How to handle GST Notices for FY 2017-18
How to handle GST Notices for FY 2017-18
Practically How to
handle
GST Show Cause
Notice & Draft Reply for
FY 2017-18
1
National Litigation Policy
Pending cases
SC – 70k+
are very high
Dist. &
HC – 40L+ Subordinate
Court – 2.75Cr+
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2
Professional Advice from us.
National Litigation Policy
46%+ cases
Govt. biggest
are linked to
contributor
Govt.
State
Revised NLP?? Litigation
Policies
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Professional Advice from us.
National Litigation Policy – Stages of Litigation
Pre- Post
Litigation Litigation
Litigation
Emphasis on exploring alternative means of dispute resolution
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Professional Advice from us.
Stages of Litigation - IDT
Pre Notice
Consultation Appeal
SCN
The Calcutta High Court held that though the pre-show-cause notice
consultation to the Noticee is not mandatory but it does not wholly
exclude issuance of notice of pre-show-cause notice consultation,
which means at least it is directory and discretionary, which shall be
exercised by the authority in a judicious and reasonable manner, and
not in an arbitrary manner or without giving any reason for not
exercising his power of discretion.
Mal Munna Lal vs. State of UP
Calcutta High Court
(3) TMI 795 Dated 23-02-2022
• "Prima facie, perusal of Form GST DRC-01A under rule 142(LA) of the
Rules indicates that it is a pre-show cause notice intimation with reference
to Section 73(1)/(5) or Section 74(1)/(5) to an assessee so that either he
deposit the amount of tax and interest or he may disagree to the
ascertainment resulting in show cause notice under Section 73(1) or Section
74(1), as the case may be. Likewise, such an intimation in Form GST DRC-
01A provides an opportunity to the dealer to resolve the dispute by
depositing or in case of disagreement to face the adjudication proceedings
under the Act. Thus, prima facie, it appears that Section 74(1) read with
Rule 142(1A) intends to afford an opportunity to the dealer/ assessee on a
pre-show cause notice stage which shall ultimately benefit both, i.e., the
assessee and the department, and shall also reduce litigation. This also
indicates to follow the principles of natural justice at a pre-show cause
notice stage.
Nanhey Mal Munna Lal vs. State of Gujarat
Gujarat High Court
(4) TMI 823 Dated 02.01.2023
Further, the National Litigation Policy is yet to be finalised by the Government and there is no concrete
roadmap from the Department to check pendency of cases and increasing expenditure.
The National Litigation Policy was drafted in 2010 and the Department during the Demand for Grants
(2018-19) had submitted that it is under active consideration of the Government.
The Committee, accordingly recommends the Department to expedite the formulation of National
Litigation Policy.
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Professional Advice from us.
Few States Litigation Policy
Confusing
Frequent /
Pressure of clarifications &/or
Retrospective
‘Revenue targets’ judicial
amendments
pronouncements
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24
Professional Advice from us.
Why disputes are rising in GST?
Compounding
Prosecution Appeals
of offences
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Professional Advice from us.
Stages of Enforcing taxation statutes
Clear Indication on
Taxable Event Whom Levy
attracting the Levy imposed & who is
obliged to pay
Measure or Value
Rate of Tax to which rate will
be applied
• The Observations in Para 104 to 111 are few anomalies noted by the
Honourable Supreme Court and has observed that GST Council shall
consider them in accordance with the law.
• The formula creates a distinction between suppliers having a higher
component of input goods than those having a higher component of
input services, and must be read down accordingly, must be rejected.
The formula is not perfect. matter would be considered by the GST
Council and anomalies as pointed out by the Supreme Court would be
removed.
• The law permits rectification of errors and omissions only at the initial
stages of Forms GSTR1 and GSTR3, but in the specified manner.
• Airtel had contended that, due to non-operability of Form GSTR2A at
the relevant time (July to September 2017), it had been denied of
access to the Credit Ledger.
• SC held that...despite an express mechanism provided by Section
39(9) read with Rule 61, it was not open to the HC to proceed on the
assumption that the only remedy that can enable the assessee to
enjoy the benefit of the seamless utilisation of the input tax credit
was by way of rectification of its return submitted in Form GSTR3B for
the relevant period in which the error had occurred.
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Professional Advice from us.
