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.

Service of notice by proper officer;Notice shall be served on the person who is chargeable with tax, who has – Not paid or short paid the tax;Received the erroneous refund;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.

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)). 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. The following table summarises the time limit for issuance of Notice and Order: 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. 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: Recommended Articles –

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