DRC-3 against wrong notice and acknowledged by GST dept

[SUSHIL BANSAL]

Dear experts,

In one of our case client purchased goods in F.Y. 2018-19. Against this purchase (bogus) client received SCN u/s 74 for the FY 2017-18 and after 20 days again a SCN of the same amount & facts received for the FY 2018-19 also.

Against the SCN of FY 2017-18 the client deposited only tax through DRC-03 which department acknowledged too & dropped the notice. (No reply was filed by client)

We filed reply for FY 2018-19 SCN but department raised demand in DRC-07. (tax,Int,Penalty)

Now the problem is that the tax as deposited for FY 2017-18 was to be deposited for FY 2018-19 & the SCN of 2017-18 was to be pleaded for dropping as wrong one.

Whether we can take refund of tax as deposited for fy 2017-18.

Plz guide how to do that or any other recourse.

[KASTURI SETHI]

(i) What is the date of issue of the SCN for 17-18 and what is the date of deposit of tax  for 17-18  through DRC-03 ?

(ii) You have used the word, 'dropped'. It appears to me that the case was not dropped. What is the factual position. Has the demand been vacated without filing reply to the SCN and without personal hearing ? It is not digestible. 

(iii) If the demand has been actually vacated, the Noticee can file refund claim for 17-18.

(iv) You cannot intermingle both years. Both are separate Assessment Orders/Adjudication Orders.

[SUSHIL BANSAL]

Tysm sir for taking up my querry. For FY 17-18 SCN was dt 02.08.2024, dropped without filing reply on dt 28.08.2024. (it was dropped being issued for wrong year)

For FY 17-18 DRC 03 on dated 16.10.2024, DRC 04 28.11.2024. Now we have to take refund of this. practically the tax was to be deposited for FY 2018-19 but deposited for FY 2017-18.

[KASTURI SETHI]

You are eligible for refund for the year 17-18 without any hurdle.

[KALLESHAMURTHY MURTHY K.N.]

Dear Sir,

When the payment was made as per the Notice issued or order and produced DRC-03, which was acknowledged by the department, though not filed a separate written reply, the DRC-03 produced itself serves as reply. Hence, the authority has closed the issue. Closing the issue cannot be construed as "dropped". If it is dropped, then there will be no liability. If it was a wrong demand, the payment made has to get the refund of the same. 

In this regard, I agree with the learned Sri Kasturi Sethi Ji. 

[Yash Shah]

According to section 54(8)(e), a person can apply for refund of the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person.

In the present case, if DRC-03 has not adjusted toward any other demand then a refund application of DRC-03 of 2017-18 can be filed u/s 54(8)(e).

Alternatively, instead of claiming a refund of DRC-03 of 2017-18, it can be adjusted toward the demand of 2018-19 by form DRC-03A since Multiple Financial Year DRC-03 can be utilized against a Single Financial Year Demand id and vice-versa. (Assuming DRC-03 of 2017-18 has not adjusted toward any other demand)

[YAGAY andSUN]

To address the issue of refund and adjustment of the tax deposited for the FY 2017-18, you have a couple of options to explore based on the information you've provided. Here's a breakdown of the situation and the potential courses of action:

1. Refund Claim Under Section 54(8)(e)

Since the tax was deposited under the DRC-03 for FY 2017-18, but the SCN for FY 2017-18 was incorrect and was effectively dropped (as per your explanation), the tax paid for FY 2017-18 should be refunded.

• Refund Process: According to Section 54(8)(e), a refund can be claimed if the tax paid was not passed on to any other person. In this case, since the payment was made mistakenly for the wrong financial year, it can be eligible for a refund.
• Action: You can file a refund application under Section 54 of the CGST Act, 2017 for the tax deposited under DRC-03 for FY 2017-18. Make sure that the tax deposited has not been used to settle any other demand, and you can clearly explain that the deposit was made for the wrong year.

2. Adjustment of Tax Against FY 2018-19

If you don't wish to claim a refund of the tax paid for FY 2017-18, you can adjust the tax amount paid against the demand raised for FY 2018-19.

• Adjustment via DRC-03A: The DRC-03A form allows you to adjust the tax paid in one year (FY 2017-18 in this case) against the demand raised in another financial year (FY 2018-19). Since the DRC-03 amount has not been adjusted for any other demand, you can use DRC-03A to adjust the tax deposit for FY 2017-18 against the demand raised for FY 2018-19. This would effectively set off the excess tax paid for FY 2017-18 against the current demand for FY 2018-19.

3. Clarification on the Term "Dropped"

From the details provided, it appears that the issue was closed rather than dropped, as the tax paid under DRC-03 was acknowledged by the department. Since the SCN for FY 2017-18 was issued incorrectly and the tax deposit was made, the department may have considered the case closed. However, since there was no formal order or written reply filed by the client, the process might be considered to have been concluded informally. This does not mean that the case is "dropped" but rather that the issue was settled because the payment was made in response to the SCN.

4. Practical Recourse: Refund or Adjustment

• Refund Option: If you decide to pursue a refund, file the application under Section 54(8)(e), providing all necessary documentation that shows the tax was paid for the wrong financial year.
• Adjustment Option: If you prefer to adjust the paid amount against the FY 2018-19 demand, use the DRC-03A form for adjustment.

Steps to Follow:

• For Refund:
  • File a refund application under Section 54(8)(e), detailing that the tax was paid for FY 2017-18, and explain the circumstances under which it was paid.
  • Ensure that the tax has not been utilized for any other demand, as this is a critical condition under Section 54.
• For Adjustment:
  • File a DRC-03A form to adjust the payment made for FY 2017-18 against the demand raised for FY 2018-19.
  • Ensure the tax amount deposited under DRC-03 for FY 2017-18 is not already accounted for in another demand or year.

Conclusion

In summary, you can either:

• Claim a refund of the tax paid for FY 2017-18 under Section 54(8)(e) if it hasn't been used to settle another demand, or
• Adjust the tax paid against the demand raised for FY 2018-19 by filing the DRC-03A form.

Both options are feasible, and the choice depends on your client's preference to either seek a refund or resolve the issue through adjustment.

AI Summary

Taxpayer Seeks Relief for Mistaken Tax Deposit Across Two Fiscal Years Under GST Section 54(8)(e) A taxpayer received two show cause notices (SCN) for different fiscal years, mistakenly depositing tax for the incorrect year through DRC-03. The first SCN for 2017-18 was acknowledged and closed without formal reply. For the 2018-19 SCN, a demand was raised. The taxpayer seeks options to either claim a refund of the incorrectly deposited tax or adjust it against the current year's demand under Section 54(8)(e) of the GST Act.