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

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

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

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

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

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

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

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

Page Contents

1. Burden to prove [S.155]

Burden of proof in case a person claim that he is eligible for input tax credit under GST shall lie on the person who claims it. Hence an onerous duty is caste on the taxpayer to prove his credits failing which presumption of wrong availment or wrong utilization can be drawn. However in all other cases tax authorities need to prove that tax has not been paid or short paid or erroneously refunded.

2. Cause of Action for determination of tax u/s 73 and 74

Following cases can give rise to process of determination of tax or input tax credit u/s 73 and 74:

  1. Taxable persons pays tax under Composition Scheme despite not being eligible [S.10(5)]
  2. Excess distribution of credit by Input service distributor [S.21]
  3. Excess credit availed in TRAN-1 u/R 117(3) [R. 121]
  4. Registered Person failing to account for goods or services in accordance with S.35(1) [S.35(6)]
  5. Failure to Deduct Tax [S.51(7)]
  6. No satisfactory explanation on Scrutiny of returns and information u/s 74 [S.61(3)]
  7. Quashing of summary assessment u/s 64
  8. Audit by Tax Authorities [S. 65(7)]
  9. Special Audit by CA/CWA [S. 66(6)]

3. Determination of Tax (not paid/short paid/ erroneously refunded) or Input tax credit (wrongly availed or utilized)

The determination of tax or Input tax credit can arise due to following reasons

By Reason of Fraud or any willful-mis statement or suppression of facts [Section 74] By Reason other than Fraud or any willful-mis statement or suppression of facts [S. 73]
1. Tax not paid

2. Tax Short paid

3. Tax erroneously refunded

4. Input Tax Credit Wrongly Availed

5. Input Tax Credit Wrongly Utilized

1. Tax not paid

2. Tax Short paid

3. Tax erroneously refunded

4. Input Tax Credit Wrongly Availed

5. Input Tax Credit Wrongly Utilized

4.What is Fraud ?

Fraud and justice never dwell together” (Frans et jus nunquam cohabitant)

Fraud is defined in section 17 of Contract Act as under :

“Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent1 , with intent to deceive another party thereto of his agent, or to induce him to enter into the contract:—

(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;

(2) the active concealment of a fact by one having knowledge or belief of the fact;

(3) a promise made without any intention of performing it;

(4) any other act fitted to deceive;

(5) any such act or omission as the law specially declares to be fraudulent.

Explanation.—Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak , or unless his silence is, in itself, equivalent to speech.

Intention to evade duty is built into the words ‘fraud’ and ‘collusion’ –Cosmic Dye Chemical v. CCE 95 STC 604

The Court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved, it vitiates judgments, contracts and all transactions whatsoever. – Lazarus Estate v. Berly

Fraud is proved when it is shown that a false representation has been made

(i) knowingly or

(ii) without belief in its truth or

(iii) recklessly, careless whether it be true or false.

Suppression of a material document would also amount to a fraud – Ashok Leyland Ltd.

In CC v. Essar Oil Ltd. (2004) 172 ELT 433 (SC), all important case law on ‘fraud’ was discussed, and it was observed, “By ‘fraud’ is meant an intention to deceive; whether it is from any expectation of advantage to party itself or from the ill will towards other is immaterial. ‘Fraud’ involves two elements, deceit and injury to the person deceived. Injury will include any harm whatever cause to any person in body, mind, reputation or such others

Misrepresentation itself amounts to fraud – Devendra Kumar v. State of Uttaranchal (2009) 9 SCC 363.

However, mere silence is not fraud, unless it is the duty of the person to speak or silence itself is equivalent to speech.

