COTTON. WRONG PAYMENT OF TAX UNDER FCM.

[Sadanand Bulbule]

Dear experts

In terms of Notification No.43/2017-CTR dated 14/11/2017, a registered person is liable to pay tax under RMC on purchase of "Raw cotton from agriculturist" under Section 9[3] of the CGST Act.

However a taxpayer under the influence of misguidance, has paid tax under FCM on supply of such Raw cotton purchased from agriculturists and it is manifest in the books of account and financial statements.

But the Adjudicating Authority has again levied tax/interest/penalty by way of a consolidated order for five years under Section 74 on such purchase under RMC without considering the actual of payment of tax under FCM by the taxpayer.

Although there is procedural lapse, what are adverse revenue implications? And what is the remedy? An appeal under Section 107 or a rectification under Section 161?

Plz clarify.

[Sadanand Bulbule]

Plz read it as " RCM" instead of RMC.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, In my opinion, the department will not accept application for rectification of error under Section 161 of CGST Act.

The better option is filing of appeal under Section 107. The issue can be contested on the ground that tax cannot be charged twice for the same transaction. (Emphasis is laid on 'same transaction'. 

Recently about four months ago I have read judgement on this issue in favour of the taxpayer.            

[Sadanand Bulbule]

Yes Sir. But the taxpayer has to deposit 10% of the disputed tax amount to file appeal under Section 107, which is the burning issue.

[Sadanand Bulbule]

Sirji

The situation is like black ice.

[KASTURI SETHI]

Dear Sir,

No chance for acceptance of application for rectification of error. Time will be wasted. The real problem is that the Adjudication Authority will not accept that he/she has committed an error worth rectification. The error must be apparent on the face of record. 

This is such a case that the whole order (foundation) has to be changed and if it is done so, it will be out of the scope of, 'rectification'. In that situation, it will tantamount to review his own order. 

[Sadanand Bulbule]

True Sir. 

[Sadanand Bulbule]

Sirji

As rightly suggested by you, there is no point in rubbing shoulders with the authorities under Section 161 of the CGST Act, since there is full flow of intoxication of ego. Better to go for alternative option.

[Shilpi Jain]

Once tax is paid on a supply, it cannot be demanded on the ground that it was liable under RCM.

THere are many decisions in the earlier laws and hence stand should be taken that hte govt has receivd its share of revenue and that it is revenue neutral (should be depicted).

No further demand should lie in this regard.

AI Summary

Double taxation: tax paid under FCM cannot be re-demanded as RCM; appeal advisable despite deposit hurdle.
Taxpayer paid tax under the forward charge mechanism on raw cotton purchases though liability lay under the reverse charge mechanism; the adjudicating authority issued consolidated assessments under penalty provisions without crediting the FCM payments. Rectification is unlikely because the error is not apparent on the record; the advised remedy is to pursue the appeal procedure arguing against double taxation, though a deposit requirement to file the appeal poses a practical hurdle.