Proper analysis of Demands and Recovery Proceedings

Question:-1   When can demand and recovery proceedings be initiated?

Ans: –    In case of tax not paid, short paid, erroneously refunded, ITC wrongly availed or utilised the demand and recovery procedure can be initiated. There are different provisions if it’s a bonafide mistake (Normal Cases) or a deliberate attempt (Fraud cases etc.)

Question:-2   Is it mandatory to issue show cause notice (SCN)? If yes then what is the time Limit?

Ans: –   Yes, It’s mandatory to issue SCN. The time limit to issue SCN in case of ’Normal cases’ is atleast 3 months prior to the time limit specified for passing the Adjudication order. And in case of ‘Fraud cases’ the time limit is 6 months.

Question:-3   What is adjudication order? And what is the limit to pass such order?

Ans:-     The proper officer after considering the representation made by the person, if any, pass an order, determining the amount of tax, interest and penalty due from such person. The time to pass Adjudication order in case of ‘Normal Cases’ is 3 years from the due date for furnishing the annual return for the financial year to which the tax is not paid/short paid/ITC wrongly availed/utilised relates to or within 3 years from the date of erroneous refund .And time limit in case of ‘Fraud Cases’ is 5 Years.

Question No:-4   What are the provisions for penalty if tax etc has been paid before SCN or after SCN? Whether there are different provisions for ‘Normal cases’ or ‘Fraud Cases’?

Ans: –     The Provisions are summarized in below table:-

In Normal Cases:-

                            Paid All Dues                              Penalty Amount
Before Notice No Penalty
Within 30 Days from Notice No Penalty
Within 30 Days of Communication Order 10% of Tax or 10,000/- Whichever is higher
After 30 Days of SCN or Communication Order 10% of Tax or 10,000/- Whichever is higher

In Fraud Cases:-

                            Paid All Dues                              Penalty Amount
Before Notice 15% of Tax
Within 30 Days from Notice 25% of Tax
Within 30 Days of Communication Order 50% of Tax
After 30 Days of SCN or Communication Order 100% of Tax

Question:-5   What is the time limit to issue notice in cases under Section 76 i.e. taxes collected but not paid to Government?

Ans.  There is no time limit. Notice can be issued on detection of such cases without any time limit.

Question:-7    What are the modes of recovery of tax available to the proper officer?

 Ans.    Modes of Recovery:-

  1. Recovery by deduction from any money owed
  2. Recovery by sale of goods under the control of proper officer
  3. Garnishee proceedings – Recovery from a third person
  4. Recovery by sale of movable/immovable property
  5. Recovery as arrears of land revenue
  6. Recovery as fine imposed by Magistrate
  7. Recovery through execution of a decree, etc.
  8. Recovery through surety
  9. Recovery from company in liquidation

Remark: Recovery of taxes can also be made from distinct persons [referred to in section 25(4) & (5)2] present in different States/ UTs.

  Question:-8   Whether the payment of tax dues can be made in installments?

  Ans. On receipt of any such request, Commissioner/Chief Commissioner may extend the time for     payment or allow payment of any amount due under the Act, other than the amount due as per the liability self-assessed in any return, by such person in monthly installments not exceeding twenty four, subject to payment of interest under section 50 with such limitations and conditions as may be prescribed. However, where there is default in payment of any one installment on its due date, the whole outstanding balance payable on such date shall become payable and recovered without any further notice. {sec.80}

Note:-In the case of ‘Kabeer Reality Private Limited vs MP high Court’ it was held that the Petitioner cannot escape his liability of payment of GST especially when he has filed GSTR-1 & has quantified the tax payable by him while submitting the GSTR-1 and the action of departments warrants no interference.

The Petitioner has certainly not paid the GST. It is noteworthy to mention that GSTR-1 is declaration of tax liability and GSTR-3B is evidence of actual payment. The Petitioner has stated that GSTR-1 cannot be termed or classified as self-assessed liability, it is only a declaration made for limited purpose. The said issued stands concluded on account of notification dated October 9th, 2019 bearing No. 49/2019, wherein an amendment has been made in Rule 61 of the CGST Rules, 2017 whereby retrospective effect the filing of GSTR-3B has been made compulsory.


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