SECTION 20-PART C REGARDING GENERAL PROVISIONS RELATING TO DEMAND OF TAX

GST Update 28.01.2016

GST DAILY DOSE OF UPDATION:-

SECTION 20-PART C REGARDING GENERAL PROVISIONS RELATING TO DEMAND OF TAX:-

The Part C pertaining to General Provisions relating to demand of tax in the proposed section 20 of the GST Act, 2016 is being discussed in this update.

The sub-section (1) states that where service of notice is stayed by an order of Court or Tribunal, the period of stay shall be excluded in computing the time period of one year, three years or five years, as the case may be.

The sub-section (2) states that where any appellate authority or tribunal or court concludes that the notice issued under sub-section B(1) or B(2) is not sustainable for the reason that the charges of fraud or any wilful-misstatement or suppression of facts to evade tax has not been established against the person to whom the show cause notice was issued, the proper officer shall determine the tax payable by such person for the period of three years, deeming as if the notice was issued under sub-section A(1) or A(2). In this regard, it is worth observing that this provision seeks to nullify the effect of number of judicial pronouncements of Supreme Court or High Court which have quashed entire demands on the basis of fact that extended period was wrongly invoked as there was no fraud, collusion or suppression of facts. The above provision also provides liberty to the revenue department to invoke extended period of limitation in every case without fear of losing demands of normal period of limitation. This is a very harsh provision for assessees as practically there will be no harm to the revenue department even in cases where extended period of limitation has been wrongly invoked by them. This provision seeks to remove the significance of invoking normal period of limitation as even otherwise, the demands of normal period of limitation will be confirmed automatically.

The other provisions like grant of opportunity of personal hearing and accepting adjournment of hearing for three times are similar to the provisions already prevalent in force. It is pertinent to note that sub-section (6) prescribes 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 grounds other than the grounds specified in the notice. This is welcome provision as it is observed often that the demands are confirmed on the grounds that were not alleged in the show cause notice.

Furthermore, sub-section (8) mentions that interest on tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability thereby meaning that interest is automatic. However, this is contradictory to section 20 (D)(1) which states that all the provisions of A, B and C mutatis mutandis apply to interest. On one hand, it is being stated that interest is payable whether or not specified in the order whereas on the other hand, it is being prescribed that the period of limitation also applies to interest. Suppose, if in a particular show cause notice, there is no mention of interest, and consequently, no mention in the order, then as per sub-section (8), interest is payable irrespective of the fact that it is not specified in the order. However, if provisions of sub-section (8) are implemented, the provisions of section 20(D)(1) become otiose as when interest is mandatorily payable, where is the need to compute time limit for confirming the same?

Finally, the important provision is contained in sub-section (9) which specifies that the officer issuing order shall be different from the officer issuing show cause notice. This is really need of the hour as practically it is difficult for the officer issuing show cause notice to drop the proceedings initiated by him. The assessees can expect a fair decision if the officer issuing notice and that passing order is different. Moreover, sub-section (10) prescribes that the adjudication proceedings shall be deemed to be concluded if the notice to show cause is not decided within one year or eighteen months as provided in sub-section A(7) or B(7). This will definitely entrust responsibility on the revenue officers to expeditiously adjudicate and decide the cases.

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GST Update 28.01.2016

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