Varun Beverages Ltd. – P&H HC
• Even if Executive Officer doesn’t agree with demand, he will raise SCN
CAG Para • Try to convince CAG that demand is not justified
Amount of ICGST (including Demand <= Rs. 20 Rs. 20 Lakhs < Demand <= Demand > Rs. 2
Cess) involved in a case Lakhs Rs. 2 Crore Crore
Amount of ICGST and CGST Demand <= Rs. 20 Rs. 20 Lakhs < Demand <= Demand > Rs. 2
(including Cess) involved in Lakhs Rs. 2 Crore Crore
a case
1 Due Date for GST Annual 31.12.2018 31.12.2019 31.12.2020 31.12.2021 31.12.2022
Return
2 Extended Due Date 05.02.2020 31.12.2020 31.03.2021 28.02.2022 -
1 Due Date for GST Annual 31.12.2018 31.12.2019 31.12.2020 31.12.2021 31.12.2022
Return
Additional or Joint Above Rs. 1 Crore Above Rs. 2 Crore Above Rs. 2 Crore
Commissioner
If the ITC conditions are satisfied, then the authorities should not disallow the credit to the
recipients merely because the transaction is not appearing in GSTR 2A.
The ITC could be availed based on the tax invoices issued by the supplier.
Press Release, Dated October 18, 2018 can be considered in this matter.
Hon’ble Gujarat High Court in the case of New Nalbandh Traders is also there.
*Additionally, the proper officer of the actual recipient shall intimate jurisdictional tax authority of
the registered person, whose GSTIN has been mentioned wrongly, to ensure that ITC on those
transactions shall be disallowed to such other person.
S. Scenario Clarification
No.
a. Where the supplier has failed to file In such cases, the difference in ITC claimed by
FORM GSTR-1 for a tax period but has the registered person in his return in FORM
filed the return in FORM GSTR-3B for GSTR-3B and that available in FORM GSTR-
said tax period, due to which the supplies 2A may be handled by following the procedure
made in the said tax period do not get provided in para 4 below.
reflected in FORM GSTR-2A of the
recipients.
Cancelled
Registration
Retrospectively
Cases of Vendor
104
Sanchita Kundu vs The Assistant Commissioner of State Tax, Bureau of
Investigation, South Bengal
W.P.A. 7231 of 2022 and W.P.A. 7232 of 2022
dated 05.05.2022 (Calcutta High Court)
• The Input Tax Credit (ITC) was denied of the Petitioner on purchase of the
goods in question from the suppliers and asking the petitioners to pay the
penalty and interest under the relevant provisions of GST Act, on the ground
that the registration of the suppliers in question has already been
cancelled with retrospective effect covering the transaction period in
question.
• The Petitioners - due diligence - verified the genuineness and identity of the
suppliers - the names of those suppliers as registered taxable person were
available at the Government portal showing their registrations as valid and
existing at the time of transactions - petitioners - limitation -ascertaining the
validity and genuineness of the suppliers - done whatever possible - were
already available with the Government record.
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Advice from us.
Sanchita Kundu vs The Assistant Commissioner of State Tax, Bureau of
Investigation, South Bengal
W.P.A. 7231 of 2022 and W.P.A. 7232 of 2022
dated 05.05.2022 (Calcutta High Court)
• Petitioners further submit that they have paid the amount of
purchases in question as well as tax on the same not in cash and all
transactions were through banks and petitioners are helpless if at
some point of time after the transactions were over, if the respondents
concerned finds on enquiries that the aforesaid suppliers (RTP) were
fake and bogus and on this basis petitioners could not be penalised
unless the department/respondents establish with concrete materials
that the transactions in question were the outcome of any collusion
between the petitioners/purchasers and the suppliers in question.
• Petitioners further submit that all the purchasers in question invoices-
wise were available on the GST portal in form GSTR-2A which are
matters of record.
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106
Advice from us.
Sanchita Kundu vs The Assistant Commissioner of State Tax, Bureau of
Investigation, South Bengal
W.P.A. 7231 of 2022 and W.P.A. 7232 of 2022
dated 05.05.2022 (Calcutta High Court)
• The Calcutta High Court bench of Justice Md. Nizamuddin has held that
the Input Tax Credit (ITC) cannot be denied on genuine transactions
with suppliers whose GST registration was cancelled after the
transaction.
112
Facts of the Case
• The respondent does not appear to have taken any recovery action
against the seller on the present transactions.
• When the seller has collected tax from the purchasing dealers, the
omission on the part of the seller to remit the tax in question must
have been viewed seriously and strict action ought to have been
initiated against the seller - in enquiry in question, the seller ought to
have been examined and this is all the more necessary, because the
respondent has alleged that the petitioners have not even received
the goods and had availed input tax credits on the strength of
generated invoices.
In my View:
As the Department is rejecting ITC claims due to Bogus or Fake ITC, it is
recommended to keep all necessary documentary evidence ready while
availing ITC. There should be monthly reconciliation of ITC with
documents so that if something is missing that can be collected timely.
