Case Law Details
Caterpillar India Pvt. Ltd. Vs Assistant Commissioner (Madras High Court)
Madras High Court recently ruled in the case of M/s. Caterpillar India Pvt. Ltd. v. The Assistant Commissioner Chennai [WP No. 28092 of 2023 dated September 25, 2023], highlighting the importance of complying with Rule 88C of the Central Goods and Services Tax (CGST) Rules, 2017 when effecting recovery based on differences between GSTR-1 and GSTR-3B.
Madras High Court allowed the writ petition and held that, no recovery can be effected directly based on the difference in Form GSTR-1 and Form GSTR-3B without complying with the requirements stated in Rule 88C of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”).
Facts:
M/s. Caterpillar India Pvt. Ltd. (“the Petitioner”) had filed the writ petition challenging the recovery notice dated September 13, 2023 (“the Impugned Notice”) issued by the Revenue Department (“the Respondent”), on the ground that the procedural safeguards prescribed under Rule 88C under the CGST Rules inserted vide Notification No. 26/2022 dated December 26, 2022 has not been complied with. The Respondent after the filing of reply by the Petitioner seeks to invoke recovery proceedings under Section 75(12) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) read with Rule 88C of the CGST Rules.
Issue:
Whether recovery proceedings due to differences in Form GSTR-1 and Form GSTR-3B can be effected without complying with Rule 88C of CGST Rules?
Held:
The Hon’ble Madras High Court, in the case of W.P. No. 28092 of 2023 held as under:
- Noted that, Instruction No. 01/2022 dated January 7, 2022 pertaining to Guidelines for recovery proceedings under the provisions of section 79 of the CGST Act, in cases covered under explanation to 75(12) of the CGST Act, is a predecessor to Rule 88C of the CGST Rules.
- Opined that, no recovery can be effected directly based on differences in Form GSTR-1 and Form GSTR-3B without complying with the requirements stated in Rule 88C of the CGST Rules.
- Held that, the Impugned Notice issued under Rule 79 of the CGST Rules is quashed and liberty is granted to the Respondent to issue appropriate notice in Form GST DRC-01B before proceeding to recover any amount based on the difference in Form GSTR-1 and Form GSTR 3B. Hence the writ petition is allowed.
Conclusion:
The Caterpillar India Pvt. Ltd. case serves as a reminder of the importance of adhering to Rule 88C of the CGST Rules when initiating recovery proceedings based on differences between GSTR-1 and GSTR-3B. The court emphasized the necessity of following the prescribed procedures, providing taxpayers with an opportunity to explain discrepancies, and issuing appropriate notices before recovery actions can be taken. This case reaffirms the significance of adherence to procedural safeguards in tax matters.
Relevant Provisions:
Rule 88C of the CGST Rules:
“Manner of dealing with difference in liability reported in statement of outward supplies and that reported in return
(1) Where the tax payable by a registered person, in accordance with the statement of outward supplies furnished by him in FORM GSTR-1 or using the Invoice Furnishing Facility in respect of a tax period, exceeds the amount of tax payable by such person in accordance with the return for that period furnished by him in FORM GSTR-3B, by such amount and such percentage, as may be recommended by the Council, the said registered person shall be intimated of such difference in Part A of FORM GST DRC-01B, electronically on the common portal, and a copy of such intimation shall also be sent to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said difference and directing him to-
(a) pay the differential tax liability, along with interest under section 50, through FORM GST DRC-03; or
(b) explain the aforesaid difference in tax payable on the common portal, within a period of seven days.
(2) The registered person referred to sub-rule (1) shall, upon receipt of the intimation referred to in that sub-rule, either,-
(a) pay the amount of the differential tax liability, as specified in Part A of FORM GST DRC-01B, fully or partially, along with interest under section 50, through FORM GST DRC-03 and furnish the details thereof in Part B of FORM GST DRC-01B electronically on the common portal; or
(b) furnish a reply electronically on the common portal, incorporating reasons in respect of that part of the differential tax liability that has remained unpaid, if any, in Part B of FORM GST DRC-01B, within the period specified in the said sub-rule.
(3) Where any amount specified in the intimation referred to in sub-rule (1) remains unpaid within the period specified in that sub-rule and where no explanation or reason is furnished by the registered person in default or where the explanation or reason furnished by such person is not found to be acceptable by the proper officer, the said amount shall be recoverable in accordance with the provisions of section 79.”
