assessment order passed under section 74 of the CGSt Act in place of under section 62 of the cgst Act non-filiers of gst returns

[HimangshuKumar Ray]

for the period 2017-2018, SCN issued on 31.03.2018, Ex-parte order u/s. 74 on 16.06.2023, for non-filiers of GST returns and RC cancelled on 08.01.2020 for non-filing of returns. GST department passed the order under section 74 of the GST Act , in place of section 62 for non-filiers of retuns and thereby not followed Circular No. 129/48/2019-GST dated 24.12.2019 issued by CBIC. Time for filing statutory appeal has expired on 16.10.2023. Is there any case laws, I am thinking to file Writ petition challenging the assessment order passed in contrary to provision of law, void, without jurisdiction. Kindly discuss.

[Sadanand Bulbule]

Dear Sir 

What is the reason for not filing appeal under Section 107 of the GST Act before 15/10/2023? Was it to avoid 10% deposit of disputed tax amount?

While filing writ petition challenging the jurisdiction, this question needs to be kept  in mind.

[KASTURI SETHI]

Dear Querist,

(i) It is NOT the best judgement, it being ex parte. The Assessment Order must bethe best.

(ii) Ex parte Order is in violation of principles of natural justice.

(iii) Can you post order portion and major contents of the Order-in-Original here ? If you post, specific relevant case laws will be posted here.

(iv) You need to take shelter of case laws pertaining to violation of principles of natural justice.

(v) Specific case laws pertaining to the best judgement will be more helpful.

[KASTURI SETHI]

(i) The Supreme Court in the case of S.M. HASAN, S.T.O., JHANSI VERSUS NEW GRAMOPHONE HOUSE, JHANSI [1975 (9) TMI 177 - SUPREME COURT] has categorically held that while assessing, on the basis of 'best judgement', the Assessing Authority has to make the assessment honestly and on the basis of an intelligent well-grounded estimate rather than upon pure surmises. The assessment so made while taking recourse to the 'best judgement assessment' should not be speculative or fanciful but on reasonable guess based upon the material available before the Assessing Authority.

The Assessing Authority is bound to act in a rational manner while resorting to best judgement assessment in view of the facts on record.

(ii) 2022 (3) TMI 88 - JHARKHAND HIGH COURT - VINMAN CONSTRUCTIONS LTD. Versus STATE OF JHARKHAND

[KASTURI SETHI]

Assessment of non-filers of GSTR-3B returns — Best judgment Method adopted by Department by multiplying three times monthly SGST tax and imposing 100% penalty without indicating provision of law arbitrary and contrary to provisions of Central Goods and Services Tax Act, 2017

The Supreme Court Bench comprising Hon’ble Mr. Justice Sanjay Kishan Kaul and Hon’ble Mr. Justice Hrishikesh Roy on 13-8-2021 dismissed the Petition(s) for Special Leave to Appeal (C) No. 11935 of 2021 filed by Assistant Commissioner State Tax against the Judgment and Order dated 31-3-2021 of Telangana High Court in Writ Petition No. 7789 of 2021 reported as 2021 (5) TMI 453 - TELANGANA HIGH COURT GOLDEN MESH INDUSTRIES Versus ASSISTANT COMMISSIONER OF STATE TAX). While dismissing the petition, the Supreme Court passed the following order :

“Reading of the impugned order shows that in para 5, the Counsel for the Department did not answer the questions posed by the Court, i.e., in what manner is three times the monthly SGST tax taken to be the principal and 100% penalty imposed. This is apparent from para 5.

Learned Counsel now contends that there is an explanation for the same but the matter was disposed of on the first date itself and possibly the Counsel could not assist the Court.

Aforesaid being the position, it is for the petitioner to file an application seeking review of the order and not preferring the SLP.

The special leave petition is dismissed with the aforesaid liberty.

Pending application stands disposed of.”

The Telangana High Court in its impugned order had held that the best judgment method adopted by the Department for non-filers of GSTR-3B returns by multiplying three times the monthly SGST tax and imposing 100% penalty without indicating the provision of the law, was arbitrary and contrary to the provisions of Central Goods and Services Tax Act, 2017. The assessment done in such manner was quashed and the Department was directed to pass a fresh reasoned order after issuing notice to the assessee indicating the method of the assessment and after granting him the opportunity of hearing.