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116
Advice from us.
8. Ineligible ITC availed in respect of invoices / debit
notes issued by the suppliers who have not filed
their GSTR-3B returns for the relevant tax period.
FORM GSTR-2A of the registered person contains the
details of “GSTR-3B filing status” of the supplier in
respect of each invoice / debit note received by the
registered person.
Where the said status is “No”, it indicates the supplier has
furnished invoice details in his FORM GSTR-1, but has
not furnished the return in FORM GSTR-3B for the
corresponding tax period.
119
Quest Merchandising India Pvt. Ltd. vs Govt. of NCT of Delhi
W.P. (C) 6093 of 2017
dated 26.10.2017 (Delhi High Court)
• The concerned provision (DVAT) to not include a buyer who has bona
fide entered into the purchase transactions with validly registered
dealers who have issued the tax invoices against the transaction.
• Law does not empower the tax authorities to reverse the ITC availed,
on a plea that the selling dealer has not deposited the tax. It can
revoke the input credit only if it relates to the incorrect, incomplete or
improper claim of such credit.
• Disallowance of ITC on the ground that selling dealer from whom the
petitioner had purchased the goods had not paid tax to the
Government.
• Input Tax Credit cannot be disallowed on the ground that the seller
has not paid tax to the Government, when the purchaser is able to
prove that the seller has collected tax and issued invoices to the
purchaser.
Issue Remark
• As a policy of financial year based • The interest under GST is required
return scrutiny what will be the to be calculated according to
date from which interest is to be return period taking into
calculated? consideration the due date for
making payment under GSTR- 3B of
the concerned return period.
• The liability on account of mis-
matches of the transaction covered
in the particular return period shall
be considered as the liability of
that return period for this purpose.
Issue Remark
• Whereas, while filing of GSTR-9 • “Any other ITC availed but not
(annual return) taxpayer had specified above” as well as ITC
reconciled the differences in claimed in subsequent financial
Table-8 of GSTR-9. year in Column 8C of GSTR-9
should also be considered for
reconciliation.
Amount of ICGST (including Demand <= Rs. 20 Rs. 20 Lakhs < Demand <= Demand > Rs. 2
Cess) involved in a case Lakhs Rs. 2 Crore Crore
Amount of ICGST and CGST Demand <= Rs. 20 Rs. 20 Lakhs < Demand <= Demand > Rs. 2
(including Cess) involved in Lakhs Rs. 2 Crore Crore
a case
3. Amount demanded in order must not exceed the amount mentioned in SCN
5. Officer issuing Order must be different from him who issued Audit Report.
7. Where the service of notice is stayed by an order of a Court or Appellate Tribunal, the
period of such stay shall be excluded.
9. The Interest shall create automatic charge whether or not specified in the order
determining the tax liability.
10. Direct recovery proceedings U/s 79 shall be initiated for any pending self-assessed tax
liability along with interest in accordance with the returns furnished either GSTR-1 or GSTR-3B.
In case of any discrepancy, he shall issue In case of any discrepancy, he shall issue a
a notice to the registered person in Form notice to the registered person in Form GST
GST ASMT-10, informing him of ASMT-10, informing him of the discrepancy
the discrepancy and seeking his and seeking his explanation thereto within
explanation thereto within such time, such time, not exceeding thirty days from the
not exceeding thirty days from the date date of service of the notice or such further
of service of the notice or such further period as may be permitted by him.
period as may be permitted by him.
-> The proper officer may call for -> The proper officer may use technology-
additional information or documents based tools to assist in the scrutiny process.
from the registered person.
-> The proper officer may issue a show- -> The proper officer may share information
cause notice to the registered person if with other officers of the GST department.
any discrepancy is found.
-> The registered person has the right to -> The proper officer may take any other
appeal against any action taken by the action that is necessary to ensure
proper officer compliance with the GST Act
Conclusion The instruction aims to ensure that GST The instruction aims to improve the
returns are properly scrutinized and that effectiveness of GST return scrutiny by using
any discrepancies are brought to light. a risk-based approach and data analytics.
Parallel Proceedings By Different Wings Of The Same Department For The Same
Period Not Permissible.
• Issue - Competent Authority passed assessment order against deceased assessee - One
of legal heirs of deceased assessee filed writ petition seeking relief in this regard
Whether assessment order passed against deceased assessee was a nullity in eye of law.
• Decision - Competent Authority were directed to take fresh action in said assessment
proceedings after ascertaining from Revenue Officials as to who all were legal
representatives or legal heirs of deceased assessee and then he would be at liberty to
render reasonable opportunity of being heard to such legal representatives and then
finalise assessment proceedings in manner known to law.
