Scruitiny of Returns

[VENU K]

Sec 73(1)

Where it appears to the proper officer...........

So when a notice is issued demanding tax for violation of say 16(4) straight away under Sec 73 is it possible to argue that

To Appear anything to officer an investigation or assessment is required. The department cannot straight away launch Demand and Recovery mechanisms.

In this case16(4) violation can APPEAR to Officer only after undertaking a scrutiny of returns. So ASMT 10 proceedings are mandatory before initiating Sec 73(1). The officer has to follow the due process and cannot skip the process.

[KASTURI SETHI]

Your view is correct. The issuance of SCN for recovery is the last resort. 

[Shilpi Jain]

There was a decision of one HC that ASMT 10 is not a pre-requisite in such cases.

[KASTURI SETHI]

Rule 99(1) of CGST Rules

"  ------------he shall issue a notice to the said person in FORM GST ASMT-10*, informing him of such discrepancy and seeking his explanation thereto within such time.

The word, 'shall' stands for mandatory and obligatory meaning and essence.

[KASTURI SETHI]

No proper officer has power to dilute this mandatory requirement. 

[Padmanathan KV]

I beg to disagree.

If on the face of the returns filed by the tax payer itself, the proper officer finds that the ITC is barred under section 16(4), why undertake a detailed scrutiny?

[Amit Agrawal]

I beg to agree with Shri Padmanatham Ji for his disagreement! 

If on the face of the returns filed by the tax payer itself, the proper officer feels that (i.e. appears to to the proper officer) the ITC is barred under section 16(4) (i.e. For example: Return for March, 22 showing ITC availed got filed in FY 2023-24), he can directly issue SCN u/s 73 without taking any scrutiny of returns etc.  

And, tax-payer is well within his rights to defend ITC so availed. But challenge to SCN itself, on the ground that Form ASMT-10 was not issued before issuance of SCN u/s 73, will not be legally sustainable IMHO.  

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[VENU K]

In my humble opinion the scheme of taxation in GST generally is to make an assessment of tax liability using provisions in Chapters XII,XIII or XIV and then go for a demand and recovery under Sec 73 or 74.

Chapter XII talks about  assessment which basically is a determination of tax liability using , self assessment, provisional assessment, scruitiny, assessment of non filers, assessment of unregistered persons , summary assessment etc  and Chapter XIII talks about Audits and Chapter XIV talks about Inspection, Search, seizure etc.Using any of the above procedures it might appear to the proper officer that taxes have been short paid .In such situation Sec 73 or 74 visualises Demand and Recovery. In my humble opinion determination of tax liability has to essentially happen through assessment or audit or enquiry to logically invoke provisions of 73 or 74. Otherwise how can a liability apppear to the officer?

In the above opinions of esteemed experts , I feel,  it was assumed that Scruitiny must essentially  involve some sophisticated procedures. Probably , like manufacture where it is essential to undertake certain process and something new having distinct charecter etc should emerge.

In my opinion even visually picking up  and glancing at my returns amount to scruitiny as it amounts to scruitinising of returns and related particulars submitted by the registered person.There is no need to complicate the word scruitiny by giving some artificial or mandatory processes being essential to amount something as scruitiny . Scruitiny can be a visual one by merely glancing at the data or  by using just pen and paper or  by using a calculater or by using excell or even by subjecting the particulars to sophisticated computer analysis. 

Further when in 2024 the officer unearths something that happened in financial year 2017-18 how can we say that it was not as a result of scruitiny  of returns ?

My whole point is,  some tax liability can appear to the officer only as a result of an underlying verification or enquiry. Please note that there is no independent power to demand and recover taxes found due as a result of scruitiny, audit or even search and seizure.The officer has to invoke 73 or 74 in all such cases.

[Amit Agrawal]

Dear Querist, 

First, kindly note that SCN u/s 73 denying ITC availed in FY 2017-18 cannot be issued in year 2024. 

