Sec 75 – General provisions relating to determination of tax

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Sec 75 – General provisions relating to determination of tax 2017-04-14T11:20:52+00:00

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  • Ashish BadalaCA Ashish Badala
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    (1) Where the service of notice or issuance of order is stayed by an order of a court or Appellate Tribunal, the period of such stay shall be excluded in computing the period specified in sub-sections (2) and (10) of section 73 or sub-sections (2) and (10) of section 74, as the case may be.
    (2) Where any Appellate Authority or Appellate Tribunal or court concludes that the notice issued under sub-section (1) of section 74 is not sustainable for the reason that the charges of fraud or any wilful-misstatement or suppression of facts to evade tax has not been established against the person to whom the notice was issued, the proper officer shall determine the tax payable by such person, deeming as if the notice were issued under sub-section (1) of section 73.
    (3) Where any order is required to be issued in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court, such order shall be issued within two years from the date of communication of the said direction.
    (4) An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.
    (5) The proper officer shall, if sufficient cause is shown by the person chargeable with tax, grant time to the said person and adjourn the hearing for reasons to be recorded in writing:
    Provided that no such adjournment shall be granted for more than three times to a person during the proceedings.
    (6) The proper officer, in his order, shall set out the relevant facts and the basis of his decision.
    (7) The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice.
    (8) Where the Appellate Authority or Appellate Tribunal or court modifies the amount of tax determined by the proper officer, the amount of interest and penalty shall stand modified accordingly, taking into account the amount of tax so modified.
    (9) The interest on the tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability.
    (10) The adjudication proceedings shall be deemed to be concluded, if the order is not issued within three years as provided for in sub-section (10) of section 73 or within five years as provided for in sub-section (10) of section 74.
    (11) An issue on which the Appellate Authority or the Appellate Tribunal or the High Court has given its decision which is prejudicial to the interest of revenue in some other proceedings and an appeal to the Appellate Tribunal or the High Court or the Supreme Court against such decision of the Appellate Authority or the Appellate Tribunal or the High Court is pending, the period spent between the date of the decision of the Appellate Authority and that of the Appellate Tribunal or the date of decision of the Appellate Tribunal and that of the High Court or the date of the decision of the High Court and that of the Supreme Court shall be excluded in computing the period referred to in sub-section (10) of section 73 or sub-section (10) of section 74 where proceedings are initiated by way of issue of a show cause notice under the said sections.
    (12) Notwithstanding anything contained in section 73 or section 74, where any amount of self-assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79.
    (13) Where any penalty is imposed under section 73 or section 74, no penalty for the same act or omission shall be imposed on the same person under any other provision of this Act.

