SECTION 75 [2] V/s. SECTION 107[1]

[Sadanand Bulbule]

Dear experts

General provisions relating to determination of tax:

Section 75. (2) Where any Appellate Authority or Appellate Tribunal or court concludes that the notice issued under sub-section (1) of section 74 is not sustainable for the reason that the charges of fraud or any wilful-misstatement or suppression of facts to evade tax has not been established against the person to whom the notice was issued, the proper officer shall determine the tax payable by such person, deeming as if the notice were issued under sub-section (1) of section 73.

Appeals to Appellate Authority.

Section 107. (1) Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person.

Query:

1].When the above provisions are collectively read, what emerges is, the 'notice issued' under Section 74[1] can be deemed as issued under Section 73[1], if any Appellate Authority or Appellate Tribunal or Court so concludes in its wisdom on merits of the case.

2] Whereas under Section 107[1], any decision or order passed under the Act is appealable before the Appellate Authority or Appellate Tribunal or Court. The word 'notice' is not covered under Section 107[1].

3] The legal position being so, can the First Appellate Authority is empowered to entertain an appeal contesting the validity of notice issued under Section 74[1] when it is not covered under Section 107[1]? Is the 'decision' covers the word 'notice' also?

4] Are these provisions not contrary to each other? If so, then what is right time and situation to enforce the provisions of Section 75[2] by the authorities defined therein?

Kindly enlighten.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, My views are as under :

1]. When the above provisions are collectively read, what emerges is, the "notice issued" under Section 74[1] can be deemed as issued under Section 73[1], if any Appellate Authority or Appellate Tribunal or Court so concludes in its wisdom on merits of the case.

Anwer : YES

2] Whereas under Section 107[1], any decision or order passed under the Act is appealable before the Appellate Authority or Appellate Tribunal or Court. The word "notice" is not covered under Section 107[1].

Ans. The word, 'notice' is covered under Section 107 (1) inasmuch as SCN has become part of Adjudication Order. Both are integrally related, especially, after the Order-in-Original is passed. Any issue decided in the Order-in-Original is appealable. Even if any issue raised in the SCN but not decided in the O-I-O that is also appealable. Thus it is implied that the word. 'notice' is covered under Section 107 (1) of CGST Act.

3] The legal position being so, can the First Appellate Authority is empowered to entertain an appeal contesting the validity of notice issued under Section 74[1] when it is not covered under Section 107[1] ?

Ans. The word, 'notice' is covered as discussed above in para no.2

3.1 Is the "decision" covers the word "notice" also ? : YES

4] Are these provisions not contrary to each other? If so, then what is right time and situation to enforce the provisions of Section 75[2] by the authorities defined therein?

Ans. These provisions are not contrary to each other. If Section 74 (1) is invoked in the SCN, the burden of proof is cast upon the department. to establish the allegations fraud, suppression etc. levelled against the noticee/assessee/tax payer Thus in the event of non-discharge of burden of proof by the department, Section 75 (2) comes into play.

Sir, Looking forward for your response for enrichment of my knowledge, if you differ with me on any of the views expressed above.

[Sadanand Bulbule]

Dear Sir

My supplementary query is:

1] What are the implications of time prescribed under Section 73[10] to conclude the adjudication when it is so decided by the Appellate Authority?  Whether the time spent during the decision of the FAA or Tribunal or Court needs to be discounted as provided under Section 75[11] while computing the statutory time limit for adjudication under Section 73 [10]?

2] Secondly I understand that the advantage of Section 75(2) is pre-deposit of 10% or 20% of disputed tax amount, as the case may be, is not needed since there is no determination of tax yet.

 Thanks for your explanation and offer your further valuable comments.

AI Summary

Deeming of fraud notice converts a contested show cause notice into a general reassessment route for tax determination. If an appellate authority finds that fraud or wilful misstatement alleged in a show cause notice is not established, the proper officer must determine tax by deeming the notice to have been issued under the general reassessment provision. A show cause notice is treated as part of the adjudication order, so issues raised in the notice are appealable as part of the order. The deeming provision operates when the department fails to discharge the burden of proof, and this has implications for time limits and pre deposit treatment during appellate proceedings.