• Issue - Section 61 of the Central Goods and Services Tax Act, 2017/Section 61 of the
Tamil Nadu Goods and Services Tax Act, 2017 Assessment Scrutiny of returns Period
2017-18 to 2019-20 Competent Authority passed ex parte assessment order dated 7-2-
2020 on assessee
• Decision - Hon'ble court held that since in instant case impugned order of assessment
had been passed on 7-2-2020, whereas personal hearing had been on 3-12-2020, after
much latter impugned order of assessment made, there was total non-application of
mind on part of Competent Authority in passing impugned order of assessment dated 7-
2-2020, impugned order dated 7-2-2020 deserved to be set aside and matter was to be
remanded back to Competent Authority to pass fresh order after affording an
opportunity of hearing to assessee
• Issue – Assessee's case was that Superintendent of GST had already passed an order
which was against it and after that event Assessing Officer had passed an order against
which appeal filed by it was pending before Commissioner (Appeals) On other hand,
Single Judge of High Court on writ petition, relegated assessee to appear before
Assessing Officer and submit its application and Assessing Officer was directed to
forward such application to Nodal Officer, who in turn would forward it to concerned
Grievance Committee.
• Decision - Hon'ble Court stated that there was nothing to interfere with order of Single
Judge; as case of assessee was admittedly pending before Commissioner (Appeals),
assessee was to be relegated before Appellate Authority
• Issue – Scrutiny of returns - GST Authority passed assessment order on assessee and
imposed tax and penalty - Assessee filed writ petition stating that an order of
moratorium had already been passed against it by National Company Law Tribunal
under provisions of Insolvency and Bankruptcy Code, 2016 and GST Authority
without examining aspect as to whether order of moratorium also covered
proceeding pending before GST Authority had passed impugned order.
• Decision - matter was to be remanded back to GST Authority for a fresh
consideration by examining aspect as to whether order of moratorium also covered
proceeding pending before GST Authority under GST Act.
• Issue – Writ petition was filed to quash said notice - Petitioner agreed to pay remaining
tax amount from its new GSTIN as its partnership firm had been converted into private
limited company and requested that claim of input tax credit might not be rejected
based on different GSTIN by Kerala GST Authorities.
• Decision - Merits of notice were not decided as petitioner had agreed to pay remaining
tax amount - Petitioner could have been made claim for ITC at jurisdictional GST Office in
State of Kerala where headquarters of company was located - Such claim should not be
rejected on ground of change of GST registration number as a result of change in
composition of partnership firm into private limited company if petitioner was entitled to
input tax credit. Writ petitions was disposed.
• Issue - Competent Authority passed assessment order dated 8-11-2019 on assessee observing that at time
of inspection conducted by Inspecting Officials on 10-9-2019 and 16-9-2019 in assessee's business
premises assessee had deposed that it was not maintaining any books of account - Assessee filed writ
petition before High Court challenging impugned assessment order - It contended that to pre-assessment
notice dated 16-10-2019, it had sent a detailed reply on 18-10-2019 raising various objections and pleaded
that it was ready and willing to produce books of account and it had claimed only eligible input tax credit
under Form GSTR -3B filed by it with Competent Authority - Despite sending reply on 18-10-2019, same
had not been considered by Competent Authority under impugned assessment order.
• Decision - Hon'ble Court was of the opinion that Competent Authority had mechanically and blindly
accepted alleged statement given by assessee before Inspecting Officials without independently giving
reasons after duly considering objections raised by assessee wherein, it had categorically pleaded that it
was always ready and willing to furnish books of account to Competent Authority and Competent Authority
had also not duly considered in assessment order with regard to assessee's claim of input tax credit as per
Form GSTR-3B filed by it and no sufficient opportunity was granted to assessee impugned assessment
order passed by Competent Authority was arbitrary and was in violation of principles of natural justice -
Held, yes - Whether assessment order deserved to be quashed, matter was remanded to Competent
Authority for fresh consideration.
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157
Advice from us.
Vimal Yashwantgiri Goswami Vs. The State of Gujarat – Gujarat High Court
R/SPECIAL CIVIL APPLICATION NO- 13679 of 2019, Dated – 04 Nov 2020
• Issue - Whether for every authorized officer carrying out arrest, preparation of an arrest
memo is mandatory
• Decision - Hon'ble High Court was of the opnion that Arrest memo is a crucial component
of legal procedure of arrest and if Magistrate finds that arrest memo is absent or
improperly filled or bereft of necessary particulars, he should decline production of
arrested person and thus, arrest memo is a key safeguard against illegal arrest.
