Section 73 of GST – Determination of tax not paid

Section 73 of GST – Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilfulmisstatement or suppression of facts . Complete Details for CGST Section 73 In this section you may find all details for “Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilfulmisstatement or suppression of facts ” as per GST Act 2017Detailed Analysis of GST Section 73 of GST Act 2017. We Provide Complete Details for All GST Section’s and In this article you may find all details for GST Section 73. Check Section Wise Analysis of GST Act 2017, Chapter Wise Analysis of GST All Sections. in this article you may find complete details regarding Section 73 of GST Act 2017 – Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilfulmisstatement or suppression of facts , gst all sections and definitionsNow Check more details from below…..

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Section 73 of GST

(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.

(2) The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.

(3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax.

(4) The service of such statement shall be deemed to be service of notice on such person under sub-section (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice.

(5) The person chargeable with tax may, before service of notice under sub-section (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.

(6) The proper officer, on receipt of such information, shall not serve any notice under sub-section (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.

(7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable.

(8) Where any person chargeable with tax under sub-section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.

(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.

(11) Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.

Introduction

1. Section 73 deals with determination of tax and its demand & recovery under certain circumstances such as:

• Tax not paid; or
• Tax short paid; or
• Tax erroneously refunded; or
• Input tax credit wrongly availed or utilised.

This section specifically covers determination of such taxes under circumstances of cases not involving fraud, wilful misstatement or suppression of facts;

2. Section 73 also applies for recovery of interest payable which is not paid or partly paid or interest erroneously refunded.

Analysis

The provisions of section 73 can be invoked where it appears to the Proper Officer that a situation involving payment of tax (stated in para 1(b) infra) has arisen in cases other than fraud, wilful misstatement or suppression of facts.

  1. The provision provides for –
  • Service of notice by proper officer;
  • Notice shall be served on the person who is chargeable with tax, who has –
    1. Not paid or short paid the tax;
    2. Received the erroneous refund;
    3. Wrongly availed or utilized input tax credit;
  • Such amounts as mentioned above shall be required to be determined along with the applicable interest as per Section 50 and penalty leviable under the provisions of this Act or the rules made thereunder.
  • The notice has to be issued at least three months prior to the time limit of three years for issuance of order.
  • The proper office shall along with Notice provide a summary in Form GST DRC-01 specifying therein the details of the amount payable.
  1. Where no notice is required to be issued for ‘periodical demand’: Subsequent to issue of a notice under Section 73(1) to a person, where the proper officer finds similar issues for any period, the proper officer may, instead of issuing a detailed notice for such period, serve a statement containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such subsequent period not covered in the earlier notice so issued under section 73(1). Service of such statement shall be deemed to be service of notice as per Section 73(1) on the condition that the grounds relied upon are the same as those mentioned in the earlier noticeissued for previous period. The proper office shall along with the statement, provide a summary in Form GST DRC-02, specifying therein the details of amount payable. Care should to taken NOT to regard such ‘statement of demand’ as being inferior or different from a show cause notice (“SCN”) issued under section 73(1) [similarly under section 74(1))].
  2. Voluntary payment of tax and interest before issue of notice/statement: Voluntary payment of tax and interest as per Section 50 before issue of notice/statement can be done either:
    • As per own ascertainment of such tax and interest or;
    • As per the ascertainment of tax and interest by the proper officer;

in accordance with the provisions of the Act; and the same shall be intimated to the proper officer in Form GST DRC-03 and the proper officer shall issue an acknowledgement, accepting the payment made, in FORM GST DRC–04. Thereafter, the proper officer shall not serve any notice / statement to the extent of such payment. In such situations, there can be no further proceedings with regard to tax and penalty so paid. Payment under Form GST DRC-03 would be a response to departmental communication in FORM GST DRC–01A so as to comply with the opportunity afforded to taxpayer under Section 73(5) (similarly under 74(5)).

  1. When the amount paid as per the ascertainment of the assessee falls short, the proper officer shall issue a notice for the amount of shortfall.
  2. In situations where the assessee makes the payment of tax along with interest within 30 days of issuance of Notice / Statement and intimates the proper officer of such payment in FORM GST DRC-03 the proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in respect of the said notice and subsequently no penalty shall be payable. Therefore, until 30 days from date of issue of SCN, no adjudication order can be passed and haste in posting of hearings can be adjourned on this ground.

Pre-notice resolution of dispute: Based on pre-notice consultations (not expressly called so), Proper Officer is permitted to issue a demand in FORM GST DRC–01A which the taxable person may accept and avail the relief available under section 73(5) or 74(5). Care must be taken not to consider this as an indirect form of ‘spot recovery’. Taxable person must take care NOT to suddenly become anxious and admit tax liability and must be well advised to avail this remedy. With the amendment to rule 142 (vide 49/2019-Central Tax dated 9 Oct 2019), it is mandatory for taxpayer to (i) be issued ‘intimation’ to avail nil or reduced penalty under section 73(5) and 74(5), respectively and (ii) where the same is rejected or accepted, partially or fully, then ‘summary of show cause notice’ in FORM GST DRC-01 may be issued. It may be noted that in Amadeus India Pvt. Ltd.v. Pr.Comm [2019 (25) G.S.T.L. 486 (Del.)], where for failure to comply with a similar pre-notice consultation procedure (issued under Master Circular 1053/2/2017-CX, dated 10 Mar 2017) the impugned SCN itself was set aside and parties relegated to pre-notice stage of the proceedings, proceed with such consultations and then, if still remaining unresolved, toproceed with SCN. With the mandate now in the rules, it is now incumbent on the Proper Officer to carefully tread this path of ‘due process’ of law that is laid down.