[Assistant Commissioner, State Tax v. Golden Mesh Industries - 2022 (4) TMI 918 - SC ORDER]

Personal hearing is must before passing order under Section 62.

2021 (5) TMI 453 - TELANGANA HIGH COURT GOLDEN MESH INDUSTRIES Versus ASSISTANT COMMISSIONER OF STATE TAX

[HimangshuKumar Ray]

RESPECTED KASTURI SETHI, SIR,

I am attaching relevant portion of order as you desired.

GOVERNMENT OF WEST BENGAL

Directorate of Commercial Taxes

Office of the Charge Officer & Senior Joint Commissioner,

Commercial Taxes & State GST

Raiganj Charge, Uttar Dinajpur

Order for creation of Demand u/s- 74 of the CGST Act 2017/ WBGST Act 2017

MemoNo. 690 Date: 16-06-2023

Case proceeding Reference No.: ZD191122001955L

SCN Reference No. ZD1903230297863 Date: 16-06-2023

Order Reference No. ZD190623018422K

To

GSTIN: 19AZLPG5195Q1ZD

Legal Name: PROBIR GHOSH

Trade Name: M/s GITA MOBILE REPAIRING & ELECTRONICS

Address: M.G. ROAD, MOHANBATI , RAIGANJ , RAIGANJ , 733134

Period Involved: FY-2017-18.

Case ID No AD191122000663K.

Please refer to the above proceedings. In this regard, the amount of tax/interest/penalty payable by you under section 74 with reference to the said case as ascertained by the undersigned in terms of the available information, as is given below:

The grounds and quantification are attached / given below:

On approval of the Joint Commissioner, Raiganj Charge, a team of officers namely Shri Souvonik Chakrabrarti (ACR), Shri A.R.Roy (STO), Shri Debasish Rakshit (STO) paid a visit to your principal place of business for the purpose of carrying out an inspection against INS-01 dated 27.01.2020.

As per the STO’s report you were registered under GST Act, 2017 in the trade name of “M/s Gita Mobile Reparing and Electronics” whereas in the signboard as well as in the tax invoices the trade name

Sl No.	Act	Tax	Interest Penalty	As per section 74	Fee	Other	Total (R/o)
01	IGST	₹ 0.00	₹ 0.00	₹ 0.00	₹ 0.00	₹ 0.00	₹ 0.00
02	CGST	₹ 5,34,627.00	₹ 5,28,152.00	₹ 5,34,627.00	₹ 0.00	₹ 0.00	₹ 15,97,406.00
03	WBGST	₹ 5,34,627.00	₹ 5,28,152.00	₹ 5,34,627.00	₹ 0.00	₹ 0.00	₹ 15,97,406.00
04	Cess	₹ 0.00	₹ 0.00	₹ 0.00	₹ 0.00	₹ 0.00	₹ 0.00
Total =		₹ 10,69,254.00	₹ 10,56,304.00	₹ 10,69,254.00	₹ 0.00	₹ 0.00	₹ 31,94,812.00

was written as “M/s Gita Mobile”. During time of visit it was noticed that you have issued tax invoices in the name of “M/s Gita Mobile” and neither CGST nor SGST/WBGST was separately charged in any of the tax invoices and some of the tax invoices were left blank. Stock was taken and some kaccha books(04) were found for which the you were unable to provide any explanation.

Several adjournments and notices calling information were sent to by the proper officer but neither you in person nor any authorized representative on your behalf appeared with books of accounts.

It is observed from records that you were registered under GST Act, 2017 with effect from 26/07/2017 and suo moto cancelled w.e.f 08/01/2020.