Section 79 of the CGST Act:
“Recovery of Tax
(1) Where any amount payable by a person to the Government under any of the provisions of this Act or the rules made thereunder is not paid, the proper officer shall proceed to recover the amount by one or more of the following modes, namely:––
(a) the proper officer may deduct or may require any other specified officer to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other specified officer;
(b) the proper officer may recover or may require any other specified officer to recover the amount so payable by detaining and selling any goods belonging to such person which are under the control of the proper officer or such other specified officer;
(c) (i) the proper officer may, by a notice in writing, require any other person from whom money is due or may become due to such person or who holds or may subsequently hold money for or on account of such person, to pay to the Government either forthwith upon the money becoming due or being held, or within the time specified in the notice not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount;
(ii) every person to whom the notice is issued under sub-clause (i) shall be bound to comply with such notice, and in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary;
(iii) in case the person to whom a notice under sub-clause (i) has been issued, fails to make the payment in pursuance thereof to the Government, he shall be deemed to be a defaulter in respect of the amount specified in the notice and all the consequences of this Act or the rules made thereunder shall follow;
(iv) the officer issuing a notice under sub-clause (i) may, at any time, amend or revoke such notice or extend the time for making any payment in pursuance of the notice;
(v) any person making any payment in compliance with a notice issued under sub-clause (i) shall be deemed to have made the payment under the authority of the person in default and such payment being credited to the Government shall be deemed to constitute a good and sufficient discharge of the liability of such person to the person in default to the extent of the amount specified in the receipt;
(vi) any person discharging any liability to the person in default after service on him of the notice issued under sub-clause (i) shall be personally liable to the Government to the extent of the liability discharged or to the extent of the liability of the person in default for tax, interest and penalty, whichever is less;
(vii) where a person on whom a notice is served under sub-clause (i) proves to the satisfaction of the officer issuing the notice that the money demanded or any part thereof was not due to the person in default or that he did not hold any money for or on account of the person in default, at the time the notice was served on him, nor is the money demanded or any part thereof, likely to become due to the said person or be held for or on account of such person, nothing contained in this section shall be deemed to require the person on whom the notice has been served to pay to the Government any such money or part thereof;
(d) the proper officer may, in accordance with the rules to be made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus amount, if any, to such person;
(e) the proper officer may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business or to any officer authorised by the Government and the said Collector or the said officer, on receipt of such certificate, shall proceed to recover from such person the amount specified thereunder as if it were an arrear of land revenue;
(f) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), the proper officer may file an application to the appropriate Magistrate and such Magistrate shall proceed to recover from such person the amount specified thereunder as if it were a fine imposed by him.
(2) Where the terms of any bond or other instrument executed under this Act or any rules or regulations made thereunder provide that any amount due under such instrument may be recovered in the manner laid down in sub-section (1), the amount may, without prejudice to any other mode of recovery, be recovered in accordance with the provisions of that sub-section.
(3) Where any amount of tax, interest or penalty is payable by a person to the Government under any of the provisions of this Act or the rules made thereunder and which remains unpaid, the proper officer of State tax or Union territory tax, during the course of recovery of said tax arrears, may recover the amount from the said person as if it were an arrear of State tax or Union territory tax and credit the amount so recovered to the account of the Government.
(4) Where the amount recovered under sub-section (3) is less than the amount due to the Central Government and State Government, the amount to be credited to the account of the respective Governments shall be in proportion to the amount due to each such Government.
Explanation.––For the purposes of this section, the word person shall include “distinct persons” as referred to in sub-section (4) or, as the case may be, sub-section (5) of section 25.”
Section 75(12) of the CGST Act:
“General Provisions relating to determination of tax
Notwithstanding anything contained in section 73 or section 74, where any amount of self-assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79.
Explanation.––For the purposes of this sub-section, the expression “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39”
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Mr.A.P.Srinivas, learned Senior Standing Counsel and Mr.A.N.R.Jayaprathap, learned Junior Standing Counsel takes notice on behalf of the respondents.
2. Earlier, the petitioner had challenged the notice in GST DRC-01A dated 07.09.2023 in W.P.No.27296 of 2023. The writ petition was closed with liberty to challenge the recovery notice.
3. Accordingly, the petitioner has now filed this writ petition challenging the recovery notice dated 13.09.2023. The challenge to the impugned recovery notice is primarily on the ground that the procedural safeguarded prescribed under Rule 88C inserted in the CGST Rules, 2017 vide Notification No. 26/2022 dated December 26, 2022 has not been observed. It is submitted that the petitioner has replied the notice in GST DRC 01A dated 07.09.2023 on 11.09.2023. However, after the reply was given by the petitioner the impugned recovery notice seeks to invoke Section 75(12) read with Rule 88C of the CGST Rules, 2017.
4. It is submitted that the respondents ought to have mandatorily issued notice in Part A of Form GST DRC 01B electronically on the common portal. It is submitted that till date such an intimation has not been received by the petitioner either physically or in the electronic portal.
