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1. UNIVERSITY
SESSION: 2019 – 20
SUBJECT :- INDIRECT TAX ( BCM4005 )
TOPIC:- DEMAND ANDRECOVERY
MADE BY :
VINODKUMARYADAV
201810701110008

2. DEMAND & RECOVERY
PROVISIONS

3. NOTICE WHEN THERE IS NO FRAUD FOR TAX
SHORTFALL(SECTION 73)
• This section applies to non-fraud cases when:
• Tax is unpaid/short paid or,
• Refund is wrongly made or,
• Input tax credit has been wrongly availed/utilised
• ——for any reason, other than fraud etc. i.e., there is no motive to evade
tax.
• The proper officer (i.e., GST authorities) will serve a show cause notice
on the taxpayer. They will be required to pay the amount due, along with
interest and penalty.

4. TIME LIMIT :- The proper officer is required to issue the show cause
notice 3 months before the time limit. The maximum time limit for the
order of payment is 3 years from the due date for filing of annual
return for the year to which the amount relates.
• FOR OTHER TAX PERIODS :- Once the above notice has been issued, the
proper officer can serve a statement, with details of any unpaid
tax/wrong refund etc. for other periods not covered in the notice. A
separate notice does not have to be issued for each tax period.
• VOLUNTARY TAX PAYMENT :- A person can pay tax along with interest,
based on his own calculations (or the officer’s calculations), before the
notice/statement is issued and inform the officer in writing of the same.
The officer will not issue any notice in this case. However, if the officer
finds that there is short payment, they can issue a notice for the balance
amount.

5. • NO PENALTY :- If the taxpayer pays all their dues within 30 days from
date of notice, then the penalty will not be applicable. All
proceedings (excluding proceedings u/s 132,i.e., prosecution) regarding
the notice will be closed.
• PENALTY IN OTHER CASES :- The tax officer will consider the taxpayer’s
representation and then calculate interest and penalty. Penalty will be
10% of tax subject to a minimum of Rs. 10,000. The tax officer will issue
an order within three years from the due date for filing of relevant annual
return.

6. • EXAMPLE :-

7. NOTICE WHEN THERE IS FRAUD FOR TAX
SHORTFALL(SECTION 74)
• This section applies to cases of tax evasion involving:
• fraud
• wilful mis-statement
• suppression of facts
• This results in:
• unpaid/short paid tax or,
• wrong refunds or,
• wrongly availed/utilized input tax credit
• In such cases, the proper officer will serve a show cause notice to the
taxpayer. They will be required to pay the amount due along with interest
and penalty.

8. • TIME LIMIT :- For cases of fraud, the proper officer is required to issue the notice 6
months before the time limit. The maximum time limit is 5 years from the due date
for filing of annual return for the year to which the amount relates.
• FOR OTHER TAX PERIODS :- Once the above notice has been issued, the proper
officer can serve a statement, with details of any unpaid tax/wrong refund etc. for
other periods not covered in the notice. A separate notice does not have to be
issued for each tax period.
• VOLUNTARY TAX PAYMENT :- If the person pays tax along with interest and a 15%
penalty based on their own calculations (or the officer’s calculations) before the
notice/statement is issued and informs the officer in writing, then the officer will not
issue any notice.

9. • ISSUE OF ORDER :- The tax officer will consider the taxpayer’s representation and
then calculate interest and penalty and issue an order. The order must be issued
within five years from the due date for filing of the relevant annual return. [For wrong
refunds the order must be issued within five years from the date of the wrong refund]. If
the taxpayer pays all their dues and a penalty of 50% within 30 days from the date of
order, then all proceedings (including prosecution) regarding the notice will be closed.

10. EXAMPLE

11. GENERAL PROVISIONS FOR DETERMINATION OF
TAX(SECTION 75)
• If the service of notice or issue of the order has been stayed by a Tribunal/Court order then the stay period will be excluded
from the time limits of 3 and 5 years.
• If the Appellate Authority/Tribunal/Court decides that charges of fraud are not sustainable (i.e., it is not a fraud case), then the
notice issued earlier will be assumed to be a notice u/s 73 (i.e. non-fraud case). The tax officer will calculate the tax
accordingly.
• If the Tribunal/Court directs that an order has to be passed, then it will be issued within two years from the date of the
direction.
• An opportunity of a personal hearing will be given to the taxpayer when they request it in writing OR a penalty or any adverse
decision is proposed against such person.
• The proper officer can adjourn the personal hearing if the person provides sufficient cause in writing. But adjournment
will be allowed for a maximum of 3 times.
• The amount of tax, interest and penalty demanded in the order will not exceed the amount specified in the notice. All
demands will be only on grounds specified in the notice.
• The Appellate Authority/Tribunal/Court can modify the amount of tax determined by the officer.
• Interest unpaid/short paid tax will have to be paid whether or not specified in the order.
• If the order is not issued within 3 or 5 years then it is assumed that the adjudication proceedings are completed. No order will
be issued afterwards

