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.

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.