For the underlying dispute with Dept. about potential breach of time-limit prescribed under Section 16(4) for availing ITC in FY 2017-18, one of  the recommendations of 53rd GST Council Meeting held on 22-06-2024, is worth noting and same is as follows:

"In respect of initial years of implementation of GST, i.e., financial years 2017-18, 2018-19, 2019-20 and 2020-21:

The GST Council recommended that the time limit to avail input tax credit in respect of any invoice or debit note under Section 16(4) of CGST Act, through any return in FORM GSTR 3B filed upto 30.11.2021 for the financial years 2017-18, 2018-19, 2019-20 and 2020-21, may be deemed to be 30.11.2021. For the same, requisite amendment in section 16(4) of CGST Act, retrospectively, w.e.f. 01.07.2017, has been recommended by the Council."

Attention is also invited to the Note from Press Release: The recommendations of the GST Council have been presented in this release containing major item of decisions in simple language for information of the stakeholders. The same would be given effect through the relevant circulars/ notifications/ law amendments which alone shall have the force of law.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Padmanathan KV]

Venu JI,

PLs consider this:

Section 2(11) defines “assessment” to mean determination of tax liability under this Actand includes self-assessment, re-assessment, provisional assessment, summary assessment and best judgment assessment;

As per section 2(11), determination of tax liability (such as under section 73 or 74 of the Act) in itself is an assessment. Further it also includes self-assessment, re-assessment provisional .... etc etc.

As long as the determination of tax liability under 73 or 74 (which is an assessment) confirms to principles of natural justice, I do not see possibility of disturbing the same through Courts.a

To put it differently, in this particular case, what prejudice has been caused to you by not issuing ASMT-10?

[VENU K]

Padmanathan Kollengode sir,

Thanks for your views.Just few observation on the matter.

If Sec 73 or 74 in itself are provisions that allow assessment in GST  I have no issues as far as that observation is concerned. 

But as far as the last point "what prejudice did it cause to you ?" I have a different opinion.

Assuming ASMT 10 is required such a question in my opinion is not relevent. Parliament in its wisdom has laid down a due process in respect of each action.Following this due process is a duty of the Officer and demanding that a due process be followed is a right and even more a responsibility of every  tax payer. If the proper officer were to invent a due process he would be legislating on his own.This cannot be allowed in a country where rule of law has been accepted  by the constitution. I think even courts are not allowed to permit such transgressions.Bonafide demands made by following  malafide means cannot be brushed aside by an Officer by asking what prejudice did it cause you. Not following the due process in itself is a prejudice in my humble opinion as it is an intergral part of rule of law.

"useless formality" theories have no place in judicial or quasi judicial proceedings and in the matter of principles of natural justice in my humble opinion.

[Padmanathan KV]

Pls consider M/S DEVI TRADERS VERSUS THE STATE OF ANDHRA PRADESH, REP. BY ITS PRINCIPAL SECRETARY TO GOVERNMENT, STATE TAX DEPARTMENT 2023 (6) TMI 1300 - ANDHRA PRADESH HIGH COURT

"Due process" has role only if Section 73/ 74 mandated initiation of scrutiny u/s. 61 etc.. as a pre-requisite for determination of tax liability. However, it is not case. Even in the absence of such pre-condition, the determination of tax liability must still be in conformity with Principles of Natural justice.

Hence, I am of the view that some prejudice caused to you in the assessment due to non-issuance of ASMT-10 must be show for the maintainability of writ jurisdiction against such SCN. 

[KASTURI SETHI]

Lack of  GST Form ASMT-10 vitiated SCN-----Madras High Court reported  as 2024 (7) TMI 1158 - MADRAS HIGH COURT. -MANDARINA APARTMENT OWNERS WELFARE ASSOCIATION (MAOWA) VERSUS COMMERCIAL TAX OFFICER/STATE TAX OFFICER

AI Summary

Debate on GST and Section 73(1) Notice Issuance Without Prior Scrutiny: Necessity of Compliance with Section 16(4) Discussed A discussion on the Goods and Services Tax (GST) focuses on whether a notice under Section 73(1) can be issued without prior scrutiny of returns, specifically regarding violations of Section 16(4). One participant argues that scrutiny is necessary before issuing a demand notice, while others contend that if a violation is apparent from the returns, a notice can be issued directly. The debate includes references to legal precedents and interpretations of GST rules, with differing opinions on whether procedural steps like issuing Form ASMT-10 are mandatory. The discussion also touches on the principles of natural justice and due process in tax assessments.