Sec 74 – Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilfulmisstatement or suppression of facts

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Sec 74 – Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilfulmisstatement or suppression of facts 2017-04-14T11:19:24+00:00

GST India Forum – Goods and Services Tax (GST) in India Forums Bare Law Sec 74 – Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilfulmisstatement or suppression of facts

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  • Ashish BadalaCA Ashish Badala
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    (1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice.
    (2) The proper officer shall issue the notice under sub-section (1) at least six months prior to the time limit specified in sub-section (10) for issuance of order.
    (3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax.
    (4) The service of statement under sub-section (3) shall be deemed to be service of notice under sub-section (1) of section 73, subject to the condition that the grounds relied upon in the said statement, except the ground of fraud, or any wilful-misstatement or suppression of facts to evade tax, for periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice.
    (5) The person chargeable with tax may, before service of notice under sub-section (1), pay the amount of tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent. of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.
    (6) The proper officer, on receipt of such information, shall not serve any notice under sub-section (1), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.
    (7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable.
    (8) Where any person chargeable with tax under sub-section (1) pays the said tax along with interest payable under section 50 and a penalty equivalent to twenty-five per cent. of such tax within thirty days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded.
    (9) The proper officer shall, after considering the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order.
    (10) The proper officer shall issue the order under sub-section (9) within a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous refund.
    (11) Where any person served with an order issued under sub-section (9) pays the tax along with interest payable thereon under section 50 and a penalty equivalent to fifty per cent. of such tax within thirty days of communication of the order, all proceedings in respect of the said notice shall be deemed to be concluded.
    Explanation 1.-For the purposes of section 73 and this section,-
    (i) the expression “all proceedings in respect of the said notice” shall not include proceedings under section 132;

    (ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded.
    Explanation 2.–For the purposes of this Act, the expression “suppression” shall mean non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer.

    Priya MadrechaPriya Madrecha
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    Section 74.1 Analysis
    The section covers determination of tax in cases of fraud, or any kind of wilful mis-statement or suppression of facts to evade payment of tax.
    1.    Whenever the tax is
    •    not paid or
    •    short paid or
    •    credit wrongly availed or utilized or
    •    erroneously refunded
    On account of the following to evade tax,
    •    Fraud;
    •    Willful misstatement;
    •    Suppression of facts;      the proper officer shall issue a notice for such amount along with interest as per Section 50 and penalty which shall be equivalent to amount of tax specified in notice.
    2.    This section covers the time limit within which the proper officer shall issue the Notice and order for the determination/ recovery of tax payment defaulted by the taxable person. As per the table below, the time limit for issuance of Notice and Order is provided herewith:
    Particulars     Time limit for issuing show cause notice     Time limit for issuing order.
    Cases involving fraud, wilful mis-statement or suppression of facts to evade tax     At least 6 months prior to the time limit specified under sub-section (10) for issuance of order.      5 years from the due date of filing annual returns/5 years from the date of erroneous refund.
    3.    Where no notice is required to be issued: Similar to the provisions under 73 explained earlier, this section also provides that a statement of demand may be issued instead of a detailed notice for the period other than the ones covered in the notice issued as per Sec 74(1) on similar issue and shall be deemed to be a notice as per Section 74(1) on the condition that the grounds relied upon are same as the notice for previous period.
    4.    The proper officer shall not serve any notice on the assessee in case of voluntary payment of tax and interest along with penalty @ 15% of tax either
    •    As per the ascertainment of the notice or; •     As per the ascertainment of the proper officer;
    Assessee shall intimate the same to the proper officer.
    5.    In case there exists some shortfall between the amount paid by assessee on his own ascertainment and the actual amount liable to be , the Proper Office shall issue a notice for the tax that remains unpaid
    6.    Where the assessee makes the payment of tax and interest along with penalty @ 25 % of tax within 30 days of issuance of Notice / Statement, then in such case it shall be deemed that all the proceedings have been concluded.
    7.    After considering the representations of the person, the proper officer shall issue an order consisting the amount of tax, interest and penalty. The proper officer shall issue an order after considering the representation made by the person chargeable with tax and the amount determined shall comprise of tax along with interest and penalty as stated above
    8.    The proper officer shall pass an order within a period of 5 years from the due date for filing of Annual return for the year to which the short payment or non-payment or input tax credit wrongly availed or utilised relates date of erroneous refund
    9.    Where the assessee makes the payment of tax and interest along with penalty @ 50 % of tax within 30 days of communication of Order, then in such case it shall be deemed that all the proceedings have been concluded.
    10.    The term “suppression” is specifically explained to mean
    •    non-declaration of facts or information which a taxable person is statutorily required to declare in the return, statement, report or any other document furnished under the Act or the rules made thereunder, or
    •    failure to furnish any information on being asked for, in writing, by the proper
    officer
    Penalty implications, in summary:
    If tax, interest and penalty (as indicated below is paid), it is Provided that further proceedings should not be continued to that extent.
    Payment of Tax, Interest & Penalty     Amount of Penalty
    Before issuance of show cause notice      15% of the tax amount
    Within 30 days after the issuance of show cause notice      25% of the tax amount
    Within 30 days from the communication of order      50% of the tax amount
    In any other case      100% of the tax amount (equivalent to tax)

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