‘COLLECT THE EGG AND NOT KILL THE GOOSE: BEST JUDGMENT ASSESSMENT CAN NOT BE A SUBSTITUTE FOR RECOVERY PROCEEDINGS UNDER THE GST’
Interpretation of statute is the soul of any legislation particularly financial laws. If in the law certain things are prescribed then the same is to be performed in the prescribed manner and not otherwise. There cannot be any shortcut to the procedures prescribed under law. It has come to our notice that these days department is issuing assessment order under section 62 of the Act, even for delayed payment of the GST liability without realizing that once self-assessment has been done by the assessee then re-assessment is not permitted under law in the garb of “Best Judgment Assessment”. There cannot be any doubt that the requisite tax is to be paid timely and if that is not done then the liability can be discharged with interest, late fine and in some cases with penalty. The department can even resort to recovery proceeding to recover arrears of tax by invoking provisions of Chapter XV (demands and recovery) with all its penal consequences. But once the assessee has filed the return under Chapter IX of the Act and assessed the liability then re-assessment is not permitted for mere nonpayment of tax. Let us try to give support to the aforesaid proposition with the help of provisions under the GST Act.
Chapter IX of the GST Act deals with the return supposed to be filed by the assessee. Normally it starts with furnishing details with the outward supply alongwith inward supply then after adjustment of the tax credit, the tax payable is determined and then the amount is paid and liability is discharged. Now the question is if the returns in the form of GSTR-1 and 2 has been filed timely and if the determined tax is not paid within the time prescribed then what are the consequences.
Chapter X of the GST Act, deals with the “payment of tax” and it has a provision for interest, penalty, late fine etc, it means the tax can be paid even later on along with interest and late fine. Section 50 deals with the payment of interest for delayed payment of tax and it reads as follow:
“50. (1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council.
(2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid.
(3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent., as may be notified by the Government on the recommendations of the Council.”
So, once there is provision for levy of interest, late fine etc. there cannot be any assessment known as the “best judgment assessment” under section 62 of the Act even if there is some delay in making the payment.
Now, let us move further and let us assume that the assessee due to some reason did not pay the tax with interest, penalty and late fine etc. then the consequences will follow in terms of Chapter XV of the GST Act. Section 73 of the Act has the provision for determination of tax not paid for any other reason than fraud or willful misstatement of suppuration of fact it read as follow:
“73. (1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.
(9) The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue an order.
(10) The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund.”
Section 76 of the Act has the provision for the tax collected and not paid to the government and it read as follows:
76 (1) Notwithstanding anything to the contrary contained in any order or direction of any Appellate Authority or Appellate Tribunal or court or in any other provisions of this Act or the rules made thereunder or any other law for the time being in force, 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.
(2) Where any amount is required to be paid to the Government under sub-section (1), and which has not been so paid, 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.
(11) …………….. ”
Once the provisions of the 73 to 76 whichever is applicable are followed then Section 78 came into picture for initiation of recovery proceeding and it has ample provisions to protect the interest of revenue. Further, the statute is also considerate about the difficulties of assessee in making the payment of tax determined and inserted a provision for making a payment in installments. Section 80 of the Act has prescribed the provision and read as follows:
“80. On an application filed by a taxable person, the Commissioner may, for reasons to be recorded in writing, extend the time for payment or allow payment of any amount due under this Act, other than the amount due as per the liability self-assessed in any return, by such person in monthly instalments not exceeding twenty four, subject to payment of interest under section 50 and subject to such conditions and limitations as may be prescribed:
Provided that where there is default in payment of any one instalment on its due date, the whole outstanding balance payable on such date shall become due and payable forthwith and shall, without any further notice being served on the person, be liable for recovery.’’
The Act even has the provision for attachment of the property including bank accounts of the taxable person if tax is not paid. Having such an elaborate provisions for “demands and recovery” then where is the question of passing the assessment order section 62 of the act if the GSTR-1 and 2 is being filed. The assessment under section 62 of the GST Act in all cases where returns are being filed and tax is not paid timely is completely without jurisdiction. By adopting a short cut measure of re-assessment of tax under section 62 of the Act, even if GSTR-1 and 2 is being filed and initiating a recovery proceeding is too onerous and is not permitted under law.
Before resorting to any coercive measure like “Best Judgment Assessment” one will have to understand the scheme of the Act and intention of the legislature. The scheme of the act is to collect the tax but simultaneously give certain liberaties to the assessee also, the intention of the legislature is to “collect the egg but not to kill the goose”. When assessee is honest and taxes is not paid for genuine reasons then collect the tax but not resort to coercive recovery proceedings as the same is ultimately kill the business and that is not the intention behind the CGST Act.
Section 62 of the Act is resorted only in the cases where return is not filed and assessment cannot be done without relying upon “prudence of the assessing officer”. Once the facts and figures of the liability is before the assessing officer then any assessment based upon his prudence will not only belie the express statutory provisions but also frustrate the entire aim and objective of the Act. In the law there is no shortcut to the procedures established under law and surpassing the same will only undermine the might and authority of the Act itself. GST law is a new law and it certainly will mature with time. It is a bounden duty of the person interpreting the law to do it in a proper manner so that ambit purpose of the Act and intention of the legislature is achieved successfully.
PRABHAT KUMAR, ADVOCATE – RAJESH KUMAR AND ASSOCIATES.