5. What is willful-mis statement ?

A false statement becomes ‘wilful’ if it is deliberate or intentional. It is not wilful if the statement is accidental or inadvertent. A statement will not be misstatement only because full facts were not disclosed. ‘Wilful’ means ‘with intent to evade duty’ – Cosmic Dye Chemical v. CCE 95 STC 604

Misstatement must be wilful to invoke extended period of limitation – Continental Foundation Jt Venture v. CCE 216 ELT 177 (SC)

6. What is suppression of facts ?

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 [Explanation 2 to section 74]

There can be no suppression of facts if facts which are not required to be disclosed are not disclosed – . Ranka Wires (2015) 322 ELT 410 (SC).

a. Suppression should be wilful

Supreme Court in Rainbow Industries v. CCE – 1994 (74) ELT 3 (SC) have held that in order for the extended period to apply, two ingredients must be present – wilful suppression, mis-declaration etc., and the intention to evade duty Same view in Tamil Nadu Housing Board v. CCE – 1995 74 ELT 9 (SC). In this case, it was held that the powers to extend period from one year to 5 years are exceptional powers and hence have to be construed strictly.

b. Intention to Evade Tax

Intention to evade payment of duty is not mere failure to pay duty. It must be something more, i.e. that assessee must be aware that duty was leviable and he must deliberately avoid payment of duty. ‘Evade’ means defeating the provision of law of paying duty. It is made more stringent by the use of word ‘intent’. In other words, the assessee must deliberately avoid payment of duty payable under the law. Where there was scope of doubt whether duty was payable or not, it is not ‘intention to evade duty’. – Tamilnadu Housing Board v. CCE 1994 (74) ELT 9 (SC). In this case, it was held that the powers to extend period from one year to 5 years are exceptional powers and hence have to be construed strictly.

c. No suppression if all facts were disclosed

If all facts have been disclosed to department, extended period is not applicable – Nestler Boilers (P.) Ltd. v. Collector – 1990 (50) ELT 613 (CEGAT)

d. Mere inaction or mere non-disclosure is not Suppression of Facts

Suppression means not providing information which the person is legally required to state, but is intentionally or deliberately not stated.

Hon. Supreme Court, in Collector v. Chemphar Drugs 40 ELT 276 has held that mere inaction or failure on part of manufacturer will not amount to suppression of facts. Conscious or deliberate withholding of information when the manufacturer knew otherwise, is required to be established, before saddling the manufacturer with liability for extended period

e. Mere non declaration is not sufficient to invoke Supression

In the case of Padmini Products v. CCE – 1989 (43) ELT 195 (SC) it has been held by Apex Court that mere non-declaration is not sufficient to invoke larger period but some more positive act is required. It was held that mere failure or negligence on part of manufacturer to take licence or pay duty in case where there was scope for doubt as to whether goods were dutiable or not, could not attract the extended limitation. In this case, the assessee did not obtain excise licence under belief that the goods are exempt from duty. There was scope of doubt regarding liability of duty. Hence, demand for period beyond period of one year (that time six months) was set aside – followed in Jaiprakash Industries v. CCE 146 ELT 481 (SC 3 member bench); Cadila Laboratories v. CCE 152 ELT 262 (SC); Gopal Zarda Udyog v. CCE 2005 (188) ELT 251; Uniworth Textiles v. CCE (2013) 31 taxmann.com 67.

f. No suppression if department aware of facts

Extended period of five years is not applicable for any omission on part of assessee, unless it is a deliberate attempt to escape from payment of duty. When facts were known to the department, extended period of five years is not applicable – Pushpam Pharmaceuticals Co. v. CCE 78 ELT 401 (SC)

7. Process of determination of Tax (not paid/short paid/ erroneously refunded) or Input tax credit (wrongly availed or utilized)

The following process is followed for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized:

