ADJUDICATION UNDER GST (PART-5)

General Provisions relating to determination of tax (Section 75)

Statutory provisions

75. (1) Where the service of notice or issuance of order is stayed by an order of a court or Appellate Tribunal, the period of such stay shall be excluded in computing the period specified in sub-sections (2) and (10) of section 73 or sub-sections (2) and (10) of section 74, as the case may be.

(2) Where any Appellate Authority or Appellate Tribunal or court concludes that the notice issued under sub-section (1) of section 74 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 notice was issued, the proper officer shall determine the tax payable by such person, deeming as if the notice were issued under sub-section (1) of section 73.

(3) Where any order is required to be issued in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court, such order shall be issued within two years from the date of communication of the said direction.

(4) 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.

(5) 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.

(6) The proper officer, in his order, shall set out the relevant facts and the basis of his decision.

(7) 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.

(8) Where the Appellate Authority or Appellate Tribunal or court modifies the amount of tax determined by the proper officer, the amount of interest and penalty shall stand modified accordingly, taking into account the amount of tax so modified.

(9) The interest on the tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability.

(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.

(11) An issue on which the Appellate Authority or the Appellate Tribunal or the High Court has given its decision which is prejudicial to the interest of revenue in some other proceedings and an appeal to the Appellate Tribunal or the High Court or the Supreme Court against such decision of the Appellate Authority or the Appellate Tribunal or the High Court is pending, the period spent between the date of the decision of the Appellate Authority and that of the Appellate Tribunal or the date of decision of the Appellate Tribunal and that of the High Court or the date of the decision of the High Court and that of the Supreme Court shall be excluded in computing the period referred to in sub-section (10) of section 73 or sub-section (10) of section 74 where proceedings are initiated by way of issue of a show cause notice under the said sections.

(12) 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.

Explanation. – For the purposes of this sub-section, the expression 'self-assessed tax' shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39.

(13) 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.

Amendments made by Finance Act, 2021

The Finance Act, 2021 has inserted the following expression in sub section (12).

(12) 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.

Sub-section (12) deals with a situation where any amount of GST, fully or partly along with interest is unpaid. In such a situation, the same shall be recoverable under the provisions of section 79 dealing with recovery of tax.

This amendment has inserted an explanation in sub-section (12) to clarify that ‘self assessed tax’ shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39 of the CGST Act, 2017.

The Finance Act, 2021 has since been enacted w.e.f. 28.03.2021 and this amendment has been notified w.e.f. 01.01.2022.

General provisions for determination of tax

Section 75 of CGST Act, 2017, 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. The section further provides that the time period during which appeal is pending in any appellate for a would be excluded while calculating the time period for issuance of such notice or passing of order. 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. 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 of CGST Act, 2017 sets out the general principles governing the adjudication under the GST law. It provides for the principles and norms to be observed by proper officer carrying out any adjudication under section 73 and 74 or any other provisions of the GST law. Such provisions inter-alia includes the following:

1. Service of notice
2. Issuance of order
3. Time lines for issuance of order
4. Granting of opportunity of being heard
5. Granting of adjournment upto three times on request and against reasons to be recorded
6. Confirmation of demand strictly as per Show Cause Notice (SCN)
7. Grounds to be considered only as per show cause notice
8. Payment of interest  irrespective of whether specified in order or not:
1. Adjudication proceedings deemed to be concluded if no order is issued :

• Within three years in section 73 cases
• Within five years in section 74 cases

10. Period of litigation before appellate forums shall be excluded while computing the period of three or five years.
11. Any unpaid amount of self assessed tax and interest shall be recovered as per section 79 of CGST Act, 2017.
50. No penalties shall be imposed under any provision of the act if penalty has already been imposed under section 73 or 74 of the CGST Act, 2017.

Adjudication under GST

Adjudication is an important function of the tax administration by the proper officers. A fair adjudication ensures that no economic loss is caused to the revenue authorities by alleged contravention by the person.

If an innocent person is punished or the punishment is more than warranted by the nature of offence it may undermine the trust between the Government and the public. If, on the other hand, a real offender escapes the punishment provided by law, it may tend to encourage commission of offences to the detriment both of the government and the honest tax payers. The authorities exercising quasi-judicial function are duty bound to justify their existence and carry credibility with the people by inspiring confidence in the adjudicatory  process. The public is entitled to have assurance that process of correction is in place and working. It is the requirement of law that correction process of judgments should not only appear to be implemented but also seem to have been properly implemented. These functions, therefore, cast a heavy responsibility on the officers invested with the powers of adjudication and confiscation to use it with utmost care and caution, free from any prejudice or bias, so that the innocent does not suffer by any injustice done to him and the real offender does not  escape the punishment provided by law.

The adjudication is done by the departmental officers, and in this capacity they act as quasi-judicial officers. It is an important function of the officers and casts heavy responsibility on the officers invested with the powers of adjudication to use it with utmost care and caution, free from any prejudice or bias. It is important to know and understand the facts of the case, processing them properly and to apply correctly the sections and rules of law or Notifications that may be relevant to the facts of each case.

Natural Justice

Adjudication proceedings shall be conducted by observing principles of natural justice. The principles of natural justice must be followed by the authorities at all levels in all proceedings under the GST law.

Basic requirements of principles of natural justice are:

(i) Full information about charges to the party

(ii) Allowing party to state his defence i.e. through personal hearing

(iii) Unbiased authority

(iv) Reasoning Order

When show cause notices are issued under provisions of law charging any person for contravention of any provisions of the said Act and rules and/or notifications issued thereunder and penal action is proposed the competent officers of the Department adjudge the case and issue orders. This process is called adjudication.

(To be continued…..)