Held:-
The Hon’ble Calcutta High Court in W. P. A. 1629 of 2021, dated March 24, 2021
stayed the summons and proceedings thereunder and held that the summons
issued by the Respondent is, prima facie, in violation of Section 6(2)(b) of the
WBGST Act.
3. Amount demanded in order must not exceed the amount mentioned in SCN
5. Officer issuing Order must be different from him who issued SCN.
7. Where the service of notice is stayed by an order of a Court or Appellate Tribunal, the
period of such stay shall be excluded.
9. The Interest shall create automatic charge whether or not specified in the order
determining the tax liability.
10. Direct recovery proceedings U/s 79 shall be initiated for any pending self-assessed tax
liability along with interest in accordance with the returns furnished either GSTR-1 or GSTR-3B.
The Supreme Court observed that personal hearing enables the concerned
authority to watch the demeanour of the witness etc and also clear up his
doubts during the course of the arguments. – Automative Tyre Manufacturers
Asson. Vs Designated Authority, [ (2011) 263 ELT 481 (Supreme Court)]
it was held that primary purpose of show cause notice was only to put
the aggrieved party on notice of facts and necessary ingredients of
charge so as to enable him to effectively meet it.
it was held that demand under indirect taxes without issue of show
cause notice was to be considered as violation of statutory provision.
it was held that show cause notice is not sustainable, if partly invalid.
it was held that if show cause notice did not indicate the basis for
demand and there was no discussion prevailing thereto in adjudication
order, the demand was considered to be unsustainable.
it was held that grounds beyond scope of show cause notice are not
allowed. Hence, Department's appeal was rejected.
it was held that show cause notice is not valid in respect of an unit
which is not within the jurisdiction of Commissioner.
it was held that if show cause notice proposes classification under one
head, adjudicating authority cannot confirm demand under another
head.
it was held that show cause notice and order in revision cannot go
beyond the original show cause notice.
it was held that firm acts only through its partners there is no need to
issue show cause notice to every partner of the firm.
It was held that invalid show cause notice issued before any duty and
penalty is levied and issued under one enactment cannot be converted
into a notice under another enactment.
It was held that a letter from the department is not a proper SCN.
It was held that order cannot travel beyond the scope of SCN.
Where the sole proprietor of assessee firm was already dead as recorded
in order itself, it was held that once factum of death of sole proprietor
came to the knowledge of the Department, Department should drop
entire proceedings, as no demand can be confirmed against dead person
even if notice was issued before his death.
It was held that date of SCN would be the date on which it signed by the
issuing authority and not the date mentioned therein which was even
prior to issue of summon.
It was held that on the basis of same facts subsequent SCN could not
have been issued alleging suppression.
Where one show cause notice for earlier period was issued invoking
extended period of limitation, it was held that second show cause notice
on the same ground for later period cannot be issued by invoking
extended period of limitation.
Where two sets of show cause notices were issued in relation to same
search and seizure, assessees could not be directed to file two separate
settlement applications for said two notices.
It was held that gaps and deficiencies in the show cause notice cannot be
plugged by averments made and/or Jexplanations given in counter
affidavit. Failure to mention the amount of duty payable impregnates the
notice with a fatal weakness.
It was held that legal deficiency or infirmity in the show case notice
cannot be cured at an appellate stage.
Serving by GST
Serving by e-mail
Portal
Facility of grievance
• The CBIC has issued instructions for officers regarding recovery and
payment of tax during Search, Inspection & Investigation.
• If any complaint is received against any officer regarding use of force
or coercion for payment of tax then strict action will be taken after
enquiry.
• But what led CBIC to issue these instructions?
• Are these Instructions sufficient?
• A scheme of payment has also been set out for the tax remaining
unpaid, as follows: scheme of payment has also been set out for the
tax remaining unpaid, as follows:
• The petitioner has stated that it has no liability to tax, that the MD
and officials were forced to accept liability to tax and the admission
was, by no means, voluntary.
• The petitioner has also made serious allegations about the high
handedness of the authorities during the conduct of search and the
scant regard expressed for the sentiments of the family of the
Managing Director and employees of the petitioner.
• They state that the visit was on the eve of Deepavali and investigation
was carried out in an intrusive and acrimonious fashion.
• The company has taken a stand in the writ petition that during the course
of investigation, the DGGI officers have acted in a high handed and
arbitrary manner and that the officers locked the door and extended
threats of arrest to Directors of the Company.
• The Company (assessee) deposited a sum of Rs.15 Crores at about 4.00
a.m. on November 30, 2019 and a sum of Rs.12,51,44,157/- on
December 27, 2019.