    Priya MadrechaPriya Madrecha
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    75.1 Analysis
    These provisions are general provisions for determination of tax and are applicable irrespective of whether the notice invokes the extended period or not
    1.    If an order of court or Appellate Tribunal stays the service of notice or issuance of order then, the period of such stay will get excluded  from the period of issuance of order i. e. 3 years or 5 years as the case may be.
    2.    When a notice has been issued considering the case to be for fraud or for willful representation or for suppression of facts, and whereas the charges of fraud, suppression and misstatement of facts were not sustainable or not established by an order of Appellate Authority or Appellate Tribunal, then in such case the officer shall determine the tax as if the notice is issued for the normal period of 3 years.
    3.    An order required to be issued in pursuance of the direction of the Tribunal or a Court shall be issued within two years from the date of communication of the said direction.
    4.    Opportunity of personal hearing has to be granted when requested for in writing by the person chargeable with tax or where any adverse decision is proposed to be taken against the person.
    5.    Personal hearing can be adjourned when sufficient cause is shown in writing. However, such adjournment can be granted for a maximum of 3 times.
    6.    The relevant facts and basis of the decision shall be set out in the order, which means a speaking order needs to be placed.
    7.    The amount of tax along with interest and penalty should not exceed the amount mentioned in the notice and the grounds shall not go beyond what is mentioned in the notice.
    8.    When the decision of Tribunal/ Court/ Appellate authority modifies the amount of tax, correspondingly interest and penalty shall also be modified to that extent by the proper officer..
    9.    Interest shall be payable in all cases whether specifically mentioned or not.
    10.    If the order is not issued within the time limits as prescribed in sub-section (10) of section 73 or (10) of section 74, i.e., 5 years in case of fraud, misstatement or suppression and 3 years in any other case, the adjudication proceedings shall be deemed to be concluded.
    11.    An issue on which
    • A first appellate authority or Tribunal or High Court has given its decision which is prejudicial to the interest of the revenue and an appeal to the Appellate Tribunal or High Court or Supreme Court against such decision is pending, then the period spent between the two dates of decision shall be excluded in computing the period of 3 years or 5 years respectively, for issue of order.
    12.    Any amount of self-assessed tax or intent payable, whether wholly or in part in accordance with a return furnished under section 39 shall be recovered under the provisions of section 79.
    13.    It is also Provided that when the penalty is imposed under Section 73 & 74 that no penalties shall be imposed under any other provisions of this Act for the same act or omission.
    75.2 Comparative Review
    These provisions of Section 73,74, and 75 are much broader than the provisions contained in existing Central Indirect Tax laws.
    Presently in Central Excise and Service Tax laws, the demand of tax can be made up to a maximum of 5 years. The normal period for which the notice could be issued is 2 years in Central Excise Law and 30 months in Service Tax Law. The VAT law seems to be quite different from the central excise and service tax provisions.
    However, the conditions for such extended period are the same as in the existing Indirect Tax Laws. The meanings of fraud, misstatement or suppression are still to be understood in the same way as in the present law i.e., deliberate intent to avoid tax requires to be established and sustained.
    Unlike the current law, the time limit of 3 years and 5 years under the GST law is for issue of orders and not for serving of show cause notice.
    75.3 Related Provisions
    Section     Description
    Section 50     Interest
    Section 21     Manner of recovery of credit distributed in excess
    Section 61     Scrutiny of records
    Section     Description
    Section 62     Assessment of non-filers of returns
    Section 83     Provisional attachment to protect revenue in certain cases
    75.4 FAQ’s
    Q1. Who has the power to issue a notice/ order?
    Ans. “Proper officer” as defined under Sec 2(91) of the Act.
    Q2. When can proceedings be initiated under Section 73/74/75? Ans. The proceedings can be initiated when there is
    •    Short payment of tax
    •    Nonpayment of tax
    •    Wrong input credit availed •     Wrong input credit utilized
    •    Erroneous refund
    Q3. Is notice for a period of 5 years valid even if charge of suppression, fraud and misstatement are not sustained?
    Ans. No, when the allegations of fraud, suppression or misstatement are not established, the notice issued under section 74 would get covered under section 73 and 3 years time would be applicable for issue of order.
    Q4. What is the condition for giving a repeat notice for a different period?
    Ans. The condition is that the grounds relied upon should be exactly the same thing as in the notice issued previously. In such cases, it is not essential to issue a detailed notice. It would suffice, if a statement giving the details of alleged amounts is issued.
    Q5. Whether there is any time limit to issue notice?
    Ans. The time limit to issue notice is at least 3 months/ 6 months (in case of extended period) prior to the last day to pass the order i.e. 3 years or 5 years as the case may be.
    Q6. Is interest applicable in all cases, even if not specifically mentioned?
    Yes, interest is applicable whenever the tax is payable whether or not it is specifically mentioned..
    Can the assessee pay tax after the issue of notice or/ and order? What is the benefit from such voluntary payments under different cases?
    Ans. Yes. The assessee is given the benefit to pay the tax before issue of notice/order as follows:
    In cases other than fraud, misstatement and suppression
    When the assessee pays the amount payable after the issue of notice but within 30 days from the issue of SCN      Tax+ interest to be paid in full and complete waiver of penalty
    In cases of fraud, misstatement and suppression
    When the assessee pays the amount payable after the issue of notice but within 30 days from the issue of SCN     Tax and+ interest to be paid in full+ along with penalty  @ 25% of tax
    When the assessee pays the amount payable after the issue of notice but within 30 days from the issue of order     Tax and interest to be paid in full along with penalty  @ 50% of tax
    75.5 MCQ
    1.    What is the time limit for issue of order in case of fraud, misstatement or suppression?
    (a)    30 months
    (b)    18 months
    (c)    5 years  (d) 3 years
    Ans.  (c) 5 years
    2.    What is the time limit for issue of order in case of other than fraud, misstatement or suppression?
    (a)    30 months
    (b)    18 months
    (c)    5 years  (d) 3 years
    Ans. (d) 3 years
    3.    The officer can issue the order under Sec 73 with a maximum demand up to?
    (a)    amount of tax + interest + penalty 10% of tax
    (b)    amount of tax + interest + penalty 10% of tax or ` 10,000/- whichever higher
    (c)    ` 10,000/-
    (d)    tax + interest+ 25% penalty
    Ans.  (b) amount of tax + interest + penalty 10% of tax or 10,000/- whichever higher
    4.    The maximum number of times the hearing can be adjourned?
    (a)    1
    (b)    3  (c) 5
    (d)     none
    Ans.  (b) 3

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