify the liquidator about the amount which is then or likely thereafter to become, payable by the company. Such notification by the commissioner to the liquidator is issued through DRC – 24 as per provisions of Rule 160 of the Rules.

DRC – 25 –“Continuation of Recovery Proceedings”. As perSection 84(a) of the act, where any amount payable to the government by any taxpayer in accordance with a notice of demand served against him and the amount got enhanced in appeal, revision or in any other proceedings taken against that dues, then a revised demand notice need not be served to the taxpayer. The recovery proceeding should got continued with the enhanced dues.

In case where the amount of dues has been reduced by any proceedings then also service of fresh notice of demand is not necessary, the commissioner should issue intimation to the taxpayer and also to the appropriate authority to whom the recovery proceedings is pending, about the reduction of dues as per provisions of Section 84(b) of the Act.

This form is issuedas order for reduction or enhancement of such demands as per Rule 161 of the Rules.

The whole discussion can be summarised in a tabular format as follows:

Views expressed/ interpretations made are strictly personal. For any queries & feedback, reach me at [email protected].