DOUBLE ADJUDICATION.IS IT ACCEPTABLE?

[Sadanand Bulbule]

Dear experts

You are aware that, the GST Act provides for adjudication under Section 73 and Section 74 on complete fulfilling the specified conditions thereunder. However in some situations the parameters of both these sections are apparently manifest for the same year for the same taxpayer. That being the case, is it acceptable to conclude double adjudication separately under these sections for the same year for the same taxpayer?

Alternatively, whether a single adjudication under Section 74 would be the right remedy with respective provisions as regards to levy prescribed amount of penalty for such unusual situation?

On practical note, many double adjudications are being concluded to take care of such situation.

I understand that to overcome such situation, a new unified Section 74Ais brought in place applicable from FY 2024-25 onwards.

I warmly welcome experts to offer comments.

[Amit Agrawal]

Dear Shri Sadanand Bulbule Ji,

I have not understood what do you mean by 'double adjudication'. Request you to elaborate.

Kindly also explain facts of the case to back your statement that 'However in some situations the parameters of both these sections are apparently manifest for the same year for the same taxpayer.'. This will help understand your query better and share our views thereon. 

[Sadanand Bulbule]

Dear Sir

"Double adjudication" means two independent adjudications, each one under Section 73 and also under Section 74 simultaneously for the same taxpayer for the same FY. In simple words, an adjudication under Section 73 for short payment of tax and the like and another under Section 74 for fraudulent evasion of tax and the like for the same year. Hope now the issue is more clear.

[Shilpi Jain]

Do you mean to say that 2 notices are issued for the same issue?

[Sadanand Bulbule]

Two notices are issued for the same year, each one under Section 73 & 74 followed by two orders each one under Section 73 and 74.

[Amit Agrawal]

There cannot be TWO orders (i.e. one u/s 73 & other u/s 74) on SAME ISSUE (i.e. for same sets of facts) for same tax-payer for same year, IMHO. Same adjudicating authority can NOT apply both Section 73 & 74 for same sets of fact for one taxpayer for same year. 

However, there can be TWO SCN/s (i.e. one u/s 73 & other u/s 74) & resultant different orders (i.e. one u/s 73 & other u/s 74) on DIFFERENT ISSUES (different sets of facts) for same tax-payer for same year, IMHO.

Kindly also explain facts of the case (i.e. issues involved) behind your statement that 'However in some situations the parameters of both these sections are apparently manifest for the same year for the same taxpayer.'. This will help understand your query better and share our views thereon. 

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

[Sadanand Bulbule]

Dear Sir

Facts of the case:

In some cases, both the ingredients of Section 73(Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts) and Section 74 (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts) have been detected by the Adjudicating Officer. And the facts are conceded by the taxpayer.

In such a scenario, what is the legal remedy bestowed on him, either to go for two separate notices/orders or else a single notice/order under Section 74 with a rider on penalty under Section 74[11] for fraudulent activities only would suffice for the same year?

Your sagacious suggestions are invited.

[Amit Agrawal]

Section 73(Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts) and Section 74 (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts) are TWO different factual positions (about underlying legal issue) involved.

Hence, both sections can NOT applied simultaneously for SAME sets of facts (about underlying legal issue) is involved. For SAME sets of facts (about underlying legal issue), Dept. cannot found that one is intentional (Section 74) and other is bona fide error (Section 73).

For example: If a tax-payer has supplied goods / services and NOT paid taxes, two different orders ((i.e. one u/s 73 & other u/s 74) cannot be issued for same sets of facts (about underlying legal issue) involved. However, if one case is for denial of ITC for contravention of Section 16(2)(c) (where underlying inward supply is not fake but genuine and entire mistake is on account of supplier not paying gst against supplies so made) and another case is taking ITC against 'fake tax-invoices' (i.e. against bonus / non-existence inward supply where tax-payer himself is involved in fraudulent ITC availment), then, there can be TWO SCN/s (i.e. one u/s 73 & other u/s 74) & resultant different orders (i.e. one u/s 73 & other u/s 74) on DIFFERENT ISSUES (different sets of facts) for same tax-payer for same year, IMHO.

Kindly also explain factual aspect of both cases (i.e. issues involved) behind your statement that 'However in some situations the parameters of both these sections are apparently manifest for the same year for the same taxpayer.' & NOT merely quoting Section 73 & 74. This will help understand your query better and share our views thereon.

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

[VENU K]

In my opinion two notices one under Sec 73 in case of issues where there is no fraud, wilful misstatement or suppression of facts to evade tax is established and another notice under Sec 74where such intentions are established is perfectly fine. In fact, I feel, that is the intention of these two sections and there is no express bar in issuing two SCN's at the same time. One under Sec 73 and another under Sec 74.

For example an issue relating to 2A vs 3B difference cannot be a part of a notice in a Sec 74 notice along with other issues that involve FWS. However the Department always takes a stand that if one issue in a notice rightly involves ingredients to issue notice under Sec 74 it gives them a license to club all non fraud cases also with such a notice. "Once a thief always a thief " attitude cannot be accepted in GST adjudication. Each issue in the notice should independently pass muster in the notice.

But if the question is as to whether two notices on the same issue can be given by the officer simultaneously, to be on a safe wicket, then, the answer is an emphatic NO.

Even in cases where invocation of two provisions are logically possible in an issue within a particular notice the officer has to ELECT the violation he wants to pursue. He cannot use both issues in a single notice. To take an example in a particular case it might be logically possible to

A. Demand reversal of input tax

B Demand tax on outward supply

Still, the Officer will need to elect what course of action he intends to take when issuing a notice. It is alright for him to issue another notice if the proceedings in the first notice were finally concluded without actual payment of taxes.

To make this more clear let us assume officer issued SCN demanding reversal of IPT and it is possible that he dropped such demand in adjudication. It is also possible that an Appellate Authority struck down such IPT reversal in Appeal. Then it is perfectly possible for the Proper Officer to issue another SCN demanding output tax provided the time period etc permits him to do so.

If a tax payer submits himself to illegal proceedings without objection he does it on his own peril. For example we routinely find issues like Late fee not paid, interest on late payment of taxes not discharged , 2A vs 3B etc in Sec 74 notices.

AI Summary

Debate on Double Adjudication Validity Under GST Act Sections 73 & 74 for Same Taxpayer and Year A forum discussion centered on whether double adjudication under Sections 73 and 74 of the GST Act is permissible for the same taxpayer and year. The original query questioned if separate adjudications under both sections are valid or if a single adjudication under Section 74 would suffice. Responses varied, with some experts arguing that both sections cannot be applied simultaneously for the same facts, while others suggested issuing separate notices for different issues. A new Section 74A, effective from FY 2024-25, aims to address such situations. The consensus emphasized the need for clarity on the specific facts and issues involved.