Petitioner gets second chance to explain voluntary payment under Section 73(5) after full tax recovery

The Calcutta HC disposed of a petition by remanding the matter to the proper officer. The petitioner had made voluntary payment under Section 73(5) after being involved in fictitious transactions for ITC availment. Despite voluntary payment, the proper officer treated it as compliance with a show cause notice without seeking explanation from the petitioner. The petitioner's appeal was dismissed for delay, filed on 6th January 2024 after the prescribed period expired. The entire outstanding demand was recovered in April-May 2023 before the appeal period ended. Since the appellate tribunal was not yet constituted, the petitioner approached the HC directly. Considering the peculiar circumstances and that full tax recovery had occurred, the court remanded the case to allow the petitioner opportunity to explain the voluntary payment circumstances under Section 73(5).

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ISSUES:

Whether the dismissal of an appeal on the ground of delay under Section 107 of the WBGST/CGST Act, 2017 was justified.Whether the proper officer erred in treating voluntary payments made under Section 73(5) of the Act as payments in compliance with the show cause notice.Whether recovery of tax demand prior to the expiry of the statutory period for appeal affects the validity of such recovery.Whether the petitioner was entitled to an opportunity to explain the circumstances of voluntary payment before final adjudication.Whether remand to the proper officer for adjudication on merits is appropriate where the appellate authority's order is set aside.

RULINGS / HOLDINGS:

The appellate authority's dismissal of the appeal solely on the ground of delay was set aside, as the petitioner made voluntary payments under Section 73(5) and was not given an opportunity to explain the same.The proper officer erred in treating the voluntary payments under Section 73(5) as payments made in compliance with the show cause notice without seeking any explanation from the petitioner.The recovery of the entire tax demand from the petitioner's Electronic Credit Ledger before the expiry of the three-month period from the date of the order was improper.The petitioner must be afforded an opportunity to respond to the show cause notice and explain the voluntary payments before adjudication on merits.The matter was remanded to the proper officer with directions to adjudicate afresh on merits after allowing the petitioner to respond within two weeks, and the prior orders dated 23rd February 2024 and 17th February 2023 were set aside.

RATIONALE:

The Court applied the provisions of the WBGST/CGST Act, 2017, particularly Sections 29(2)(e), 73(5), 74, and 107, emphasizing the procedural safeguards and the necessity of opportunity before adverse orders.The Court noted that voluntary payments under Section 73(5) are distinct from payments made in compliance with a show cause notice, requiring explicit clarification before treating them as such.The principle that recovery of tax demand should not precede the expiry of the statutory appeal period was underscored to protect the taxpayer's right to appeal.The absence of an appellate tribunal justified the writ petition, but the Court insisted on adherence to due process by remanding the matter for fresh adjudication.No dissent or doctrinal shift was indicated; the judgment reaffirmed established procedural rights under the GST framework.

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