As per GSTR-2A reflected in the portal, the details of inward supplies made to you by various RTPs are as follows:

Rate (%)	Taxable Value (₹)	IGST (₹)	CGST (₹)	SGST/WBGST (₹)	Cess (₹)
5	392372.4	0	9809.33	9809.33	0
12	8082297	0	484937.9	484937.94	0
18	144530.8	0	13007.72	13007.72	0
28	10097.35	0	1413.63	1413.63	0
Total	8629297	0	509168.6	509168.62	0

In absence of any regular books of accounts the value of outward taxable supply is determined adding profit @ 5% to the best of the judgement of the undersigned.

Hence Tax Involved in outward supplies for the period FY-2017-18 is computed as detailed below:

Rate (%)	Taxable Value of inward supply (₹)	Taxable Value of outward supply (₹)	IGST (₹)	CGST (₹)	SGST/WBGST (₹)	Cess (₹)
5	392372.4	411991.02	0	10299.78	10299.78	0
12	8082297	8486411.85	0	509184.71	509184.71	0
18	144530.8	151757.34	0	13658.16	13658.16	0
28	10097.35	10602.21	0	1484.31	1484.31	0
Total	86,29,297.00	90,60,761.85	0	5,34,627.00	5,34,627.00	0

An intimation of liability in FORM-GST-DRC-01A was issued to you vide case proceeding reference no. ZD191122001955L dated 02-11-2022 with direction either to file any submissions against the ascertainment thereon or to pay the amount of tax as ascertained thereon along with the amount of applicable interest upto the date of payment under section 50 of the CGST/SGST Act, 2017 and penalty under section 74 (5) of the GST Act by 17-11-2022.

WHEREAS you have failed to pay the amount and inform the same and also failed to furnish an explanation within stipulated time provided in FORM-GST-DRC-01A, you were, SCN vide reference no. ZD1903230297863 dated 31-03-2023 was issued to you to show the cause as to why you should not pay the amount specified thereon along with interest payable and penalty leviable thereon.

WHEREAS, neither any payment has been made within 30 days of the issue of the notice by you; nor you have filed any explanation against the show-cause, within the time specified thereon, therefore, order for creation of demand is prepared today for payment of taxes specified in the table below along with interest payable and penalty leviable thereon

Computation of interest upto the date of this order i.e. 16-06-2023 is as below:

Period Excess [3B-2A]	Payment	due date	Date of order	delay in days	CGST interest	SGST interest
Jul-17	₹ 59,403.00	25-08-2017	16-06-2023	2121	₹ 62,134.00	₹ 62,134.00
Aug-17	₹ 59,403.00	20-09-2017	16-06-2023	2095	₹ 61,372.00	₹ 61,372.00
Sep-17	₹ 59,403.00	20-10-2017	16-06-2023	2065	₹ 60,493.00	₹ 60,493.00
Oct-17	₹ 59,403.00	20-11-2017	16-06-2023	2034	₹ 59,585.00	₹ 59,585.00
Nov-17	₹ 59,403.00	20-12-2017	16-06-2023	2004	₹ 58,706.00	₹ 58,706.00
Dec-17	₹ 59,403.00	22-01-2018	16-06-2023	1971	₹ 57,740.00	₹ 57,740.00
Jan-18	₹ 59,403.00	20-02-2018	16-06-2023	1942	₹ 56,890.00	₹ 56,890.00
Feb-18	₹ 59,403.00	20-03-2018	16-06-2023	1914	₹ 56,070.00	₹ 56,070.00
Mar-18	₹ 59,403.00	20-04-2018	16-06-2023	1883	₹ 55,162.00	₹ 55,162.00
Total =	₹ 5,34,627.00				₹ 5,28,152.00	₹ 5,28,152.00

Please note that interest has been levied up to the date of issue of the order. While making payment, interest for the intervening period between date of order and date of payment, shall also be worked out and paid along with the dues stated in the order.

Please also note that if you make the payment of tax, up to date interests and penalty @ 50% of the tax within 30 days of the communication of this order, then remaining amount of penalty stated in the order shall be deemed to be waived off and no further proceeding shall be launched to recover the same.

You are hereby directed to make the payment by 14/09/2023 failing which proceedings shall be initiated against you to recover the outstanding dues.

