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Though GST Act 2017 was introduced in the midnight of 1st July 2017 still there are several discrepancies that are being visualized day in and day out.

Reading the religious books like Bhagawat Gita, Bible and Quran, Guru Govind Sahiba Grandh etc., would relieve us from the problems or the daily imitations and provide us a feel of mental peace and would show different experience each and every time , but reading the GST Act would complicate all the stakeholders and the courts who are all regularly completely engrossed in implementing the GST Law. Needless it is to submit that as the daily life experiences to find out a kind of certainty about the position of law as it is overwhelmingly with innumerable circulars, notifications  and amendments  to the provisions and also the rules that.

One good thing is that the Act is a centralized one and to say that many of the States have adopted the Central Act though Article 246A of the Constitution empowers the States to enact separate laws for each of the States.

Be that as it may, the discrepancy that is to be noted is with regard to section 73 & 74. Section 73 which provides for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful-misstatement or suppression of facts. This provision enumerates that under sub section (1) if any tax has not been paid etc., short paid or erroneously refunded or where input tax credit has been wrongly availed not by way of fraud or willful misstatement, a notice may be issued as to why he should not pay the tax, interest under section 50 and penalty  as specified under this Act.

Subsection (5) says before service of notice, the person chageable with tax may pay the tax along with interest under section 50 on the basis of his own ascertainment or ascertainment by the proper officer and inform the proper office in writing about the payment of tax. Under subsection (6) , the proper office should not serve any notice under section 1 or as the case may be, the statement under subsection (3) in respect of tax or penalty payable under the provisions of this Act.

The whole discrepancy that I have noticed is in subsection (8) which says that “where any person chargeable with tax under subsection (1) or subsection (3) pays the said tax along with interest payable under section 50 within 30 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.

Here subsection (8) is contrary to subsection (6) as when any person pays the tax and interest, no penalty should be payable as stated in subsection (8) and subsection (6) is somewhat different as it says that if tax is paid then the authority is not to serve any notice  in respect of the tax so paid or any penalty payable under the provisions of the Act or  rules.

When Form DRC -01A is said to be not a show cause notice, if any dealer pays the tax and interest, then no penalty shall be payable but we see Form DRC -01A is issued including penalty. If subsection (1) of Section 73 is read, then there is a discrepancy in between these two subsections and also subsection (5) and (6).

So also section 74 which says that “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 fact”.

This provision also deals within the same manner. Subsection (1) and subsection (3) and subsection (5) says that before service of notice if tax along with interest under section 50 is paid then penalty equivalent to 15% on the basis of his own ascertainment or on the basis of the ascertainment by the proper officer  is payable and subsection (8) says if the said person does not pay the tax, interest under section 50 under subsection 5 of Section 74 then if the person pays the amount within 30 days of the show cause notice, if he pays the tax, interest and 25% of the penalty.

The question of ascertainment by the dealer can be understood and the ascertainment of tax by officer is also understandable. The question of paying penalty under section 73 and 74 is in variance to section 122.

What section 122 says “penalty for certain offences” and it does not refer to either section 73 or section 74 but speaks in subsection (2) of section 122 for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent. of the tax due, whichever is higher; and in clause (b) it is  said that for the reason of fraud or willful misstatement or reason of fact to evade tax shall be liable to a penalty equivalent to ten thousand or tax due from such person whichever is higher.

It does not speak of erroneously refunded as the framers of the statute or the legislature had given a thought that when the refund is erroneously given, then there cannot be penalty to be levied on a dealer but the refunded amount should be collected from the dealer.

Let us see section 73 & 74 and section 124 as the language employed in section 122 though refers to on determination of tax  not paid or short paid or accordingly refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful misstatement or suppression of fact as enumerated in section 73 and determination of tax not paid or short paid or erroneously refunded or input tax credit availed or utilized by reason of fraud or any willful misstatement or suppression of facts. Though in section 122(2), section 73 and 74  are not referred to, the language employed therein has to be understood in such a manner that the penalty provision has referred to section 73 and 74 and it has to be harmoniously construed to reach an understanding which should be conclusive. But the language employed in section 122(2) a & b is some what different to sections 73 & 74 as section 122 refers to only penalty, but section 73 and 74 refers to penalty and interest and if section 122(2) (a) & (b) are to construed as machinery provision than levy has to be on par with the machinery provision.

Harmonious construction:-

What is harmonious construction is stated in the legal school and harmonious construction is a principle of statutory interpretation used more particularly in Indian legal system to hold when two provisions by a legal text seems to be in conflict, then they should be interpreted so that each as a separate effect and neither is redundant or obnoxious.

It also refers to such construction by which a harmony be brought amongst various provisions of an enactment.

Normally it would be assumed that the legislature would enact a law with certain purposes and it uses precise words. Only when there is a conflict between the two provisions or the provision which deals is not referred to in the later provision then it should be read in a harmonious manner to reach a final conclusion and to meet the legislative intent.

Here section 73 and 74 are referring to a notice or a statement and if Form DRC -01A is construed to be notice then without hearing the person and the niceties of the reply as the case may be,  determination of penalty is prematurely decided and I think that the Government has not given  a though about this particular aspect and if the Government has given a thought to this particular aspect, then such levy would cause a lot of damage to the dealer and it may benefit the Government for administrative purpose, but in long way, Government may loose the income which it has to earn.

With this I conclude my opinion on the article and request the readers to give their opinion so that I can develop and learn.

*****

Author Mr. M. V. J. K. KUMAR, is Senior Standing Counsel for Central Excise, Customs & Service Tax at High Court of Hyderabad.

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