[Opinion] Shifting Goalpost or Genuine Attempt to Protect Due Tax | A Perspective

Adv. Akashdeep Singh – [2024] 158 taxmann.com 57 (Article)

Introduction

1. As they say, there is no point in levying taxes which cannot be recovered. The preferred and desirable mode of recovery is payment of due tax by the assessee under self-assessment scheme. However, where the assessee is not able to compute the correct tax liability and paid less than due tax, or where assessee is not so honest and is engaged in evasion of tax, statues provide for recovery provisions. Generally, recovery proceedings start with issuance of show cause notice which is the culmination of all the investigation, communication with tax payer and all other preparatory work to gather evidences against the assessee and formulate the allegations against assessee in specific terms. The provision which authorizes recovery proceedings also provide for a time period within which recovery notices can be issued. The start date of such period could be any event like date of filing of statutory return, or due date of filing of return where no return is filed, or due date of payment of tax, or the date of refund of tax which has been erroneously made, or clearance of goods, as the case may be. Before the GST regime, though the period for issuing notice was fixed, there was no such limitation regarding adjudication of such notice leaving it open ended. Adjudication of such notices were taking too long and, in some cases, the orders were issued by the adjudicating authorities after 6 to10 years leading to quashing of such notices by High Courts on the grounds of inordinate delay.

2. To curb this, GST statues provides for a limitation period for adjudication of the notices and limitation to issue notice has been linked with last date for issue of order by the adjudicating authority. This has served dual purposes, first, adjudication become time bounds and second, if the time limit for issuing order is extended for any reason, the time limit for issuing notice will extend automatically, which ultimately goes in favour of the Revenue.

Overview of recovery provisions under CGST Act.

3. Under CGST Act, 2017, Section 73 and 74 are the recovery provisions prescribing for issue of notice in cases where tax is not paid or short or erroneously refunded or input tax credit is been wrongly or utilized. Where reasons for non-payment or short payment of tax or wrong availment or utilization of ITC other than fraud, or wilful misstatement or suppression of facts to vade tax, notice shall be issued under Section 73(1), else notice shall be issued under Section 74(1).

4. Sub-section (2) of Section 73 provides that notice under Section 73(1) shall be issued three months prior to the time limit specified under Section 73(10) for issuance of order. Section 73(9) provides that the proper office after considering the representation, if any, made by the Noticee, shall determine the amount of tax, interest and penalty and issue an order. Section 73(10) provides that such order shall be issued 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 ITC wrongly availed or utilized relates to or within three years from the date of erroneous refund. Under Section 74, time limit for issuing the order is five years and SCN can be issued prior to three months from the date of issue of order.

5. In nutshell, any dispute raised by the revenue alleging non-payment or short payment of tax for any reasons other fraud or any wilful mis-statement or suppression of facts has to be adjudicated within three years or five years from the due date of furnishing annual return for the financial year to which such dispute relates to. It is quite possible that, under certain circumstances, proper officer may not be able to issue notice or the order within the prescribed time line and in order to enable the proper officer to issue notice and to pass the order, extension of time line is required. Such a situation had arisen due to world-wide spread of COVID 19 pandemic where both assessee as well as revenue was not able to keep up with the time lines.

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