12. RECOVERY OF TAX
• Under GST, there are well defined procedures for demand of unpaid tax,
which is done via the issue of Show Cause Notice (SCN) and Order.
However, if the due tax amount still remains unpaid, then the
department is authorised to start recovery of tax, meaning proceedings
can be started officially.
As per the provisions of recovery of tax in GST, if the amount payable by
a taxable person, remains unpaid, even after 3 months from the date of
issuing the order for demand of tax, then the recovery of tax under GST
will be initiated. However, if the proper officer considers it urgent in the
interest of revenue, he may state reasons recording in writing, and direct
the concerned taxpayer to make payment in a reduced period as well. In
any case, if the demand is not paid in the time specified, then the

13. MODES OF RECOVERY OF TAX UNDER GST
• Deduction of due amount from the tax amount payable to such person by the
department
• Recovery of tax by way of detaining and selling any goods belonging to such
person
• Recovery of tax from another person, from whom money is either due or may
become due to such person
• Recovery of tax from another person, who holds or may subsequently hold money
for or on account of such person, to pay to the credit of the Central or a State
Government
• Detention of any movable or immovable property belonging to such person, until
the amount payable is paid. If the dues are not paid within 30 days, the said
property is to be sold and with the proceeds of such sale the amount payable and
cost of sale is to be recovered
• Recovery of tax through the collector of the district, in which such person owns
any property or resides or carries on his business, as if it were an arrear of land

14. • Recovery of tax by way of application to the appropriate magistrate, who
in turn shall proceed to recover the amount as if it were a fine imposed by
him
• Recovery of tax via enforcing the bond or instrument executed under the
Act or any rules or regulations made under the Act
• Recovery of tax done by the proper officer of the State Government or
Union Territory Government, wherein, any CGST arrears will be recovered
as if it were an SGST / UTGST arrear. Such an amount will be recovered,
and then later credited to the account of the Central Government. In case
the amount recovered by this means, is less than the amount due, then the
amount will be apportioned among the Central Government and State / UT
Government in proportion to the amount due to each authority

15. SPECIAL PROVISIONS FOR RECOVERY OF TAX UNDER
GST
• VOID TRANSFER OF PROPERTY
As per the GST provisions, the department can seize properties belonging to the defaulter to recover the due tax
amount. Sometimes, in order to avoid such seizures, the taxpayer transfers the property via sale, mortgage, exchange
etc. after the amount has become due – the intention being to evade paying the tax amount which is due. To handle
such a scenario, the provisions have been laid down, which state that transfer of property will become void, whenever
there is a tax amount due to be paid.
However, the transfer will not be held as void, provided:
• Transfer has been made for an adequate consideration
• Transfer has been made in good faith, i.e. without any intention to cause fraud
• The taxpayer has not received any notice regarding pending tax dues or proceedings at the time of transfer
• Prior permission of the proper officer has been obtained
• TAX TO BE THE FIRST CHARGE ON PROPERTY
• As per the provisions of recovery of tax in GST, any tax amount which is due, including interest and penalty, will be
the first charge on the property of the defaulter, and will override all laws, except the Insolvency and Bankruptcy
Code.

16. • If at any point in time, the commissioner is of the opinion, that the government
revenue is at stake, then he has the authority to provisionally attach any
property of the defaulting taxpayer. Such a provisional attachment will have a
validity of 1 year.
• Properties are generally treated as a temporary security for the purpose of
provisional attachment, especially when there is a strong suspicion that the
defaulter will abscond. That is the reason why the provision has been made to
include bank accounts also into such property and include them as part of
provisional attachment of property to protect revenue.
• APPEAL AND REVISIONS
• If the taxpayer files for an appeal or revision against the notice of demand
received, then either of the following can occur, as far as the decision is
concerned:
• Due Amount is Increased – In this case, the commissioner will serve another
notice of demand for the difference amount. The old amount will anyway be