The document discusses provisions under the Central Goods and Services Tax Act (CGST Act) relating to the determination of tax not paid or short paid and the recovery process. It notes that officers have challenging timelines to issue orders within 3-5 years of the annual return filing date. It summarizes key sections of the CGST Act pertaining to the determination of tax in normal cases within 3 years [Section 73], and for fraud/suppression within 5 years [Section 74]. The document also discusses provisions for issuing show cause notices, paying tax to avoid penalties, and the definition of "suppression" under the Act.

1. [Type text]
DEMANDS, AND
RECOVERY OF
TAX UNDER THE
GST LAW (CGST
ACT,2017)
PRESENTED BY:
K.VIJAYA KUMAR
ASST.COMMISSIONER
CENTRAL EXCISE, BELGAUM

2. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
Introduction
The determination of tax not paid or short paid or erroneously refunded or
input tax credit wrongly availed or utilized is going to be nightmare,
indeed, for the Officers of the Central Tax under the Central Goods and
Services Tax Act, 2017 (the CGST Act, 2017 for short) as the orders, under
Section 73 (10) and Sec.74 (10), are required to be issued within 3 or 5
years of filing of annual return in normal cases, and fraud or suppression
cases respectively.
It is worth to note that, as per Section 75(10), the adjudication proceedings
shall be deemed to be concluded, if the order is not issued within three
years as provided for in sub-section (10) of section 73 or within five years
as provided for in sub-section (10) of section 74.
Under the GST Law, Officers do not have the luxury of having separate time
periods for issuance of SCNs and for passing orders as the SCNs to be
issued at least 3 months or 6 months prior to last date of passing
adjudication order, as stipulated under Section 73 (2) and Section 74 (2),
in normal cases and in fraud cases respectively .
It means, the tax payers who were issued with notices either under Sec.73
or Sec.74 can expect results or orders within stipulated time limits without
waiting for the long intervals. For officers, it is going to be a challenging
task and the year end (31st December) or the month of December is going
to be nightmare as they required pass the orders within a period of three or
five years from the due date of furnishing annual return (GSTR-9) for the
financial year to which tax not paid or short paid or input tax credit (ITC)
wrongly availed or utilized.

3. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
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 wilful misstatement or
suppression of facts. (NORMAL PERIOD)
Section 73 of the CGST Act, 2917 provides 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 wilful misstatement or
suppression of facts.
This Section further provides that the adjudication order will be issued
within three years from the due date of filing of annual return for the year
to which the discrepancy is noticed. This Section also provides that the
show cause notice is required to be issued at least three months prior to
the time limit. It has also been provided that SCN need not be issued if tax
along with interest is paid before issue of such notice. This Section further
provides that where any person chargeable with tax pays the tax along with
interest within thirty days of issue of show cause notice, no penalty shall be
payable and all proceedings in respect of the notice shall be deemed to be
concluded.
Let us have a look at provisions of Section 73 as tabled below:
Section 73 (1) Issuance of Show Cause Notice (SCN).
Section 73 (2) Time limit for issue of the SCN.
Section 73 (3) Service of a Statement for subsequent period.
Section 73 (4) Statement issued deemed to be notice if ground relied
upon are the same.
Section 73 (5) Payment of amounts before service of SCN.
Section 73 (6) No service of Notice, if tax or penalty paid.
Section 73 (7) Notice can be issued, if amount settled is less of payable.
Section 73 (8) No penalty, if tax and interest paid within 30 days of SCN.
Section 73 (9) Determination of tax, interest and penalty equivalent to
10% of tax or Rs.10,000/- whichever is higher.
Section 73 (10) Issue of order within three years.
Section 73 (11) Penalty levied, if self-assessed tax not paid with 30 days of
due day of payment of such tax.

4. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
Analyzing Section 73 (1) of the CGST Act, 2017
It may be noted that as per Section 73. (1), where it appears to the proper
officer that
 any tax has not been paid or short paid (TAX)
 or erroneously refunded, (REFUND)
 or where input tax credit has been wrongly availed or utilised (ITC)
for any reason, other than the reason of fraud or any wilful-misstatement
or suppression of facts to evade tax,
The Proper Officer shall serve notice on the person chargeable with
 tax which has not been so paid or which has been so short paid or
(TAX)
 to whom the refund has erroneously been made, (REFUND)
 or who has wrongly availed or utilised input tax credit, (ITC)
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.
Periodical Statement for subsequent periods in lieu of
notice
This Section also provides for issuance of a statement by the proper officer
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. 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 are the same as are mentioned in the earlier notice.

5. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
No issue of SCN or No penalty when tax paid, with interest,
within three months of the notice.
To appreciate the aforesaid position, it is beneficial to consult the relevant
provisions of Section 73 (6) and Section 73 (8) of the CGST Act, 2017 as
under:
73(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.
73(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.
The expression “all proceedings in respect of the said
notice” shall not include proceedings under section 132;
It may be noted that as per Explanation 1 given under Section 74 for the
purposes of section 73 and section 74 ,—
(i) the expression “all proceedings in respect of the said notice”
shall not include proceedings under section 132;
Section 132 provides for a list of offences which shall be punishable with
gradation of fine and imprisonment depending on the amount of tax evaded
or the amount of input tax credit wrongly availed or utilised or the amount
of refund wrongly taken.

6. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
Determination of tax, interest, and penalty equivalent to
10% of tax or Rs.10,000/- whichever is higher.
Section 73(9) provides that 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.
Penalty payable, if self-assessed tax or the amount
collected as tax is not paid within a period of 30 days from
the due date of payment.
However, it may be noted that penalty under Section 73 (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.
Recovery of short-fallen amount than the actual payable,
when party has paid tax and interest before issue of the
notice.
As per Section 73(7), if the proper officer is of the opinion that the amount
paid under sub-section (5) (i.e. payment of tax with interest before issue of
the SCN by the person chargeable with tax) falls short of the amount
actually payable, he shall proceed to issue the notice as provided for in
Section 73 (1) in respect of such amount which falls short of the amount
actually payable.

7. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
Determination of tax not paid or short paid or erroneously
refunded or input tax credit wrongly availed or utilised by
reasons of fraud or any wilful misstatement or suppression
of facts. (EXTENDED PERIOD)
Section 74 of the CGST Act, 2017 provides that in cases of tax not paid or
short paid or erroneously refunded or input tax credit wrongly availed or
utilised, for reasons of fraud or wilful misstatement or suppression of facts,
the adjudication order will be issued within five years from the due date of
filing of annual return for the year to which the discrepancy is noticed.
Further, the show cause notice is required to be issued at least six months
prior to the time limit.
This section also provides that such notice need not be issued if tax along
with interest and penalty equal to fifteen per cent. of tax is paid before
issue of such notice.
This section also provides that where any person chargeable with tax pays
the tax along with interest and penalty equal to twenty five per cent. of tax
within thirty days of issue of show cause notice, all proceedings in respect
of the notice shall be deemed to be concluded.
This section also provides that where any person chargeable with tax pays
the tax along with interest and penalty equal to fifty per cent. of tax within
thirty days of communication of order, all proceedings in respect of the
notice shall be deemed to be concluded.
What amounts to “suppression” ?
As per Explanation-2 provided under Section 75, for the purposes of this
Act, the expression “suppression” shall mean:
“non-declaration of facts or information which a taxable person is
required to declare in the return, statement, report or any other document
furnished under this Act or the rules made thereunder, or failure to
furnish any information on being asked for, in writing, by the proper
officer”.

8. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
Penalty (along with tax and interest) payable under Section
73 or Section 74 has reference to corresponding provisions
of Section 122(2) of the CGST Act, 2017.
It is worth to note in this connection that penalty as referred in Section 73
or Section 74 has direct reference to provisions of Section 122(2) of the
CGST Act, 2017.
For ease of reference, the provisions of Section 122(2) are reproduced as
under:
Section 122 (2) Any registered person who supplies any goods or services or
both on which any tax has not been paid or short-paid or erroneously
Refunded, or where the input tax credit has been wrongly availed or
utilised,—
a) for any reason, other than the reason of fraud or any wilful
misstatement or suppression of facts to evade tax, shall be
liable to a penalty of ten thousand rupees or ten per cent. of
the tax due from such person, whichever is higher;
(SECTION 73)
b) for reason of fraud or any wilful misstatement or suppression
of facts to evade tax, shall be liable to a penalty equal to ten
thousand rupees or the tax due from such person, whichever is
higher. (SECTION 74)
Therefore, penalty referred in Section 73 or Section 74 are nothing but
penalty imposable under provisions of Section 122(2) (a) and
Sec.122(2) (b) respectively.
Accordingly, while issuing a notice under Section 73(1) or 74 (1), a
reference of provisions of Section 122(2) (a) or Section 122(2) (b), as the
case may be, may be made for the purpose of clarity.
122 (2) (a)
122 (2) (b)

9. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
Analyzing Section 74 of the CGST Act, 2017
Let us first refer to sub-sections of Sec.74 as shown under the following
Table.
Section 74 (1) Issuance of Show Cause Notice (SCN).
Section 74 (2) Time limit for issue of the SCN, i.e. 6 months before order
Section 74 (3) Service of a Statement for subsequent period.
Section 74 (4) Statement issued deemed to be notice if ground relied upon
are the same.
Section 74 (5) Payment of tax, interest and 15% of tax as penalty,
before service of SCN.
Section 74 (6) No service of Notice, if tax, interest and penalty paid.
Section 74 (7) Notice still can be issued, if amount settled is less of payable.
Section 74 (8) Only penalty of 25% of tax is payable, if tax and interest,
reduced penalty paid within 30 days of SCN.
Section 74 (9) Determination of tax, interest and penalty due from such
person and issue an order.
Section 74 (10) Issue of order within five years relevant date.
Section 74 (11) If tax, interest, and a penalty equivalent to 50% of tax is paid
within 30 days of communication of the order, all
proceedings shall be concluded.
Periodical Statement for subsequent periods in lieu of
notice
As per Section 74 (3), when a notice has been issued for any period under
section 74 (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 section 74(1), on the person chargeable with tax.
Further as per Section 74 (4), the service of statement under section 74 (3)
shall be deemed to be service of notice under section 73 (1), subject to the
condition that the grounds relied upon in the said statement, except the
ground of fraud, or any wilful-misstatement or suppression of facts to
evade tax, for periods other than those covered under section 74 (1) are the
same as are mentioned in the earlier notice.

10. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
Payment of tax, interest, and penalty of 15% of tax,
before issuance of the SCN.
Section 74 (5) provides that the person chargeable with tax may, before
service of notice under section 74(1), pay the amount of tax along with
interest payable u/s 50 and a penalty equivalent to fifteen per cent. of
such tax 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.
Determination of tax, interest, and penalty.
Section 74(9) provides that 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 (equal to tax or Rs.10,000/- whichever is
higher) due from such person and issue an order.
Issue of order within five years
Section 74 (10) stipulates that the proper officer shall issue the order under
section 74 (9) within a period of five 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 five years from the date of erroneous refund.
Reduced Penalty of 50% of tax, if tax, interest, and penalty
paid within 30 days from the date of communication of
order.
Section 74 (11) provides that where any person served with an order
issued under section 74 (9) pays the tax along with interest payable
thereon under section 50 and a penalty equivalent to fifty per cent. of
such tax within thirty days of communication of the order, all
proceedings in respect of the said notice shall be deemed to be concluded.

11. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
Settlement provisions under Section 73 or Section 74
It may be noted that Taxable person can settle the demand at any stage,
right from audit/investigation to the stage of passing of adjudication order
and even thereafter. These provisions are brought out under the following
Table, for ease of reference:
Stage Under Section 73 Under Section 74
Before issue of
SCN
Tax, Interest, and
No Penalty.
Tax, Interest, and
Penalty equal to 15% of
Tax.
Within 30 days
from the SCN
Tax, Interest, and
No Penalty.
Tax, Interest, and
Penalty equivalent to
25% of Tax.
Determination
by Order
Tax, Interest, and
Penalty equivalent to
10% of Tax
or Rs.10,000/-
whichever is higher.
Tax, Interest, and
Penalty equivalent
to Tax (i.e.100%),
or Rs.10,000/-
whichever is higher.
Within 30 days
from
Tax, Interest, and
Penalty of 10% of Tax
or Rs.10,000/-
whichever is higher.
Tax, Interest, and
Penalty equivalent to
50% of Tax.
Conclusion of proceedings against co-noticees (some other
persons) when proceedings are concluded against main
person.
As per Explanation-2 (ii) to Section 74, it may be noted that where the
notice under the same proceedings is issued to the main person liable to
pay tax and some other persons, and such proceedings against the main
person have been concluded under section 73 or section 74, the
proceedings against all the persons liable to pay penalty under sections
122, 125, 129 and 130 are deemed to be concluded.

12. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
General provisions relating to determination of tax
under Section 73 or Section 74.
Section 75 provides for general provisions for determination of tax. This
section provides that the period of stay, if any, would be excluded while
calculating the time period for issuance of show cause notice or passing of
order. This section further provides that the time period during which
appeal is pending in any appellate fora would be excluded while calculating
the time period for issuance of such notice or passing of order.
Following the principles of natural justice.
This Section stipulates that an opportunity of hearing shall be granted
where a request is received in writing from the person chargeable with tax
or penalty, or where any adverse decision is contemplated against such
person. Further, the proper officer shall, if sufficient cause is shown by the
person chargeable with tax, grant time to the said person and adjourn the
hearing for reasons to be recorded in writing:
Provided that no such adjournment shall be granted for more than
three times to a person during the proceedings.
Passing of Speaking order, and demand cannot be
confirmed beyond the scope of the SCN or the grounds not
specified.
Section 75 (6) mandates that the proper officer, in his order, shall set out
the relevant facts and the basis of his decision.
Section 75 (7) stipulates that the amount of tax, interest and penalty
demanded in the order shall not be in excess of the amount specified in the
notice and no demand shall be confirmed on the grounds other than the
grounds specified in the notice.

13. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
Interest liability is automatic and payable even though not
specified in the order.
Section 75 (9) provides that the interest on the tax short paid or not paid
shall be payable whether or not specified in the order determining the tax
liability.
Proceedings are conclusive, if the order not issued within
statutory limit of three or five years u/s 73 or u/s 74
respectively.
This section also provides that the adjudication proceedings shall be
deemed to be concluded, if the order is not issued within the statutory time
limit.
Section 75 (10): The adjudication proceedings shall be deemed to be concluded, if
the order is not issued within three years as provided for in sub-section (10) of
section 73 or within five years as provided for in sub-section (10) of section 74.
Recovery of self-assessed tax under Section 79
This section also provides that no such notice needs to be issued for
recovery of unpaid self-assessed tax as per return and interest thereon.
Section 75(12) states that, notwithstanding anything contained in section
73 or section 74, where any amount of self-assessed tax in accordance with
a return furnished under section 39 remains unpaid, either wholly or
partly, or any amount of interest payable on such tax remains unpaid, the
same shall be recovered under the provisions of section 79.
No double Penalty for the same act or omission.
Section 75 (13) provides that where any penalty is imposed under section
73 or section 74, no penalty for the same act or omission shall be
imposed on the same person under any other provision of this Act.

14. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
Tax collected, regardless whether supplies are
taxable or not, but not paid to Government
Section 76 provides that any amount collected as tax, along with interest,
from customers “representing it as tax” shall be paid to account of the
Government regardless of whether the supplies are taxable or not. This
section further provides for issuance of a show cause notice for the amount
collected but not deposited. It also requires that the order needs to be
issued within one year from the date of issuance of such notice.
Tax wrongfully collected and paid to Central Government or
State Government, shall be refunded.
Section 77 provides for refund of central tax in situations where intra-State
supplies are subsequently held to be inter-State supplies. A registered
person who has paid the Central tax and State tax or, as the case may be,
the Central tax and the Union territory tax on a transaction considered by
him to be an intra-State supply, but which is subsequently held to be an
inter-State supply, shall be refunded the amount of taxes so paid in such
manner and subject to such conditions as may be prescribed.
Recovery action immediately after completion of three
months.
Section 78 provides that any amount payable in pursuance of an order
shall be paid by such person within a period of three months, except in
certain specified cases, from the date of service of order failing which
recovery proceedings shall be initiated.

15. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
Recovery of Tax under Section 79
Section 79 provides for various modes of recovery of amount payable
under the CGST Act, 2017 from a person (such person). The modes of
recovery, inter alia, includes,-
 Deducting the money so payable (refund, drawback etc.) to such
person which may be under his control.
 Detaining and selling any goods belonged to such person.
 Issuing notice of recovery from third parties from whom money is
due to such person.
 Distrain any movable or immovable property belonging to such
person.
 Certificate action through Collector of District to recover as land
revenue.
 Recovery through SGST or UTGST officers.
 Enforcing Bond or other instrument, if any executed by such person.
Payment of Tax and other amount in installments.
Section 80 provides that, on an application filed by a taxable person, the
Commissioner may, for reasons to be recorded in writing, extend the time
for payment or allow payment of any amount due under this Act, other than
the amount due as per the liability self-assessed in any return, by such
person in monthly instalments not exceeding twenty four, subject to
payment of interest u/s 50 and subject to such conditions and limitations
as may be prescribed.
Transfer of property to be void in certain cases.
Section 81 provides that where a person, after any amount has become
due from him, creates a charge on or parts with the property belonging to
him or in his possession by way of sale, mortgage, exchange, or any
other mode of transfer whatsoever of any of his properties in favour of
any other person with the intention of defrauding the Government
revenue, such charge or transfer shall be void as against any claim in
respect of any tax or any other sum payable by the said person.

16. K.Vijaya Kumar, Asst.Commissioner, Central Excise, Belgaum
First charge on the property of the taxable person
Section 82 provides that liabilities under the proposed Act shall be the first
charge on the property of the taxable person, save as otherwise provided in
the Insolvency and Bankruptcy Code, 2016.
Provisional attachment of property for a period of one year.
Section 83 provides that during the pendency of any proceedings under
certain sections of the proposed Act, the Commissioner by order in writing
attach provisionally any property for a period of one year from the date of
the order for provisional attachment.
Continuation and validation of certain recovery proceedings;
another demand notice for enhanced dues.
Section 84 provides for continuation and validation of certain recovery
proceedings. Particularly when notice, for recovery of Government dues is
served upon any taxable person or any other person and any appeal or
revision application is filed or any other proceedings is initiated in respect
of such Government dues, then such Government dues are enhanced in
such appeal, revision or other proceedings, the Commissioner shall serve
upon the taxable person or any other person another notice of demand in
respect of the amount by which such Government dues are enhanced and
any recovery proceedings in relation to such Government dues as are
covered by the notice of demand served upon him before the disposal of
such appeal, revision or other proceedings may, without the service of any
fresh notice of demand, be continued from the stage at which such
proceedings stood immediately before such disposal.
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