Recently, it has been observed that the taxpayers are getting DRC 01A/DRC 01 on issues that are completely different from those intimated in ASMT 10 pursuant to scrutiny of the returns under Section 61 of the CGST Act, 2017. In many of the cases it was observed that DRC-01A/DRC-01 was issued on a complete presumptive and ad-hoc basis without verification of the books of accounts.
In this regard the following provisions are referred to:
Section 61 of the CGST Act, 2017:
61. Scrutiny of returns.— “(1) The proper officer may scrutinize the return and related particulars furnished by the registered person to verify the correctness of the return and inform him of the discrepancies noticed, if any, in such manner as may be prescribed and seek his explanation thereto.
(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) In case no satisfactory explanation is furnished within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine the tax and other dues under section 73 or section74.”
Rule 99 of the CGST Rules,2017:
“(1) Where any return furnished by a registered person is selected for scrutiny, the proper officer shall scrutinize the same in accordance with the provisions of section 61 with reference to the information available with him, and in case of any discrepancy, he shall issue a notice to the said person in FORM GST ASMT-10, informing him of such discrepancy and seeking his explanation thereto within such time, not exceeding thirty days from the date of service of the notice or such further period as may be permitted by him and also, where possible, quantifying the amount of tax, interest and any other amount payable in relation to such discrepancy.
(2) The registered person may accept the discrepancy mentioned in the notice issued under sub-rule (1), and pay the tax, interest and any other amount arising from such discrepancy and inform the same or furnish an explanation for the discrepancy in FORM GST ASMT-11 to the proper officer.”
Moreover, in instruction No. 02/2022-GST dated 22.03.2022 issued by CBIC the procedure that needs to be followed before invoking section 73 or section 74 has been stated. The same has been reproduced below:
“6.8 In case no satisfactory explanation is furnished by the registered person in FORM GST ASMT-11 within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to pay the tax, interest and any other amount arising from such discrepancies, the proper officer, may proceed to determine the tax and other dues under section 73 or section 74. Needless to mention, for proceeding under section 73 or section 74, monetary limits as specified in Circular No. 31/05/2018-GST dated 9th February 2018 shall be adhered to. However, if the proper officer is of the opinion that the matter needs to be pursued further through audit or investigation to determine the correct liability of the said registered person, then he may refer the matter to the jurisdictional Principal Commissioner / Commissioner through the divisional Assistant / Deputy Commissioner, for the decision whether the matter needs to be referred to Audit Commissionerate or Anti-evasion Wing of the Commissionerate, as the case may be.”
The intention of the law can be clearly concluded from the above-mentioned provisions and instruction wherein it is mentioned that pursuant to scrutiny of the returns the discrepancies must be intimated to the taxpayer in form ASMT 10 and if the taxpayer fails to give proper explanation or after accepting the discrepancies fails to pay the tax then only the proper officer may proceed to invoke section 73 or section 74 of the CGST Act, 2017. However, if the proper officer is of the opinion that the matter needs to be pursued further through audit or investigation to determine the correct liability of the said registered person, then he may refer the matter to the jurisdictional Principal Commissioner / Commissioner.
When the Act prescribes the method and manner for performing an act, such act should be performed in compliance with the said method and manner only and in no other manner. The proper officer cannot proceed to issue DRC-01/01A on matters which were never intimated to the taxpayer in form ASMT 10 pursuant to scrutiny of the returns.
The following case law is relied upon in this regard:
Facts of the case
The petitioner is engaged in the business of manufacture and supply of pyrotechnic products (fireworks) and is registered under the TNGST Act. The Respondent had undertaken Scrutiny of the GST returns in terms of Section 61 of the TNGST Act and a notice in Form ASMT 10 dated 22.12.2021 was issued pointing out certain discrepancies between GSTR3B, GSTR 1 and GSTR 2A returns filed by the petitioner for the year 2018-19 calling upon the petitioner to pay taxes to the extent of Rs.13,54,250/- along with interest. The petitioner in response paid the interest and furnished GST-DRC 03 dated 27.12.2021, while submitting his explanation in Form ASMT 11 on 18.01.2022 by furnishing the relevant details.
Pursuant to scrutiny of returns a summary of the notice in DRC-01 and an order in DRC-07 were issued of which the petitioner was unaware. On pursual of the downloaded summary of Show Cause Notice in GST DRC-01 and Order in GST DRC-07, the petitioner found that pursuant to alleged Scrutiny of the returns, six defects were noticed, which were different from the defects/discrepancy which were pointed out in the Form ASMT 10 issued.
Submissions made by the petitioner
The ld. Counsel for the petitioner contended that the impugned proceedings is in gross violation of the procedure contemplated under Rule 99 of the Tamil Nadu Goods and Service Tax Rules, which prescribes the method and the manner for verification of the correctness of the returns and to correct any discrepancy that may be noticed or to initiate appropriate proceedings under Sections 65, 66, 67, 73 or 74 of the GST Act pursuant to a Scrutiny under Section 61 of the Act. To appreciate the above contention the petitioner relied upon Section 61, 74 and Rule 100(2) of the Tamil Nadu Goods and Service Tax Act and Rules.
On the basis of the submissions made and the provisions and rules relied upon it was held that:
- The proper officer may scrutinize returns and related particulars and in case any discrepancies are noticed, the same shall be informed in ASMT 10 seeking explanation from the taxable person
- If the explanation offered by the petitioner in ASMT 11 is acceptable, no further action shall be taken. In case the explanation is not satisfactory or no explanation is offered or the taxable person fails to take corrective measures in the return for the month in which the discrepancies were noticed and accepted, the proper officer may proceed to initiate appropriate action under Section 65, 66, 67, 73 or 74 of the Act. Thereafter, the proper officer shall proceed to pass order in GST DRC-07 under Section 73 and 74 after issuing GST DRC-01A in terms of Rule 142 (1A) and GST DRC-01
- It is thus clear that any proceeding in GST DRC-01A/1 culminating in an Order in GST DRC-07, if pursuant to Scrutiny under Section 61 of the TNGST Act ought to be preceded by issuance of Form ASMT 10. In the present case, though ASMT 10 was issued on 22.12.2021 pointing out certain discrepancies, the GST DRC-01 dated 15.02.2022 and the impugned order in GST DRC-07 dated 09.05.2022 are made on the basis of issues that are completely different from what was set out in Form ASMT 10 dated 22.12.2021. ASMT 10 is mandatory before proceeding to issue GST DRC-01, failure to issue the same in respect of the discrepancies forming the subject matter in GST DRC-01 dated 15.02.2022 culminating in GST DRC-07 dated 09.05.2022 would vitiate the entire proceedings. It is trite law that when the Act prescribes the method and manner for performing an act, such act shall be performed in compliance with the said method and manner and no other manner.
The learned Additional Government Pleader sought leave to issue notice in Form ASMT 10 in respect of the aspects forming the subject matter of the impugned proceedings and thereafter to assess in compliance with the procedure contemplated under the Act including Section 61. Recording the same, the impugned order dated 09.05.2022 was set aside and the matter was remitted back to the Assessing Officer for redoing the assessment.
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