  1. Taxpayer is provided opportunity to pay tax without issue of Show cause notice on basis of his own ascertainment or ascertainment of proper officer and inform the proper officer regarding payment of tax in writing in Form DRC-03. The proper officer shall issue an acknowledgment of payment accepted in DRC-04. [S. 73(5) and S. 74(5)]
  2. If tax is paid by taxpayer at his own volition as above, no further show cause notice is issued to the taxpayer and the matter stands concluded on payment of tax along with interest and NIL or very low amount of penalty [S. 73(6) and S. 74(6)] except 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. [S. 73(11)]
  3. If taxpayer does not pay tax by self-determination or makes short payment of tax in above ascertainment, then proper officer shall issue a show cause notice for determination of of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized in Form GST DRC-01.[S. 73(1), 73(7) and S. 74(1), 74(7)]. The notice and summary shall be served in form DRC-01[R. 142(1)]
  1. Further the proper officer may also serve a detailed statement regarding determination of tax or input tax credit for periods not covered by show cause notice and service of such statement shall be deemed to be service of show cause notice for such periods [S. 73(3),73(4) and S. 74(3),74(4)]. The statement shall be served in Form DRC-02 [R. 142(2)]
  1. Once show cause notice u/s 73 or 74 is issued the taxpayer can not have recourse to application for advance ruling [Ist Proviso to S. 98(2)]
  1. If The person charged pays tax and interest with in 30 days from the issue of show cause notice and informs the proper officer about payment in form GST DRC-03, he may be subject to NIL penalty or reduced amount of penalty and proper officer shall issue an order concluding all the proceedings in respect of notice against all persons except prosecution proceedings u/s 132. [S. 73(8) and S. 74(8)] except 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. [S. 73(11)]. Intimation of payment shall be given in DRC-03 and order of proper officer concluding the proceedings shall be intimated in form DRC-05.[R. 142(3)]
  1. If the person charged does not pay tax and interest along with reduced amount of penalty with in 30 days from the date of issue of show cause notice he is given opportunity to make his representation for contesting his case. Representation shall be made in Form DRC-06 [R. 142(4)]
  1. The proper officer after considering the representation of the person charged, shall determine the amount of tax, interest and penalty to be paid by person charged and issue an order. [S. 73(9) and S. 74(9)]. Summary of order specifying the amount of tax, interest and penalty payable by the person chargeable with tax shall be served in DRC-07 [R. 142(5)]. The order issued shall be deemed to be notice for recovery[R. 142(6)]. Rectification of order u/s 161 can be made in DRC-08.[R. 142 (7)]
  1. In case of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud, willful misstatement or suppression of facts one more opportunity is granted to pay tax and interest with penalty lesser than as determined in order above provided the amount of tax, interest and lesser penalty is paid with in 30 days from the date of communication of the order. On payment of tax, interest and penalty all proceedings shall be concluded against all persons except prosecution proceedings u/s 132. However, This opportunity is available only in case of fraud, willful misstatement or suppression of facts and not other cases because in case of fraud, willful misstatement or suppression of facts a very high amount of penalty is charged.[S. 74(11)]

8. Quantum of Penalty at Various stages of Proceedings

Tax and Interest and applicable penalty paid By Reason of Fraud or any willful mis statement or suppression of facts [Section 74] By Reason other than Fraud or any willful mis statement or suppression of facts [S. 73]
Before Issue of Show Cause Notice [S. 73(5) and 74(5)] NIL 15% of the tax
With in 30 days from the issue of Show Cause Notice [S. 73(8) and 74(8) NIL 25% of the tax
With in 30 days from the date of Communication of Order [S. 74(11)] Higher of the

a) 10% of tax or

b) Rs. 10,000/-

[S.73(9) and S. 122(2)(a)]

50% of Amount of Tax
After 30 days from the date of Communication of Order

[S. 73(9) and S. 122(2)]

Higher of the

a) 100% of tax due or

b) Rs. 10,000/-

[S. 74(9) and S. 122(2)(b)]

Immunity from Penalty under other sections

Where any penalty is imposed under section 73 or section 74, no penalty for the same act or omission shall be imposed on the same person under any other provision of this Act [S.75(13)] like u/s. 122, 125, 129 and 130

Interest

The interest on the tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability [S. 75(9)]

9. Maximum Time limits for Issue of Show cause Notice and Determination Order

Maximum Time period allowed By Reason of Fraud or any willful mis statement or suppression of facts [Section 74] By Reason other than Fraud or any willful mis statement or suppression of facts [S. 73]
For Order of Determination of tax not paid or short paid or ITC wrongly availed or mis utilized or 5 years from due date for furnishing of annual return for the financial year to which determination of tax etc. relates

OR

5 years from date of erroneous refund

[S. 74(10)]

3 years from due date for furnishing of annual return for the financial year to which determination of tax etc. relates