• The company filed an application seeking refund on September 29, 2020.
• The assessee filed refund application before jurisdictional officer. When
the attempts of the company to seek refund did not yield any result, the
assessee filed writ petition.
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226
Advice from us.
Union of India vs Bundl* Technologies Pvt. Ltd [*Swiggy]
Karnataka High Court: WA No. 1274 & 4467 of 2021 (T-RES)
Order Dated: 3-Mar-2022
▪ Pahawa Chemicals (P) Ltd. vs. CCE – 2005 (181) ELT 339 (SC).
▪ Palak Designer Diamond Jewellery Vs. UOI – 2021 – TIOL – 424
– CESTAT - AHM
▪ Aeon Construction Products Ltd. vs. CCE – 2005 (184) ELT 120
(SC)
▪ Palak Designer Diamond Jewellery vs. UOI – 2019-TIOL-1756-
HC-AHM-CX
• Shri Nandhi Dhall Mills India Pvt. Ltd. vs. SIO -2021-TIOL-828-
HC-MAD-GST
• Dabur India Ltd. vs. State of UP – 2002-TIOL-2781-SC-CX-LB
• Vodafone Essar South India Ltd. vs. UOI -2009-TIOL-117-HC-
MUM-CUS.
• Cleartrip Pvt. Ltd. vs. UOI – 2016-TIOL-863-HC-MUM-ST
▪ Proper officer to issue the Order under sub-section (9) i.e. the
adjudication order within a period of 5 years from the due date for
furnishing of annual return for the financial year to which the
demand or erroneous refund relates.
SR.NO. Relevant F.Y. to Due date for Last date for Remarks
which the demand furnishing the AR issuance of the
relates in FORM GSTR- 9 show cause notice
as per S.74(2) r/w.
S.74(10)
1 Due Date for GST Annual 31.12.2018 31.12.2019 31.12.2020 31.12.2021 31.12.2022
Return
2 Extended Due Date 05.02.2020 31.12.2020 31.03.2021 28.02.2022 -
1 Due Date for GST Annual 31.12.2018 31.12.2019 31.12.2020 31.12.2021 31.12.2022
Return
▪ Fraud; or
▪ wilful misstatement of facts; or
▪ wilful suppression of facts exists
▪ Apex Electricals (P) Ltd. vs. UOI – 1992 (61) ELT 413 (Guj.)
▪ Explanation 2 to S.74.
▪ Biomax Life Sciences Ltd. vs. CCE – 2021 (375) ELT 263
(Tribunal)
•Peter & Millere Packers vs. CCE – 2008 (232) ELT 695 (Tribunal)
•D. Cawasji & Co. vs. State of Mysore – 1978 (2) ELT J154 (SC)
25
For Information purpose not to be considered as 5
Professional Advice from us.
Study and Analysis of the SCN
• Basis of SCN/Demand
▪ Scrutiny of Returns
▪ Audit
▪ Anti-evasion or Preventive action
▪ DGGI action
• Computation of demand
▪ Classification
▪ Valuation
▪ Exemption notification
▪ Rate of tax
▪ Cum-tax principle
• Cross-examination
▪ Need for cross-examination
▪ Can cross-examination be sought as a vested right?
▪ Persons whose cross-examination can be sought
▪ Admissibility of the statement in case the person does not appear for the
cross-examination
▪ Written submissions on conclusion of the cross-examination
▪ Refusal to grant cross-examination – Consequence and course of action
▪ Law relating to cross-examination.
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261
Professional Advice from us.
Checklist of Notice: Unregistered
Noticee Notice
Unregistered by Central or State/UT Administration
• Grounds of Defence
▪ Merits of the case
▪ Limitation
▪ Computation
▪ Challenge to the penal action and other action proposed
• Procedural requirements
▪ Payment of tax, etc. u/s. 73(5)/74(5) or in terms of other provisions - Form GST DRC-03
▪ Payment of tax, etc. u/s. 73(8)/74 (8) or S.129 (1) – Form GST DRC-03
• Procedural requirements
▪ Orient Paper Mills Ltd. vs. UOI – 1978 (2) ELT J345 (SC)
▪ Orient Paper Mills Ltd. vs. UOI – 1978 (2) ELT J382 (SC)
▪ CCE vs. National Tobacco Co. of India Ltd -1978 (2) ELT J 416 (SC)
▪ Bindal Sponge Ltd. vs. UOI – 2015 (122) ELT 657 (Tribunal)
▪ Afloat Textiles (P) Ltd. vs. CCE – 2007 (215) ELT 198 (Tri-Ahd.)
