Notice under Sec 63 of CGST Act, 2017

[HNA CharteredAccountants]

XYZ received notice on 13-01-2025 under Sec 63 for FY 2017-18. However, on the date of issueance of notice, XYZ is registered. Please share your views if the same can be done by the department ?

Further Sec 63 talks about issuance or order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates, in this case, what shall be the due date for FY 2017-18 for passing the order ?

[KASTURI SETHI]

Due date for passing the Order for 17-18 under Section 74 is 05.02.2025. The period is to be computed from the due date of GSTR-9. Due date for filing GSTR-9 for 17-18 was extended. The extended due date was 5 and 7 February, 2020.

See Instruction No. 2/2021-22/GST-Investigation, dated 22-9-2021 and Notification No. 6/20-CT dated 3.2.2020

[VENU K]

In my opinion the notice is without jurisdiction since registration ousts jurisdiction under Sec 63 due to the following reasons.

1.The section starts with a non obstante clause, meaning whenever the provisions of Sec 73 or 74 applies, the provisions of Sec 63 of the Act cannot be invoked.

2.Tax payers who have obtained registration cannot be directed to submit information and records pertaining to period prior to date of registration and initiate proceedings under Sec 63.

3.There is no authority in Sec 63 for the proper officer to secure tax payers involvement in investigation.

4.The section can be invoked only when such unregistered person has 'FAILED' to obtain registration. As such, once registration is obtained use of best judgment method permitted in case of unregistered persons cannot be applied against registered persons even for a period prior to date of registration.

5.If past failures (for the period prior to registration) are open to proper officer to act upon under Section 63, the provisions of Sec 63 will be retro active (taking steps prospectively of anterior facts)

The best option under such circumstances is to approach the High Court to quash the proceedings because the Section grants the power to the Officer to make a unilateral assessment as per his best judgment. Such judgment would  invariably result in a WORST JUDGMENT assessment.

There is no mention in the query as to the contents of the notice and as such replies are based on  pure reading of the section.

[Ganeshan Kalyani]

Sir, what is the issue raised in the Notice ? Is it regarding turnover exceeded but not obtained registration or regarding RCM payment. If we know the fact our reply will be according to it.

[KASTURI SETHI]

What is the best judgement ?

It is pertinent to go through the judgement of Hon'ble Supreme Court.

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.

[KASTURI SETHI]

The Best Assessment Judgement must be the best in real terms. Read carefully Allahabad High Court judgment 2020 (12) TMI 280 - ALLAHABAD HIGH COURT. In this context, all the relied upon case laws in this judgment are worth reading.

[CA Shyama B]

Ans Q1.

Assessment of Unregistered Taxable Persons under Section 63

This section empowers the Proper Officer to conduct a "best judgment assessment" against the following category of persons:

a. Taxable persons i.e., who failed to obtain registration despite being liable to do so under sec 22 or sec 24
b. Persons whose registration has been cancelled under Section 29(2) but liable to pay tax

Based on the available facts, the following conclusions can be drawn:

1. Liability to Register but Remains Unregistered:
   If the XYZ was liable to register under sec 22 or sec 24 but remained unregistered until voluntarily obtaining registration, proceedings under Section 63 are permissible for FY 2017-18.
2. Voluntary Registration
   If the individual voluntarily registered without any liability under sec 22 or sec 24 proceedings under Section 63 is not warranted for the prior periods.

Caveat - However, the Proper Officer may initiate a summary assessment under Section 64 if evidence of tax liability exists. Such action requires prior approval from the Additional Commissioner or Joint Commissioner and is aimed at safeguarding the interest of revenue.

Ans Q2.

Due date of annual return for FY 17-18 is 5^th /7^th  February 2020, hence the due date for issuing assessment order under sec 63 will be 5^th  /7^th February 2025

AI Summary

Forum Debates Jurisdiction of Section 63 CGST Notice to Registered Entity XYZ for 2017-18; Order Due February 2025. A discussion on a forum addresses a notice issued under Section 63 of the CGST Act, 2017, to a registered entity, XYZ, for the fiscal year 2017-18. Participants debate the jurisdiction and applicability of Section 63, emphasizing that it typically applies to unregistered entities. One view suggests the notice lacks jurisdiction, as the section cannot apply to registered entities for periods before registration. Another perspective highlights the due date for passing an order as February 2025, based on the extended due date for filing GSTR-9 for 2017-18. The discussion also touches on the concept of 'best judgment assessment' and its legal interpretations.