5. That apart, it is submitted that the difference between the sales declared in the outward supplies and declared in Form GSTR 1 and the returns filed is primarily on account of the sales return which has been explained.
6. That apart, it is further submitted that the difference between amount in Form GSTR – 1 and Form GSTR3-B was explained by the petitioner, in reply dated 11.09.2023 in response to the notice in Form GST DRC – 01A dated 07.09.2023. Despite the same, the respondents have proceed to issue the impugned recovery notice which is impermissible. It is submitted that there is no scope for short circuiting in the procedural safeguards prescribed under Rule 88C of the CGST Rules, 2017.
7. It is further submitted that Rule 88C of the CGST Rules, 2017 also mandates the proceeding can be initiated based on the recommendations of the counsil. It is submitted that though GST counsil has deliberated on the issue in 49th Meeting held on 18.02.2023, there are no intimation to complying with the requirements of Rule 88C of the CGST Rules, 2017 as inserted vide Notification No. 26/2022 dated December 26, 2022
8. The learned Senior Standing Counsel and learned Junior Standing Counsel for the respondents has drawn attention to the Clarifications/Instructions/Orders issued by the Central Board of Indirect Taxes and Customs, GST Policy Wing and GST Investigation Wing dated 07.01.2022 and 25.5.2022.
9. Specifically, the learned Senior Standing Counsel and learned Junior Standing Counsel for the respondents referred to Para 3.2 of the Clarifications/Instructions/Orders – GST dated 07.01.2022 bearing reference CBEC-20/16/05/2021-GST/23. Para 3.2 of the Clarifications/Instructions/Orders-GST, which reads as under:-
“3.2.There may, however, be some cases where there may be a genuine reason for difference between the details of outward supplies declared in GSTR-1 and those declared in GSTR-3B. For example, the person may have made a typographical error or may have wrongly reported any detail in GSTR-1 or GSTR-3B. Such errors or omissions can be rectified by the said person in a subsequent GSTR-1/GSTR-3B as per the provisions of sub-section (3) of Section 37 or the provisions of sub-section (9) of Section 39, as the case may be. There may also be cases, where a supply could not be declared by the registered person in GSTR-1 of an earlier tax period, though the tax on the same was paid by correctly reporting the said supply in GSTR-3B. The details of such supply may now be reported by the registered person in the GSTR-1 of the current tax period. In such cases, there could be a mismatch between GSTR-1 and GSTR-3B (liability reported in GSTR-1 tax paid in GSTR-3B) in the current tax period. Therefore, in all such cases, an opportunity needs to be provided to the concerned registered person to explain the differences between GSTR-1 and GSTR-3B, if any, and for short payment or non-payment of the amount of self-assessed tax liability, and interest thereon, before any action under Section 79 of the Act is taken for recovery of the said amount.”
10. It is submitted that the petitioner has not replied and therefore the impugned recovery notice does not require any interference under Article 226 of the Constitution of India.
11. The learned Senior Standing Counsel and learned Junior Standing Counsel for the respondents further submits that the petitioner has not clearly stated notice in Form GST DRC-01B may be issued to the petitioner in the common portal as is contemplated under Rule 88C of the CGST Rules, 2017, but the petitioner has suppressed the same.
12. I have considered the arguments advanced by the learned counsel for the petitioner and the learned Senior Standing Counsel and learned Junior Standing Counsel for the respondents.
13. This writ petition is disposed at the time of admission by directing the respondents to issue notice that is contemplated in Form GST DRC – 01B if it has not been issued on the common portal, within a period of seven days as is contemplated under Rule 88C of the CGST Rules, 2017 inserted vide Notification No. 26/2022 dated December 26, 2022. Liberty is given to the respondents to issue appropriate notice calling upon the petitioner to explain the aforesaid difference in tax payable. The Clarifications/Instructions/Orders-GST dated 07.01.2022 bearing reference CBEC-20/16/05/2021-GST/23 is precursor to insertion to the GST Rules in 88C vide above mentioned. Without following the procedure prescribed the recovery cannot be made directly based on the difference noticed in Form GSTR – 1 and Form GSTR – 3B without complying with the mandatory requirements of Rule 88C of CGST Rules, 2017.
14. Under these circumstances, the impugned recovery notice issued under Rule 79 of the CGST Rules, 2017 is quashed with liberty to the respondents to issue appropriate notice in Form GST DRC 01B before proceedings to recover any amount based on the difference noticed in Form GSTR1 and Form GSTR 3B.
15. This writ petition stands allowed with the above liberty. No costs. Consequently, connected writ miscellaneous petitions are closed.
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