Validity of DRC-01 Received U/S 73 Dated 28/09/2023 for FY 2017-18 by a Composite Dealer

[KAMAL SETHI]

Dear Friends

I am seeking your opinion on the validity of a DRC-01 notice u/s 73 received on 28/09/2023 concerning the FY 2017-18. The key details and timeline are as follows:

1. The notice pertains to payment of tax due on stock held in July 2017-18 when the dealer migrated from the regular VAT scheme to the Composite Scheme.
2. As per Section 73(1) and Section 73(10) of the CGST Act, 2017, a show cause notice must be issued at least three months prior to the time limit of three years from the due date for furnishing the annual return for the relevant financial year. For FY 2017-18, the due dates for the annual return were 5th & 7th Feb, implying the order can be issued up to 4th & 6th Feb respectively.
3. However, with Notification No. 13/2022-Central Tax dated 5th July, 2022 the time limit specified under sub-section (10) of section 73 for issuing an order for FY 2017-18 was extended to 30th September, 2023.
4. With the above notification, the deadline for issuing the SCN under section 73(1) was automatically extended to 30th June, 2023.

Given that the DRC-01 was issued on 28/09/2023, it seems to be notice is issued beyond extended deadlines. However, I would like your expert opinion on the validity of this notice and any potential nuances or overlooked aspects that may be beneficial to our case like applicability of time limit in case of composite dealer or applicability of section 74.

Thank you for your time and expertise.

AI Summary

Time bar for GST recovery notices can be extended by notification, validating a SCN issued after the original deadline.
Notifications in 2022 and Notification No. 09/2023 extended the time limit for issuance of recovery orders for FY 2017-18 to 31 December 2023, rendering a DRC-01 issued on 28/09/2023 within the extended limitation period. On the substantive issue, GST on stock transferred into the composition scheme is exigible only where VAT was not paid or transitional credit not accounted for; composition dealers cannot carry forward input tax credit, and charging GST where VAT was already paid may amount to double taxation.