Sl No.	Act	Tax	Interest Penalty	As per section 74	Fee	Other	Total (R/o)
01	IGST	₹ 0.00	₹ 0.00	₹ 0.00	₹ 0.00	₹ 0.00	₹ 0.00
02	CGST	₹ 5,34,627.00	₹ 5,28,152.00	₹ 5,34,627.00	₹ 0.00	₹ 0.00	₹ 15,97,406.00
03	WBGST	₹ 5,34,627.00	₹ 5,28,152.00	₹ 5,34,627.00	₹ 0.00	₹ 0.00	₹ 15,97,406.00
04	Cess	₹ 0.00	₹ 0.00	₹ 0.00	₹ 0.00	₹ 0.00	₹ 0.00
Total =		₹ 10,69,254.00	₹ 10,56,304.00	₹ 10,69,254.00	₹ 0.00	₹ 0.00	₹ 31,94,812.00

Summary of the order in FORM-GST-DRC-07 is uploaded electronically vide Reference No ZD190623018422K, Dated 16-06-2023, as per the provisions of section 74 of the Central Goods And Service Tax, 2017/ West Bengal Goods And Service Tax Act, 2017, along-with a copy of this order.

For any query, you may call or mail the undersigned in his/ her contact details given below.

Office Address: Office of the Charge Officer, Designation:

DEPUTY COMMISSIONER OF REVENUE, STATE TAX

Raiganj Charge, E-mail ID : [email protected]

Super Market, 1st Floor, 4th Block, Mobile No. : 8697830312

Raiganj, Uttar Dinajpur, PIN Code : 733134.

[KASTURI SETHI]

"Several adjournments and notices calling information were sent to by the proper officer but neither you in person nor any authorized representative on your behalf appeared with books of accounts."

   Do you agree with the above  ? if so,  how many letters were sent to you  ? 

  How many opportunities for P.H. were accorded  ? 

 Did you reply to the above  ?

[Sadanand Bulbule]

Dear querist

The query with half truth will not get the best solution. Place the full truth whether you like it or not. Query should be genuine. Experts are investing precious time and energy to give the best free of cost. You have declined to reply to my response as regards to your failure to file an appeal within the stipulated time. Of course, it is your choice. Rest all is your domain.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, The querist has not only declined to submit the information asked for by you but also did not submit any information to the SGST Office. It shows that we are more keen than the querists. This is not only one instance earlier it has also happened.

(2) The querist has committed so many Himalayan blunders which are apparent on the face of the brief facts recorded in the Order-in-Original (DRC-07).

(3) High Courts admit writ petition only if there has been gross violation of principles of natural justice on the part of the Adjudicating Authority while passing the Order.

Just shared with you in the interest of all querists and visitors of TMI website.

[HimangshuKumar Ray]

To Bulbule Sir & Sethi Sir,

Sorry for Late reply as yesterday Bengali New Year Pujo,

1) The petitioner was very small dealer and his registration cancelled in Middle of 2020, Being very small businessman, now he has no business. He depended on a Tax consultant and being initial year 2017-18 of GST, Tax consultant missed the notices.

2) date of knowledge of order is March 2024 when the Department telephoned the petitioner to pay dues and in the mean time time for filing appeal missed. petitioner belongs from a small town.

3) As the order passed under section 74 in place of section 62 and department failed to follow the procedure laid down in law and this is also violation of principles of natural justice.

4)  PH date, time  venue mentioned in scn of section 74, as the scn uploaded in additional portion of the portal, petitioner missed.

5) one adjournment give, but same in portal, law says 75(5), three adjournment.

6) petitioner missed the  all notices, order, as in additional section of the portal.