OR

3 years from the date of erroneous refund

[S. 73(10)]

For Issue of Show Cause Notice At least 6 Months prior to:

5 years from due date for furnishing of annual return for the financial year to which determination of tax etc. relates [S. 74(10)]

OR

5 years from date of erroneous refund

[S. 74(2)]

At least 3 months prior to:

3 years from due date for furnishing of annual return for the financial year to which determination of tax etc. relates [S. 74(10)]

OR

3 years from the date of erroneous refund

[S. 73(2)]

The adjudication proceedings shall be deemed to be concluded, if the order is not issued within three years as provided for in sub-section (10) of section 73 or within five years as provided for in sub-section (10) of section 74.[S. 75(10)]

10. Stay Period to be excluded from time limits

In calculation of above time limits for issue of show cause notice as well as issue of order for determination of tax etc., if the service of notice or issuance of order has been stayed by order of Court or Appellate Tribunal, the period of stay shall be excluded while calculating the time limits and hence the time for issuance of notice or order shall stand extended. [S. 75(1)]

11. Exclusion of time period for vacation of advance ruling obtained by fraud or suppression or misrepresentation [S. 104]

Where the Authority or the Appellate Authority finds that advance ruling pronounced by it has been obtained by the applicant or the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio. In such case, The period beginning with the date of such advance ruling and ending with the date of order of vacation of advance ruling shall be excluded while computing the period of issuing show cause notice [3months/6 months prior to 3years/ 5 years] and period for order of determination [3year/5 years] (as specified in sub-sections (2) and (10) of section 73 or sub-sections (2) and (10) of section 74)

12. Exclusion of Time period of Pendency of Proceedings due to prejudicial order in some other proceedings in further appeal

It may happen that issue on which show cause notice is issued may be the same on which revenue has already lost its case before Appellate Authority or Appellate Tribunal or High Court.

Now in such other case the department goes for further appeal before Appellate Tribunal or High Court or Supreme Court because it is prejudicial to the interest of revenue and wishes to keep the impugned case for which show cause notice has been issued alive till the matter is decided by higher Court or Tribunal. Hence in such a case period between the date of decision of

  1. Appellate Authority and Appellate Tribunal or
  2. Appellate Tribunal and High Court or
  3. High Court and Supreme Court

Shall be excluded while calculating the time limits and hence the time for issuance of notice or order shall stand extended. [S. 75(11)] Show cause notice is transferred to “Call book” in such cases.

13. Discovery of Tax (not paid/short paid/ erroneously refunded) or Input tax credit (wrongly availed or utilized) by Appellate Authority [S. 107(11) 2nd Proviso]

Where the Appellate Authority is of the opinion that any tax has not been paid or short-paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised, no order requiring the appellant to pay such tax or input tax credit shall be passed unless the appellant is given notice to show cause against the proposed order and the order is passed within the time limit specified under section 73 or section 74.

14. Where charges of fraud, willful misstatement or suppression of facts are not established [S. 75(2)]

  • Where any Appellate Authority or Appellate Tribunal or court concludes that the notice issued under sub-section (1) of section 74 is not sustainable
  • for the reason that the charges of fraud or any wilful-misstatement or suppression of facts to evade tax has not been established against the person to whom the notice was issued,
  • the proper officer shall determine the tax payable by such person,
  • deeming as if the notice were issued under sub-section (1) of section 73.

Implications

  1. Reduced limitation period for issue of show cause notice and issue of order for determination of tax etc shall apply
  2. Reduced penalty as applicable to cases where determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized is by Reason other than fraud or any willful mis statement or suppression of facts shall apply.