  1. In situations where the person files a reply or representation, the proper officer after considering the representation, shall issue an order in FORM GST DRC-06, consisting of the amount of tax, interest and penalty (i.e. tax + interest + penalty). The amount of penalty shall be higher of 10% of tax or ` 10,000/-. A summary of such order shall be uploaded electronically in FORM GST DRC-07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax. Such summary of order in Form GST DRC-07 shall be treated as a notice for recovery.
  2. Where a rectification of the order has been passed or where an order uploaded in the system has been withdrawn, a summary of the rectification or withdrawal order is to be uploaded electronically by the proper officer in Form GST DRC-08.
  3. It must be noted that the proper officer is required to pass an order within a period of 3 years from the
    • due date for filing of Annual return for the year to which the short payment or non-payment or input tax credit wrongly availed or utilised relates
    • date of erroneous refund

The following table summarises the time limit for issuance of Notice and Order:

Particulars

Time limit for issuing SCN

Time limit for issuing order (Sec 73(10)

Cases not involving fraud, wilful misstatement or suppression of facts

At least 3 months prior to the time limit specified under Section 73(10) for issuance of an order.

3 years from the due date for furnishing 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 3 years from the date of erroneous refund.

  1. When all other opportunities granted such as acceptance of liability before issue of SCN by pre-notice consultations under rule 142(1A) and acceptance of liability within 30 days after issue of SCN, Proper Officer will be liable to pass a ‘speaking order’. Care must be taken to examine all aspects of natural justice and adherence to due process of law are satisfied in passing such adjudication order, such as (not exhaustive):
    • Opportunity granted to be heard which is adequate and reasonable which includes granting adjournments, for genuine reasons, where requested or necessitated;
    • Grounds raised in SCN are recorded and dealt with during the proceedings. SCN must be the culmination of investigation or inquiry by tax authorities. Incomplete investigation or inquiry leading to assumptions in SCN about tax default is fatal to theproceedings. Investigation or inquiry cannot be continued after SCN is issued. Taxpayer is well within statutory rights to question the incompleteness of the investigation and leave the adjudicating authority to find within the SCN sufficient evidence to fasten tax demand;
    • Relevant facts and applicable provisions of law including judicial authorities (case laws) are considered. Relevant facts are facts which impact the allegations. Onus to prove the allegations lie on the tax authorities making such allegation. Under VAT laws it was common for allegations to be made and taxpayer carried the burden to disprove those allegation;
    • Points and submission of both sides are recorded and discussed. Taxpayer is NOT liable to furnish facts to displace the allegations. Taxpayer merely needs to (i) accept or deny allegation (ii) assail (or attack and question) the evidence adduced to satisfy burden that lies on the tax authorities to prove allegations. Evidence may be produced by the taxpayer, in reply to SCN, by way of rebuttal even if there is a presumption in the law about mens rea. Presumption is not assumption (refer discussion under section 144) and all presumption are to be understood as ‘rebuttable presumption; only;
    • Clear findings are reached based on the above without adopting new grounds that were not originally raised in the SCN (see discussion under section 75(7) below). Howsoever compelling ‘new grounds’ may be, adjudicating authority is barred from travelling beyond the four corners of the SCN even if the SCN contains errors of omission or commission which may be fatal to the proceedings;
    • Final decision is reached based on the said findings by an ‘order’ which is to be complied or appealed against.

Proper officer: As per Circular No. 3/3/2017-GST dated 05.07.2017, the Superintendent of Central Tax is assigned to discharge powers under sub-sections (1), (2), (3), (5), (6), (7), (9) and (10) of section 73 of the CGST Act. In other words, all officers up to the rank of Additional/Joint Commissioner of Central Tax are assigned as the proper officer for issuance of show cause notices and orders under this Section. Further, they are also assigned under the IGST Act as well, as per section 3 read with section 20 of the IGST Act.

  1. Penalty is always determined to be 10 per cent of tax stipulated in adjudication order due to the relief from further litigation, that such relaxation is permitted under 73(11). Further, where any self-assessed tax remains to be paid or where any amount collected ‘as tax’ is lying unpaid, penalty of 10% of tax or Rs.10.000/- is also prescribed under section 73(11). Please refer various other aspects such as notice under section 76 without any time limit and mandatory penalty under that section in the detailed discussion under section 76.
  2. Monetary limits have been prescribed vide Circular No. 31/05/2018-GST dated09.02.2018 for officers of different designations to function as the proper officers in relation to issue of show cause notices and orders under Sections 73 and 74:
Designation of Offi Monetary limit of the amount of CGST (including cess) for issuance of show cause notices & orders u/s 73 & 74 of CGST Monetary limit of the amount of IGST (including cess) for issuance of show cause notices & orders u/s 73 and 74 of CGST Act made applicable to IGST Monetary limit of the amount of CGST and IGST (including cess) for issuance of show cause notices & orders u/s 73 and 74 of CGST Act made applicable to IGST
Superintendent Up to Rs.10 lakhs Up to Rs.20 lakhs Up to Rs.20 lakhs
Deputy or Assistant Commissioner Above Rs.10 lakhs up to Rs.1 crore Above Rs.20 lakhs up to Rs.2 crore Above Rs.20 lakhs up to Rs.2 crore
Additional or Joint Commissioner Above Rs.1 Crore Above Rs.2 Crore Above Rs.2 Crore

Summary of Penalty implications

If tax, interest and penalty (as indicated in the table below) are paid, then all the proceedings in that respect shall stand concluded:

Pay tax plus interest Amount of penalty
Before issuance of SCN notice No penalty
Within 30 days after the issuance of SCN No penalty
In any other case 10% of the tax or ` 10,000 whichever is higher.

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