7) Of course, petitioner also committed mistake, he ought to have check portal, submit reply. 

these are the true facts of this case.

with regards, 

[HimangshuKumar Ray]

To Bulbule Sir,

as date of knowledge of order is March 2024, time for filing of statutory appeal already lapsed and petitioner filed Writ Petition.

with regards,

[Alkesh Jani]

Shri

Please go through the case law given below and consult an expert before taking any decision.

to procced to adjudicate the case on ex parte basis, will it be violative of principles of natural justice? For this purpose, the following decision of various legal forum are given below:-

(a) Hon’ble High Court of Delhi in the case of SAKETH INDIA LIMITED Vs. UNION OF INDIA - 2002 (1) TMI 76 - HIGH COURT OF DELHI., has observed that:

“Natural justice - Ex parte order by DGFT - EXIM Policy - Proper opportunity given to appellant to reply to show cause notice issued by Addl. DGFT and to make oral submissions, if any, but opportunity not availed by appellant - Principles of natural justice not violated by Additional DGFT in passing ex parte order - Para 2.8(c) of Export-Import Policy 1992-97 - Section 5 of Foreign Trade (Development and Regulation) Act, 1992”.

(b) The Hon’ble CESTAT, Mumbai in the case of GOPINATH CHEM TECH. LTD Vs. COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-II - 2004 (4) TMI 664 - CESTAT MUMBAI, has observed that;

“Natural justice - Personal hearing fixed by lower authorities but not attended by appellant and reasons for not attending also not explained - Appellant cannot now demand another hearing - Principles of natural justice not violated. [para 5]”

(c) The Hon’ble Supreme court in the case ofF.N. ROY Versus COLLECTOR OF CUSTOMS, CALCUTTA AND OTHERS reported in 1957 (5) TMI 1 - SUPREME COURT., has observed as under:

“Natural justice — Opportunity of personal hearing not availed of—Effect — Confiscation order cannot be held mala fide if passed without hearing.

- If the petitioner was given an opportunity of being heard before the confiscation order but did not avail of, it was not open for him to contend subsequently that he was not given an opportunity of personal hearing before an order was passed. [para 28]”

A humble request please consult an expert near you.

Thanks

[Sadanand Bulbule]

Dear Sh.Sethi Sir

Your expression at Sl No.8 reminds me the old adage:

" Water should not be thirsty of fish". In reality, it is the other way around.

[KASTURI SETHI]

Sh.Ray Ji,

"He depended on a Tax consultant and being initial year 2017-18 of GST, Tax consultant missed the notices."

              Do you want to say that Common Portal System (GSTN) is the initial defaulter ? 

            and  Tax Consultant is the secondary  defaulter   ? If so, have you any documentary evidence to this effect ?

[KASTURI SETHI]

Sh. Sadanand Bulbule Ji,

Sir, This is with reference to your outpouring at serial no. 12 above. My response is as under :-

(i) The charm of the term, 'free' makes the whole difference. This is the way of the world. The alibi taken by the querist is not digestible.

(ii) Such facility is available only on TMI website in the interest of Trade and Industry.

(iii) Other websites allow such facility if the querist is a regular subscriber to their website.

(iv) Thus TMI is liberal in the larger interest of the society..

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

Thanks a lot for posting case laws. Our advice is too late as the writ petition has already been filed. However, there are case laws wherein  the relief was allowed to the party on the ground that the petitioner's consultant was at fault. I have read such case laws on TMI website itself.  

[KASTURI SETHI]

2015 (10) TMI 863 - PUNJAB AND HARYANA HIGH COURT - KAUSHAL CONSTRUCTION CO. Versus COMMISSIONER OF CENTRAL EXCISE

[Alkesh Jani]

Shri Kasturiji Sir,

I posted the case law with the reason that while filing reply or appeal we should also check what is there in our pocket and what is in the others pocket. 

Thanks,

With Due Regards.

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

You are absolutely right. I agree with your logic.

[Padmanathan KV]

Whether GSTR-3B was filed for 2017-18 period? if yes, on what dates?

AI Summary

Assessment Order Under Section 74 vs. 62 for Non-Filers Sparks Debate on Validity and Legal Compliance A discussion forum addressed an issue where an assessment order was passed under Section 74 of the CGST Act instead of Section 62 for non-filers of GST returns for the period 2017-2018. The order was issued ex-parte, and the registration was canceled in January 2020. The forum debated the validity of the assessment, citing non-compliance with a CBIC circular and potential violations of natural justice principles. The petitioner missed the deadline for filing an appeal and considered filing a writ petition challenging the order's jurisdiction and legality. Various contributors provided legal precedents and advice on addressing the situation.