15. Consequential Orders pursuant to direction of Court etc. [S. 75(3) & 75(8)]

  • Where order for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized
  • is required to be issued in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court,
  • such order shall be issued within two years from the date of communication of the said direction.
  • Where the Appellate Authority or Appellate Tribunal or court modifies the amount of tax determined by the proper officer, the amount of interest and penalty shall stand modified accordingly, taking into account the amount of tax so modified

16. Process of Decision Making

An opportunity of being heard shall be granted [S. 75(4)]

  • Where any adverse decision is contemplated against person chargeable with tax or penalty or
  • Where request is received in writing from person chargeable with tax or penalty

Adjournment [S. 75(5)]

The proper officer shall, if sufficient cause is shown by the person chargeable with tax, grant time to the said person and adjourn the hearing for reasons to be recorded in writing: No such adjournment shall be granted for more than three times to a person during the proceedings

Speaking Order [S. 75(6)]

The proper officer, in his order, shall set out the relevant facts and the basis of his decision.

17. Demand Order Amount not to exceed show cause notice [S. 75(7)]

The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice

18. Order of Discharge of Demand u/s 73 & 74 [S. 49(8)]

Every taxable person shall discharge his tax and other dues under this Act or the rules made thereunder in the following order, namely:––

(a) self-assessed tax, and other dues related to returns of previous tax periods;

(b) self-assessed tax, and other dues related to the return of the current tax period;

(c) any other amount payable under this Act or the rules made thereunder including the demand determined under section 73 or section 74.

19. Recovery of Self Assessed Tax [S. 75(12)]

Notwithstanding anything contained in section 73 or section 74, where any amount of self-assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79.

20. Tax Collected but not paid [S.76]

i. Payment of Amount collected as representing Tax [S. 76(1)]

  • Every person who has collected from any other person any amount as representing the tax under this Act,
  • and has not paid the said amount to the Government,
  • shall forthwith pay the said amount to the Government,
  • irrespective of whether the supplies in respect of which such amount was collected are taxable or not.

ii. Show Cause Notice and opportunity [S. 76(2) & (5)]

The proper officer may serve on the person liable to pay such amount a notice requiring him to show cause as to

  • Why the said amount as specified in the notice, should not be paid by him to the Government and
  • Why a penalty equivalent to the amount specified in the notice should not be imposed on him under the provisions of this Act.
  • An opportunity of hearing shall be granted where a request is received in writing from the person to whom the notice was issued to show cause.

iii. Order [S. 76(6), (7), (8)]

The proper officer shall issue an order within one year from the date of issue of the notice. Where the issuance of order is stayed by an order of the court or Appellate Tribunal, the period of such stay shall be excluded in computing the period of one year. The proper officer, in his order, shall set out the relevant facts and the basis of his decision.

iv. Payment of Tax and penalty pursuant to notice [S. 76(3) & (6)]

The proper officer shall, after considering the representation, if any, made by the person on whom the notice is served determine the amount due from such person and thereupon such person shall pay the amount so determined.. The proper officer shall issue an order within one year from the date of issue of the notice.

v. Payment of Interest [S. 76(4)]

In addition to amount along with penalty, the impugned person shall be liable to pay interest from the date such amount was collected by him to the date such amount is paid by him to the Government

vi. Disposal of Amount Collected [S. 76(9),(10),(11)]

  1. Adjust the amount paid towards tax payable
  2. Balance to be credited to Consumer Welfare Fund
  3. The person who has borne the incidence of the amount, may apply for the refund

21. Tax paid under Wrong head [S. 77 of CGST and S. 19 of IGST]

Tax Paid by Registered Person Subsequently Held to be Refund of Interest
Central tax and State Tax or

Central tax and Union Territory Tax

On transaction considered to be Intra State Supply

Inter state Supply Central Tax and State tax or

Central Tax or Union Territory Tax [S. 77(1)]

No Interest on payment of Integrated Tax [S. 19(2)]
Integrated Tax

On transaction considered to be Inter State Supply

Intra State Supply Integrated Tax [S. 19(1)] No Interest on Payment of Central Tax and State/UT Tax [S. 77(2)]

22. Jurisdiction

As per Circular 3/3/2017-GST dated 05-07-2017, Superintendent is empowered to deal cases u/s 73, where charge of fraud, willful mis statement or suppression of facts is not there. However in case of fraud , willful mis statement or suppression of facts u/s 74, only Deputy Commissioner/ Assistant Commissioner can deal. Also for dealing cases of amount collected representing tax not paid to the government Deputy Commissioner/ Assistant Commissioner is empowered.

