Section 78-79 | Recovery of tax | CGST Act 2017

Simplified GST Series –Section 78-79 /Recovery of tax /CGST ACT 2017

Section 78-Initiation of recovery proceedings

Any amount payable by a taxable person in pursuance of an order passed under this Act shall be paid by such person within a period of three months from the date of service of such order failing which recovery proceedings shall be initiated:

Provided that where the proper officer considers it expedient in the interest of revenue, he may, for reasons to be recorded in writing, require the said taxable person to make such payment within such period less than a period of three months as may be specified by him. 

Analysis– This section enables initiation of proceedings for recovery of the amount from a taxable person. 

• The amount shall be paid by taxable person within a period of 3 months of the service of order, failing which the Proper Officer shall initiate the recovery proceedings.

• If it is in the interest of revenue, the proper officer after recording the reasons in writing, may initiate the recovery proceedings even before the completion of the said period of 3 months. However, this section empowers the Proper Officer in the interest of revenue (after recording the reasons) to initiate recovery proceedings even before the said completion of 3 months.

Section 79- 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;

Analysis- The section empowers the departmental officers to collect/recover any amount which is payable under GST Act.

• When any amount that is payable by any person (hereinafter referred to as defaulter) to Government is not paid, the officer can adopt one or more of the methods set out in section 79 for recovery of amounts payable. The methods are :

(a) Deduction out of any money owing to defaulter:

– There should be some money which is being owed by the Government to defaulter;

– The amount payable can be deducted out of the said amount due to defaulter;

– The deduction can be done by the proper officer himself or he may ask any other specified officer to do so.

– The proper officer shall specify the amount so deducted in form GST DRC- 09 as prescribed in Rule 143

(b) By detaining and selling the goods belonging to defaulter: 

There should be goods which are under the control of the proper officer or other specified officer;

– Such goods should belong to the person who is liable to pay any amount.

– The goods may be detained and sold by the proper officer or such other specified officer on request by the proper officer; Out of the realisation, the amount payable by defaulter shall be recovered.

(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 whoholds 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; 

Analysis- Recovery from any other person who owes money to defaulter.

This applies when any other person –

• has become due to pay money to the defaulter;
• is likely to become due to pay money to the defaulter;
• holds money for or on account of the defaulter;
• may subsequently hold money for or on account of the defaulter   

In such cases the proper officer may issue notice in writing in Form GST DRC-13 to such other person to pay to the credit of the Government –

• forthwith
• upon the money becoming due or
• being held, or
• at or within the time specified in the notice not being before the money becomes due or is held.

The amount directed to be paid in the notice shall be –

• Where the amount due/held by such other person is more than amount due by the defaulter – to the extent of amount due by the defaulter;
• Where the amount due/held by such other person is equal to or less than amount due by defaulter – whole of money due/held.

– Such other person to whom such notice is issued is bound to comply with the same.

– In cases where such notice is issued to a post office, banking company or an insurer, they are required to comply with the same without insisting on production of any passbook, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like, though that might be the normal practice.

• If such person to whom such notice is issued, fails to comply, he shall be treated as defaulter to the extent of the amount mentioned in the notice and all other consequences under the law shall follow;

Where the third person makes the payment of the amount specified in the notice in FORM GST DRC-13, then the proper officer shall issue a certificate in FORM GST DRC-14 to the third person clearly indicating the details of the liability so discharged.

– The notice so issued may be amended or revoked or time may be extended for making any payment;

– The payment made by such other person in accordance with the notice issued, shall be deemed to have made the payment on behalf of such defaulter and the amount credited to the government shall be deemed to constitute the discharge of liability of such defaulter to the extent of the payment made. Consequently no civil suit or other proceedings could be filed or initiated by the defaulter on the notice, who has complied with this provision.

– Instead of crediting the amount to the government, if such person makes the payment to defaulter, then such other person shall be personally liable to the Government to the extent of the amount due by the defaulter or amount discharged to the defaulter whichever is lower.

– However such person shall not be personally liable, if he proves to the officer issuing the notice that

• the money demanded or any part thereof was not due to the person in default or
• at the time of service of the notice he did not hold any money for or on account of the person in default,
• the money was not demanded from him.
• any part of the money demanded is not likely to become due to such other person or
• any part of the money will not likely be held for or on account of such person.

(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,  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. 

Analysis-Collection by detention of any movable or immovable property.- 

On authorisation by competent authority, a proper officer in accordance with the Rule 147 of the CGST Rules framed for this purpose may interalia

• prepare a list of movable and immovable property belonging to the defaulter.
• estimate their value as per the prevalent market price and
• issue an order of attachment or distrain and a notice for sale in FORM GST DRC-16  prohibiting any transaction with regard to such movable and immovable property as may be required for the recovery of the amount due
• The property attached or distrained shall be sold through auction, including e-auction, for which a notice shall be issued in FORM GST DRC- 17 clearly indicating the property to be sold and the purpose of sale.           

Such detention of any movable or immovable property belonging to defaulter will be done till the amount payable is paid.

– If any part of the amount payable or cost of distress or keeping the property is not paid  within 30 days from such distress, the proper officer may sell the property and with the  proceeds he may adjust towards:

– amount payable;

– costs including the cost of sale remaining unpaid;

– After such adjustment, the remaining surplus shall be returned to the defaulter.   

Recovery through District Collector: Proper officer may prepare a certificate signed by him specifying the amount due from the defaulter.

– Such certificate will be sent to the Collector of the District in FORM GST DRC-18 in which the defaulter.

• owns any property; or
• resides; or
• carries on his business.

– The DC on receipt of such certificate shall proceed to recover from such defaulter the amount specified in the certificate as if such amount is arrears of land revenue.

Recovery through Magistrate:

– This provision has overriding effect over Code of Criminal Procedure;

– In this case the proper officer may file an application to the appropriate Magistrate;

– The Magistrate to whom application (in FORM GST DRC- 19) is made shall proceed to recover from the defaulter the amount specified in the application as if it is fine imposed by such Magistrate.

• Under the GST Act, rules or regulations there would be requirement to execute bond or other instruments. If such bond/instrument provides that the amount becoming due shall be recovered in terms of Section 79(1), then the recovery shall be effected a discussed above irrespective of whether other mode of recovery exists or not.
• Further it is also provided that, if either SGST Officer/ UTGST Officer while recovering SGST/UTGST arrears may also recover any amount due from the defaulter the amount due by him under CGST Act as if it is SGST/UTGST and later pass it on to the Central Government. 

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