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272
Professional Advice from us.
Adjudication proceedings:
• Fair and reasonable hearing
▪ Havacrumb Rubber (P) Ltd. vs. Supdt. of C. Ex.-1983 (14) ELT 1685 (Kerala)
▪ Aluminium Corporation of India Ltd. vs. UOI - 1978 (2) ELT J 320 (SC)
• A few Do’s
• Show Cause Notice:
• Do make a note of the date of issue of the SCN
• Do make a note of the date of receipt of the SCN
• Do place acknowledgement of the receipt of the SCN by way of letter, etc.
• Do check that all RUDs are available with the SCN
• Do ask for the return of non-relied upon documents, if any
• Do ask for the free translation in in English of the statement/s, if recorded in a language other than
English.
On facts On law
Issue A YES/NO YES/NO YES/NO
Vital or Empowers PO
Only 2 sub-
Very Brief Indispensable to Summon
sections
Role Any Person
Seeking
To give
Personal
Evidence
attendance
To Produce a To record a
Document Statement
For Information purpose not to be considered as Professional Advice from us. 304
For Information purpose not to be considered as Professional Advice from us.
Supreme Court in
Amrit Foods
vs
Commissioner of Central Excise, U.P
305
Exact Contravention is needed
• Rule 173Q of the Central Excise Rules, 1944 - Penalty - Neither show
cause notice nor order of Commissioner specified which particular
clause of Rule allegedly contravened by appellant - Assessee to be
put on notice as to exact nature of contravention for which assessee
was liable under provisions of Rule - Tribunal order setting aside
penalty upheld - appeals disposed of (Para 5)
• Rule 173Q contains six clauses the contents of which are not same.
•First SCN
19/08/2020 •DEPTT. DROPPED
03/12/2020 •WRIT PETITION
5/04/2021 •ORISSA HIGH
FIRST SCN AND CANCELLED COURT ISSUED
•PETITIONER’S •DEPTT. CANCELLED •AA ORDER ISSUED
ISSUED FRESH SCN DIRECTED TO FILE ORDER IN FAVOUR
REPLY GST REGISTRATION IN FAVOUR OF
APPEAL TO AA OF PETITIONER
DEPTT.
• The said visits which were undertaken on July 01, 2019, a conclusion
was drawn that the transactions entered into by the Petitioner with
the selling dealer in April and August 2018 were fake transactions.
•First SCN
19/08/2020 •DEPTT. DROPPED
03/12/2020 •WRIT PETITION
5/04/2021 •ORISSA HIGH
FIRST SCN AND CANCELLED COURT ISSUED
•PETITIONER’S REPLY •DEPTT. CANCELLED •AA ORDER ISSUED
ISSUED FRESH SCN DIRECTED TO FILE ORDER IN FAVOUR
GST REGISTRATION IN FAVOUR OF
APPEAL TO AA OF PETITIONER
DEPTT.
IMPORTANT DATES
For Information purpose not to be considered as Professional
315
Advice from us.
For Information purpose not to be considered as Professional Advice from us.
• The time allowed to reply to SCN was seven days and SCN also
provided that the authorized representative of the petitioner will
appear for personal hearing.
For Information purpose not to be considered as Professional Advice from us. 330
Facts of the Case
• The appellant was granted registration under the provisions of the
VAT in 2013 and was migrated to GST in 2017.
• In 2018, a show cause notice was issued to the appellant by the
Deputy Commissioner of GST calling upon the appellant to show
cause as to why the registration should not be cancelled as it has
been obtained by means of fraud, wilful mistatement or suppression
of facts.
• The appellant did not avail the remedy granted and did not appear
before the authority and therefore, the registration was cancelled.
For Information purpose not to be considered as Professional Advice from us. 331
Facts of the Case
• Later the appellant had filed an application for revocation of the
cancellation of registration and the registration was restored.
• Thereafter, within a period of three days, another show cause notice
was issued on the same ground as the earlier show cause notice.
• The appellant submitted the reply. However, the registration was
cancelled expressing doubt on the documents produced by the
appellant to show that he was carrying on business in the premises,
which has been shown in the registration certificate.
For Information purpose not to be considered as Professional Advice from us. 332
Facts of the Case
• Against this cancellation Order the appellant filed an application for
revocation of the said order, which was also dismissed.
• Against this dismissal appellant filed an appeal before the Joint
Commissioner, which was dismissed.
• The appellant was granted registration under the provisions of the
West Bengal Value Added Tax Act, 2003 dated 27th August, 2013. The
appellant has been enjoying the benefit of such registration ever
since 2013. After coming into force of the WBGST Act, the licence
migrated under the new provisions. On 10th September, 2018 first
SCN was issued. Appellant approached the High Court.