23. Service of Notice, Orders etc. [S. 169, 160]

a. Modes of Service [S. 169(1)]

Any decision, order, summons, notice or other communication under the Act or the rules made thereunder shall be served by any one of the following methods, as specified in section 169(1) of CGST Act:

(a) by giving or tendering it directly or by a messenger including a courier to the addressee or the taxpayer or to his manager or authorized representative or an advocate or a tax practitioner holding authority to appear in the proceeding on behalf of the taxable person or to a person regularly employed by him in connection with the business, or to any adult member of family residing with the taxable person, or
(b) by registered post or speed post or courier with acknowledgement due, to the person for whom it is intended or his authorized representative, if any at his last known place of business or residence, or
(c) by sending a communication to his e-mail address provided at the time of registration or as amended from time to time, or
(d) by making it available on common portal, or
(e) by publication in a newspaper circulating in the locality in which the taxable person or the person to whom it is issued is last known to have resided, carried on business or personally worked for gain, or
(f) if none of the modes aforesaid is practicable, by affixing it in some conspicuous place at his last known place of business or residence, and if such mode prescribed is also not practicable for any reason, then by affixing a copy thereof on the notice board of the office of the concerned officer or authority who or which passed such decision or order or issued such summons or notice

b. Effective Date of Service of Notice etc. [S. 169(2)]

Every decision, order, summons, notice or any communication shall be deemed to have been served on the date on which it is tendered or published or a copy thereof is affixed.

c. Presumption of service of Notice when sent by registered post or speed post [S. 169(3)]

When such decision, order, summons, notice or any communication is sent by registered post or speed post, it shall be deemed to have been received by the addressee at the expiry of the period normally taken by a registered letter in transit unless the contrary is proved.

d. Where Service of notice etc. is not challenged [S. 160(2)]

The service of any notice, order or communication shall not be called in question if the notice, order or communication, as the case may be, has already been acted upon by the person to whom it is issued or where such service has not been called in question at or in the earliest proceedings commenced, continued or finalised pursuant to such notice, order or communication

24. Recovery of Tax

Payment of tax in pursuance of order passed under the Act to be made with in 3 months from the date of service of order, failing which recovery proceedings shall be initiated. The period may be reduced below 3 months also in appropriate cases. [S.78]. State tax officer can also recover the amount payable under Central tax. If the amount payable under state tax and central tax is not fully recovered, the amount recovered shall be credited to central tax and state tax proportionately [S. 79(3) and 79(4)].

i. Modes of Recovery [S.79]:

One or more of following modes may be adopted for recovery by Proper officer [Deputy Commissioner/Assistant Commissioner (Circular 3/3/2017 dated 5-7-17)]:

a. Recovery by deduction from money owed

 Amount payable may be deducted from money owing , under control of proper officer, to person charged. Proper Officer may also require any other specified officer to execute the same in respect of money owing under control of specified officer. The requirement to specified officer shall be communicated in DRC-09 [S. 79(1)(a) and R. 143]. Specified officer here includes officer of State Tax. Officers of Local Authority or Board or corporation owned or controlled, wholly or partly by government can also be so required. [S. 79(1)(a) and R. 143]

b. Recovery by detention and sale of goods in control

 Recovery made be made by detaining and selling goods, under control of proper officer, belonging to person charged. Proper officer shall prepare inventory and estimate market value of goods and proceed to sell so much of the goods as may be required for recovering the amount payable along with administrative expenses incurred on recovery process. Goods shall be sold through process of auction including e-auction for which a at least 15 days notice shall be issued in FORM GST DRC-10 clearly indicating the goods to be sold and the purpose of sale. However perishable goods may be sold forthwith . Pre bid deposits to be returned to the unsuccessful bidders, forfeited in case the successful bidder fails to make the payment of the full amount. Notice to bidder to pay the amount with in 15 days to be given in DRC-11 . On full payment possession of goods shall be transferred to successful bidder and certificate in DRC-12 shall be issued. If defaulter pays the amount under recovery and expenses of recovery before the issue of auction notice, the proper officer shall cancel the auction process. Where no bid is received or auction is noncompetitive due to lack of adequate participation or low bids, the proper officer shall cancel auction and proceed for re auction [S. 79(1)(b) and Rule 144]

c. Recovery from Third party (Garnishee Proceedings)

