Invoke the extended period of limitation for the financial years 2017-18 and 2018-19

[vinod jadhav]

Respected Sir,

I require your valuable opinion on the below-mentioned issue. One of my clients has executed a works contract for canal works, serving as a sub-sub-contractor for the F.Y 2017-18 and 2018-19.

Moreover, the department initiated an audit in June 2023, covering the period from April 2017. Below are the specific details of the works contract:

Below are the details of the works contract details;

1. He worked as a sub-sub-contractor within the project.
2. However, he incorrectly claimed a sub-contractor exemption, charging 5% instead of the required 18%.

My questions are:

1. Can the department invoke the extended period of limitation for the financial years 2017-18 and 2018-19, despite the audit commencing in June 2023, and no Show Cause Notice (SCN) being issued within the normal period, i.e., by December 31, 2023?
2. If a demand is raised for the F.Y 2017-18 and 2018-19 under section 74 of the GST Act, can we contest it since there was no suppression of facts? The sales details were already submitted in GSTR-1 to the department and were also provided to the audit party in June 2023.

AI Summary

Extended limitation for tax recovery hinges on whether omission amounts to suppression of facts, affecting prosecutorial proceedings.
Invocation of the extended period of limitation turns on whether a short payment reflects suppression of facts-non declaration of required particulars in prescribed returns-rather than an innocent error. Audit detection can trigger extended proceedings when suppression or intentional evasion is found; the revenue bears the burden of proving intent. Key defences include contemporaneous return disclosures, documentary evidence of bona fide belief in a lower rate, and verification of the actual rate applicable during the disputed period amid multiple rate notifications.