Summary: The issuance of Form GST ASMT-10 under Section 61 of the CGST Act is a mandatory and beneficial procedural step in GST proceedings, serving as an opportunity for the registered person to rectify discrepancies identified in their returns. This scrutiny notice informs the taxpayer of mismatches, allowing for rectification and potentially preventing escalation to formal proceedings under Section 73 or 74. Judicial precedent, notably from the Gauhati and Rajasthan High Courts, confirms the critical importance of ASMT-10: first, it must be issued before initiating actions under Section 73 or 74 if the issue is a return discrepancy; second, the officer is mandated to consider the taxpayer’s explanation; and third, if the explanation is found satisfactory, resulting in the issuance of ASMT-12, no further action on that matter can be initiated. Failure by the proper officer to adhere to this statutory sequence vitiates the jurisdiction for issuing a show cause notice, highlighting that the scrutiny mechanism provides a necessary and crucial safeguard against immediate litigation.
ASMT-10 IF ISSUED IS BENEFICIAL TO THE REGISTERED PERSON
I would like to explain in this article about why the proceedings if initiated under section 61, are beneficial to the Registered Person and importance of ASMT-10 under the GST Law.
Beneficial to the Registered Person
The proceedings initiated under Section 61 CGST by issuing ASMT-10 makes conversant with the discrepancies occurred in the GST Returns furnished by the Registered Person. The ASMT-10 is an opportunity to the Registered Person to rectify the discrepancies which are brought to his knowledge. The Registered Person if rectify it within time stipulated under section 61, may save himself from further proceedings.
Importance of the ASMT-10
1. ASMT-10 is mandatory to be issued before initiating the proceedings under section 73 or 74 if there is the only case of discrepancy in the returns furnished by the Registered Person.
2. The Explanation furnished by the Registered Person in pursuance the ASMT-10 issued must be considered by the ld. Officer before issuing the notice under section 73 or 74.
3. If the ASMT-12 has been issued and the ld. Officer had satisfied with the explanation furnished by the Registered Person then the further proceedings against the same matter cannot be initiated.
Limbs of Section 61
1. Sub-Section (1) of Section 61 authorizes the proper officer to scrutinize the return and related particulars furnished by the registered persons to verify the correctness of the return and inform him of the discrepancies noticed, if any, in prescribed manner and seek his explanation thereto.
2. Sub-Section (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. Sub-Section (3) deals with the procedure to be followed in case no satisfactory explanation is furnished within a stipulated period or where after accepting discrepancy, the person concerned fails to take corrective measures in its return.
Importance of the ASMT-10
A. ASMT-10 is mandatory to be issued before initiating the proceedings under section 73 or 74 if there is the only case of discrepancy in the returns furnished by the Registered Person
In the case of M/S PEPSICO INDIA HOLDINGS PVT LTD (WP(C)/6960/2023) the Notice under section 73 was issued by alleging a purported mismatch between the details furnished by the petitioner in its annual return filed in the form GSTR-9C and the reconciliation statement filed in FORM of GSTR-9C. As per the show cause notice, the Input Tax Credit (ITC) reported in FORM GSTR-9C and the expenses reported in the financial statements, which are required to be disclosed in Table 14 of FORM GSTR-9C, appear to be unreconciled. Consequently, the petitioner is alleged to have wrongly availed and utilized Input Tax Credit amounting to Rs. 19,51,41,111/-.
The petitioner submits that the impugned show cause notice has been assailed on the ground that the precondition necessary for the invocation of the jurisdiction of the proper officer under Section 61 is absent. It is submitted that as per Section 61 of the CGST Act, 2017 read with Rule 99 of the Rules the steps and the actions prescribed thereunder must be mandatorily be undertaken before a show cause notice to be issued under section 73(1) of the CGST Act, 2017.
The Hon’ble Gauhati High Court held that
- The mandate of section 61 is very clear and any discrepancy noticed in the returns filed and which are scrutinized by the revenue is to be confronted to the registered dealer in Form GST ASMT-10.
- The procedure prescribed under section 61 was not followed in the present case.
- The revenue was duty bound in law to bring the discrepancy to the notice requiring the assessee to submit its explanation as per the procedure prescribed.
- It is only in the event of the assessee failure to submit explanation as required and/or in the event the explanation was not found satisfactory, the proceedings under section 73 could have been invoked.
- The scheme of the act itself clearly provides that an opportunity must be granted to the assessee to rectify or at least explain the discrepancies found by the revenue in the scrutiny of the returns. This opportunity was admittedly not offered to the assessee.
- This Court holds that the revenue, through the proper officer, invoked its jurisdiction under Section 73 without due compliance with the procedure prescribed under Section 61; therefore, such invocation of jurisdiction is completely unauthorized, and consequently, all further actions taken thereunder must be held to be contrary to the provisions of law.
B. The Explanation furnished by the Registered Person in pursuance the ASMT-10 issued must be considered by the ld. Officer before issuing the notice under section 73 or 74.
In the case of GOVERDHANDHAM ESTATE PRIVATE LIMITED (D. B. Civil Writ Petition No. 16702/2023) –
The Show Cause Notice was issued on dated 21-09-2023 for the matter which was held in favour of the petitioner by issuing ASMT-12 of the dated 29-09-2023. In the ASMT-12 it was stated that the petitioner’s reply to the notice under Section 61 has been found to be satisfactory and no further action is required to be taken in the matter. Along with the said communication an enclosure was made stating that issuance of ASMT-12 does not affect the validity of show cause notice issued.
The notice issued before considering the explanation the court observed that once notice under Section 61 was issued to the petitioner requiring its explanation pointing out certain discrepancies from the return, the proper officer, before he could assume jurisdiction to issue show cause notice under Section 73 of the Act, was mandated under the law to consider the explanation offered by the petitioner. The statutory scheme engrafted in Section 61 does not allow the authority to invoke powers under Section 73 of the Act and issue show cause notice unless the explanation submitted by the registered person is considered. Once an explanation is offered, the proper officer is obliged under the law to examine the same and record its own reasons to conclude whether there is satisfactory explanation furnished.
C. If the ASMT-12 has been issued and the ld. Officer had satisfied with the explanation furnished by the Registered Person then the further proceedings against the same matter cannot be initiated.
In the above case stated in B the Hon’ble Rajasthan High Court observed that a communication in form GST ASMT-12 was issued to the petitioner on 29.09.2023. This clearly refers to order of acceptance of reply against notice issued under Section 61 of the Act. The communication says that with reference to reply submitted by the petitioner, details of which are mentioned in the table given therein the reply submitted by the petitioner has been found to be satisfactory and no further action is required to be taken in the matter. This communication is clearly referable to the provisions contained in Section 61(2) read with Rule 99 of the CGST Rules. Sub Section (2) of Section 61 clearly states that in case explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard. Considering the statutory scheme as engrafted in Section 61(2) read with Rule 99 of the Rules, there is clear scheme of statute that once the explanation with regard to discrepancy in the return is offered and accepted, further proceedings are not required to be drawn.
Conclusion
- The issuing of the SCN under section 73 or 74, without adhering to the prescribed statutory mandate under Section 61 of the CGST Act, 2017 read with Rule 99 of the CGST Rules, completely vitiates the jurisdiction of the proper officer.
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