Recovery by Notice in writing to Person from whom money is due to or from whom money may become due to or who holds money for or on account of or who may subsequently hold money for or on account of person charged. Recovery to be made only when money becomes due and not before it so becomes due. Further if amount payable by person charged is less than money due from third party then, third party shall be required to pay only the amount as is sufficient to pay the dues of person charged or else third party shall be required to pay whole of amount due. Every person including banking company company, insurer or post office to whom notice is given shall be bound to comply such directions or else shall be deemed to be defaulter under the law and shall be personally liable for default amount. Time period of notice may be changed from time to time. Third party may also prove to the satisfaction of proper officer that no amount was due to taxable person and then provisions of recovery shall not apply to third party. For recovery from third party a notice shall be issued in DRC-13 and on payment discharge of liability certificate in DRC-14 shall be given. If amount is receivable by virtue of Court decree , Proper office shall send request to Court in DRC-15, the Court shall execute the attached decree and credit the net proceeds for settlement of amount recoverable [S. 79(1)(c) and R. 145, 146]

d. Recovery by Sale of Movable or Immovable Property

Distraining any movable or immovable property and detaining the same. If still the amount remains unpaid the proper officer may cause the property to be sold and recover the amount. [S. 79(1)(d)]

ii. Procedure to be adopted for Recovery [R.147]

i) Prepare list of Movable and Immovable properties belonging to defaulter

ii) Estimate the value of properties as per prevalent market price

Attachment or Distraint

iii) Issue and order of attachment or distraint and a notice for sale in DRC-16 prohibiting any transaction with regard to such movable and immovable property as may be required for the recovery of the amount due

iv) Copy of order of attachment or distraint shall be sent to concerned

-Revenue Authority or

-Transport Authority or

-Any such authority

To place encumbrance on impugned movable or immovable property , to be removed on orders of proper officer only.

v) Manner of attachment or distraint

Immovable Property Order of attachment or distraint to be affixed and remain affixed till confirmation of salw
Movable Property – Seize the property

– Hand over custody to proper officer or officer authorized by him

Claim or objection to attachment or distraint

vi) -If there is Claim or objection to attachment or distraint on the ground of property not being liable to attachment or distraint

– Proper officer shall investigate the claim or objection and

– May postpone the sale till the time he thinks fit

vii) Evidence shall be adduced to prove that on date of attachment or distraint order that person making claim had interest or was in possession of impugned property

viii) Where upon investigation proper officer is satisfied that on the date of order of attachment or distraint

– Property was not in possession of defaulter or

– Property was not in possession of any other person on defaulter’s behalf or

– Property was in possession of defaulter not on his own account or as his own property but wholly or partly on account of or in trust of any other person

Proper officer shall make an order for release of property wholly or the extent he thinks fit.

ix) If the proper officer is not so satisfied or property was in occupancy of a tenant or other person who was paying rent to him, the proper officer shall reject the claim and proceed with process of sale

iii. Auction Process for sale of Property

Property shall be sold through process of auction including e-auction for which a at least 15 days notice shall be issued in FORM GST DRC-17 clearly indicating the property to be sold and the purpose of sale. However perishable or hazardous property may be sold forthwith . Pre bid deposits to be returned to the unsuccessful bidders, forfeited in case the successful bidder fails to make the payment of the full amount. Notice to bidder to pay the amount with in 15 days to be given in DRC-11 . On full payment possession of goods shall be transferred to successful bidder and certificate in DRC-12 shall be issued. If defaulter pays the amount under recovery and expenses of recovery before the issue of auction notice, the proper officer shall cancel the auction process. Where no bid is received or auction is on competitive due to lack of adequate participation or low bids, the proper officer shall cancel auction and proceed for re auction

  • Where one of highest bidders is co-owner of the property, co-owner shall be deemed to be successful bidder
  • Any amount, including stamp duty, tax or fee payable in respect of the transfer of the Property shall be paid to the Government by the person to whom the title in such property is transferred.