For Information purpose not to be considered as Professional Advice from us. 333
Respondent’s (Department) Argument
• An inspection was conducted by the officers of the department, the
receptionist of the building affirmed that power of attorney agent of
the owner, used to come to the premises and carried on certain
business activities. Nevertheless, the said receptionist could not
recognise the owner, whose photograph appears to have been
shown to the said receptionist.
For Information purpose not to be considered as Professional Advice from us. 334
Calcutta High Court Held:
• In any event, the authority while cancelling the registration could not have solely
relied upon a statement made by the receptionist of the building and merely
because she could not recognise owner’s photograph, could not have been the
reason for cancellation. [Para 10]
• The proper course that should have been adopted is to issue a notice directing
the owner and his power of attorney agent to be personally present in the office
of the revenue and the landlord of the premises also should have been
summoned. If all the three parties are present, the correct facts will come to
light. Had this procedure been adopted, the truth would have been established
and a proper order could have been passed either way. [Para 10]
For Information purpose not to be considered as Professional Advice from us. 335
Calcutta High Court Held:
• Order of Joint Commissioner Set-aside and the matter is remanded back to the
first respondent for conducting a fresh enquiry.
• As a result of the same, the order dated 17th March, 2021 directing rejection of
application for revocation of cancellation is also set aside and the said application
is restored to the file of the first respondent for conducting fresh enquiry.
• The first respondent is directed to depute one of his officers to effect personal
service of the hearing notice on the landlord of the building to ensure that the
landlord is present on the said date (20-Jun-2022).
For Information purpose not to be considered as Professional Advice from us. 336
DRS WOOD PRODUCTS LUCKNOW VS STATE OF
U.P. 2022-VIL-550-ALH
• GST - Section 29 of the CGST Act – Rejection of application for revocation of cancellation
of registration - Cancellation of registration on the ground that on an investigation at the
principal place of business of the petitioner, no business activity was found nor any stock
of goods / employee was found - whether the action taken against the petitioner in
respect of cancellation satisfies the test of the requirement of Section 29 of the CGST
Act HELD - perusal of the show-cause notice clearly depicts the opaqueness of the
allegations levelled against the petitioner, which were only to the ground that ‘tax payer
found non-Functioning / non-existing at the principal place of business’ - The said SCN
did not propose to rely upon any report or any inquiry conducted to form the opinion
and on what basis was the allegation levelled that the tax payer was found non-
functioning as it does not indicate as to when the inspection was carried - A vague show-
cause notice without any allegation or proposed evidence against the petitioner is
violative of principles of administrative justice. Cancellation of registration is a serious
consequence affecting the fundamental rights of carrying business and in a casual
manner in which the show-cause notice has been issued clearly demonstrates the need
for the State to give the quasi-adjudicatory function to persons who have judicially
trained mind, which on the face of it absent in the present case
Your GSTR-1 Liability > GSTR-3B Liability + Difference > Tolerance Limit
Supplier has defaulted in discharging his tax liability as per Sec. 49(12)
• ITC has been used by supplier upto a specified limit but how Purchaser can control this?
Your Supplier has defaulted in payment of tax and such default is continued
for prescribed period.
• GSTR-3B filing status of supplier can be checked from GST Portal but Purchaser has no control
• Only GSTR-3B filing status of supplier can be checked from GST Portal but Purchaser has no
control on his GSTR Return and ITC Claim.
For Information purpose not to be considered as Professional
344
Advice from us.
New proposed Restrictions in ITC
Restrictions shall be placed wherein ITC reflecting in GSTR-2B cannot
be availed wholly or partly in following cases:
(c) subject to the provisions of section 41 or section 43A, the tax charged in
respect of such supply has been actually paid to the Government, either in cash
or through utilisation of input tax credit admissible in respect of the said supply;
348
Facts of the Case
• The respondent does not appear to have taken any recovery action
against the seller on the present transactions.
• When the seller has collected tax from the purchasing dealers, the
omission on the part of the seller to remit the tax in question must
have been viewed seriously and strict action ought to have been
initiated against the seller - in enquiry in question, the seller ought to
have been examined and this is all the more necessary, because the
respondent has alleged that the petitioners have not even received
the goods and had availed input tax credits on the strength of
generated invoices.
35
2
Supreme Court Judgment
Radhakrishna Industries
For Information purpose not to be considered as Professional Advice from us. 360
Thank You!!
For Information purpose not to be considered as Professional
361
Advice from us.