[Opinion] Extraordinary Period provided under CGST for Recovery of Taxes

D Arvind – [2023] 149 taxmann.com 283 (Article)

Taxes are one of the core pillars of every economy. Taxes may burn a hole in your pocket, but only through them can the government run the system. Without taxes, managing the country would be impossible, as they are one of, if not the biggest, income resources for a country.

While it stands true that businesses liable as taxpayers must file their taxes, there are always instances of unpaid or short-paid taxes. In such cases, the government imposes specific acts to recover overdue or short-paid taxes or refund taxes paid excessively or incorrectly when unpayable.

Recently, the Central Government of India issued a notification (dated 31.03.2023) extending the time limit for initiating and passing orders under Section 73 central GST act, concerning normal period as under:

(i) For the financial year 2017-18, up to the 31st day of December 2023.

(ii) For the financial year 2018-19, up to the 31st day of March 2024.

(iii) For the financial year 2019-20, up to the 30th day of June 2024.

Therefore, to facilitate the refund or recovery of taxes, every tax statute provides laws and mechanisms that issue timely notices, including indirect tax statutes. Before examining the pros and cons of this notification one needs to understand the time limits within which a notice can be issued under earlier indirect tax laws.

Central Excise Act 1944

The Central Excise Act 1944, under Section 11A, issued a recovery mechanism where the Central Excise officer will issue a Show Cause Notice within two years from the relevant date before adjudicating or recovering short or unpaid taxes. This rule changed on 14th May 2016, before which the Show Cause Notice period was only one year.

Under this mechanism, the taxpayer should file monthly returns on or before the 10th of that month for the clearances affected during the previous month. In this case, the relevant date would be the filing date for monthly returns. Therefore, before 14th May 2016, the tax department had 405 days (one year and 40 days) to issue notice for all transactions made on 1st April 2015.

14th May 2016 onwards, Section 11A underwent an amendment to extend the notice period by two years under the normal period, meaning the tax department now had 770 days (405 days and a year) to issue a notice under the normal period for all transactions conducted on 1st April 2016.

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