commencement of proceedings

[Bibhu Tripathy]

Dear experts

Section 50 mentions interest on net tax libility will not be applicable when any commencement og proceedings under sec 73 and 74 started

my question

whether the investigation period will be the held as commencement of proceedings under sec 73 or 74. Whether the returns filed during this period will atttact intetest on gross liability or net tax liability*

[KASTURI SETHI]

Sh.Bibhu Tripathy Ji,

You need to go through the definition of the word, 'proceedings'. The term, 'proceedings' neither been defined in GST Acts nor in General Clauses Act. So we shall have to resort to legal dictionary meaning of the term, 'proceedings'. In different dictionaries the meaning of this word has been explained as under :-

1. As per S.B.Sarkar's dictionary of 'Words & Phrases of Excise, Customs & Service Tax' (4th Edition) Centax Publications Pvt. Ltd. at page-3491)----A very comprehensive term and generally speaking means a prescribed course of action for enforcing a legal right and hence it necessarily embraces the requisite steps by which a judicial action is involved.(From 'Words & Phrases', Permanent Edition, Vol.34) ---Collector Vs. R. Seshammal;

-----Doing a legal action or process, any act done by the authority of a Court of Law, (Shorter Oxford)

2. As per Collins English Dictionary & Thesaurus, " An act or course of action, a legal action, any step taken in a legal action, the events of an occasion.

3. As per legal dictionary. 'The Law Lexican With Legal Maxims' (Edition 1993), a proceeding is an act which is done by the authority or directions of the Court, express or implied; an act necessary to be done in order to attain a given end ; a prescribed mode of action for carrying into effect a legal right; performance of an act, wholly distinct from any consideration of an abstract right; the form and manner of conducting judicial business before a Court or judicial officer ; regular and orderly progress in form of law including all possible steps in an action, from its commencement to the execution of judgement;

In the light of above legal meanings of the word, 'proceedings' it is very much clear that the step/process of investigation is covered under Sections 73 and 74 of CGST Act.

It is clearly mentioned in Section 50 of CGST Act, if the return is filed after commencement of proceedings initiated under Sections 73 or 74, interest will be charged on gross liability by the department.

Hence it is in the interest of the assessee to pay Govt. dues on one's own without any intervention from the department. Even a simple letter from the Range Office or any other wing of the of the department i.e. Preventive, Audit or division will attract interest on gross liability.

Emphasis is supplied on highlighted words and sentences.

[YAGAY andSUN]

Statutory Interest will be applicable on Gross Liability.

AI Summary

Interest on gross liability applies when proceedings commence under sections 73 and 74, affecting post commencement returns. Investigation steps and departmental communications constitute commencement of proceedings; returns filed after such commencement attract interest on gross tax liability rather than on net tax liability, so taxpayers are advised to pay dues voluntarily before any departmental step to avoid gross liability interest.