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Introduction

In this article, we will understand the instructions for the initiation of recovery proceedings before three months from the date of service of a demand order, as provided in Instruction No. ​ 01/2024-GST issued by the Central Board of Indirect Taxes and Customs. ​

Section 78 of the CGST Act specifies the time for initiation of recovery proceedings, while Section 79 outlines the modes of recovery. ​

General Rule for Initiating Recovery Proceedings

According to the instructions, recovery proceedings shall be initiated by the proper officer only after the expiry of three months from the date of service of the order, if any amount is payable by a taxable person in accordance with an order passed under the CGST Act is not paid within this period. ​​

Exceptional Cases

In exceptional cases where it is necessary in the interest of revenue, the proper officer may require the taxable person to make payment within a period less than three months from the date of service of the order. ​​ This requirement must be recorded in writing, along with the reasons for doing so.

Uniformity in Implementation

To ensure uniformity in the implementation of the law across field formations, the Central Board of Indirect Taxes and Customs has issued instructions to be followed in cases where recovery needs to be initiated before the three-month period. ​

Roles of Proper Officers

The recovery proceedings under sub-section (1) of section 79 of the CGST Act are to be undertaken by the jurisdictional Deputy or Assistant Commissioner of Central Tax. ​ However, in cases where recovery proceedings need to be initiated before the completion of three months, the matter must be placed before the jurisdictional Principal Commissioner/Commissioner of Central Tax by the Deputy or Assistant Commissioner. ​ The Principal Commissioner/Commissioner will examine the reasons provided and, if satisfied, may issue directions for early payment of the amount. ​

Reasons for Early Payment

The jurisdictional Principal Commissioner/Commissioner of Central Tax should provide specific reasons for asking the taxable person for early payment of the amount. ​ These reasons should outline the circumstances prompting such early action, such as high risk to revenue, declining financial conditions, impending insolvency, or the likelihood of proceedings under the Insolvency and Bankruptcy Act. ​ These reasons should be based on credible evidence, which should be kept on record. ​

Considerations for Proper Officers

While issuing directions for early payment, the proper officer must duly consider the financial health, status of business operations, infrastructure, and credibility of the taxable person. ​ A balance must be struck between the interest of revenue and ease of doing business. ​ It is important to note that such directions should not be issued mechanically but only in cases where the interest of revenue needs to be safeguarded due to specific apprehension or circumstances. ​

Conclusion

These instructions for the initiation of recovery proceedings before three months from the date of service of a demand order provide clarity and ensure uniformity in the implementation of the law. ​ It is crucial for proper officers to carefully consider the circumstances and reasons before issuing directions for early payment. ​ By adhering to these guidelines, the interest of revenue can be safeguarded while maintaining a fair and balanced approach.

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One Comment

  1. Prateek Mitruka says:

    Disclaimer: This article is for informational purposes only and does not constitute legal advice. The information contained in this article is sourced from the instruction and is subject to change based on future developments in GST law. Readers are advised to consult with a qualified legal professional for advice specific to their circumstances. For any feedback and queries write to me at prateekmitruka.pm@gmail.com.

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