iv. Shares or other Negotiable Instruments

Where the property to be sold is a negotiable instrument or a share in a corporation, the proper officer may, instead of selling it by public auction, sell such instrument or a share through a broker and the said broker shall deposit to the Government so much of the proceeds of such sale, reduced by his commission, as may be required for the discharge of the amount under recovery and pay the amount remaining, if any, to the owner of such instrument or a share. This procedure for shares etc overrides all other provisions of recovery

Proper officer may prepare a certificate DRC-18 signed by him and send it to Collector or Deputy Commissioner of district where person charged owns any property or resides or carries on any business. The amount specified in certificate shall be recovered like land revenue.

Application to Magistrate in DRC-19 can be made to recover the amount specified in application to be recovered like fine imposed by Magistrate.

v. Disposal of proceeds of sale of goods and movable or immovable property [R. 154]

The amounts so realised from the sale of goods, movable or immovable property, for the recovery of dues from a defaulter shall,-

(a) first, be appropriated against the administrative cost of the recovery process;

(b) next, be appropriated against the amount to be recovered;

(c) next, be appropriated against any other amount due from the defaulter under the Act or the Integrated Goods and Services Tax Act, 2017 or the Union Territory Goods and Services Tax Act, 2017 or any of the State Goods and Services Tax Act, 2017 and the rules made thereunder; and

(d) any balance, be paid to the defaulter.

vi. Provisional Attachment [S. 83]

Normally above modes shall come into plunge only after expiry of period of 3 months from date of order or reduced period specified by proper officer, but in order to protect interest of revenue, Commissioner may order provisional attachment of any property including bank account belonging to taxable person during pendency of proceedings u/s 62,63, 64, 67, 73 and section 74. However, Such order shall abate after expiry of one year from the date of order.

vii. Payment in Installments [S.80]

On application Commissioner may allow payment in maximum 24 monthly installments with interest. . No appeal can be made against the order of Commissioner not allowing or allowing payment in lesser installments [S. 121(d)]

25. Tax, Interest and Penalty is first charge on property [S. 82]

  • Notwithstanding anything to the contrary contained in any law for the time being in force,
  • save as otherwise provided in the Insolvency and Bankruptcy Code, 2016,
  • any amount payable by a taxable person or any other person
  • on account of tax, interest or penalty
  • which he is liable to pay to the Government
  • shall be a first charge on the property of such taxable person or such person.

26. Transfer of property with intention to defraud government revenue [S. 81]

  • Where a person, after any amount has become due from him,
  • Creates a charge on or parts with the property belonging to him or in his possession
  • by way of sale, mortgage, exchange, or any other mode of transfer whatsoever of any of his properties
  • in favor of any other person
  • with the intention of defrauding the Government revenue,
  • such charge or transfer shall be void
  • as against any claim in respect of any tax or any other sum payable by the said person

27. Protection against transfer being declared void [Proviso to S. 81]

  • Such charge or transfer shall not be void if it is
  • made for adequate consideration,
  • in good faith and
  • without notice of the pendency of such proceedings under this Act or without notice of such tax or other sum payable by the said person, or with the previous permission of the proper officer.

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2 Comments

  1. Asha Kanta Sharma says:

    Can recovery proceedings be initiated for late filling of GSTR-10 with a late fine of Rs. 10,000/- who is a NIL Return filler for the F.Y. 2017-18. Doesn’t it unfair to levy such huge amount just for the delay and that too for a case where no transactions were carried out in the books of accounts for the whole year.

  2. ASHOK KUMAR JAIN says:

    A dealer at the time filing GSTR 3B, due to clerical error, take ITC as 1110000/- instead of 110000/-. The mistake came to notice of dealer after 3 months. He reversed the ITC voluntarily and never utilised this amount. ITC carried forward during all the 3 months remains more 1000000/-. Whether the amount shown excess will be treated as wrongly availed and the interest under section 50(1) will be chargeable for 3 month. Here it is pertinent to mention that the excess amount was never utilised till reversed..

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