2023 (4) TMI 1062 - HC - GST

Validity of demand u/s 61 on the basis of GSTR return - Non-service of notice u/s 74 - department to point out deficiency in the returns (which was not done) - classification or short payment of tax - whether the department is enjoined to issue a notice under subsection 3 of Section 61 of Central Goods and Service Tax Act, 2017 once returns have been submitted by the assessee before initiating action under Section 74 of the Act or not? - HELD THAT - Section 61 regulates scrutiny of returns. In the process of scrutiny of such returns the proper officer has been vested the jurisdiction to examine the return and in case any discrepancies are notice therein the proper officer can intimate such discrepancy to the assessee with the object of conferring an opportunity upon the assessee to rectify such discrepancy. The discrepancy may be of different kinds. In the present case it does not appear that any discrepancy was noticed by the department in the returns of the petitioner nor any such deficiency was pointed out to the assessee for it to be rectified by it. The returns, therefore, remain intact. It is later at the stage of consideration of the return that the department has found that proper tax has not been deposited and consequently proceedings under Section 74 has been initiated and concluded against the petitioner. In the statutory scheme the course followed by the department would clearly be permissible in law - The argument that unless deficiency in return is pointed out to the assesee, and an opportunity is given to rectify such deficiency, that the department can proceed under Section 74 is not borne out from the statutory scheme and the argument in that regard therefore, must fail. The scrutiny proceedings of return as well as proceeding under Section 74 are two separate and distinct exigencies and issuance of notice under Section 61(3), therefore, cannot be construed as a condition precedent for initiation of action under Section 74 of the Act. Merely because no notices were issued under Section 61 of the Act would mean that issues of classification or short payment of tax cannot be dealt with under Section 74 as exercise of such power is not dependent upon issuance of notice under Section 61. The argument is misconceived is thus, repelled - the petitioner has a remedy of preferring appeal which has not been availed. Various facts are asserted during the course of hearing to highlight the incapacity of the petitioner due to which the appeal could not be filed earlier. Petitioner is permitted to prefer such appeal within two weeks from today and in the event such an appeal is filed, the same shall be entertained without raising any objection with regard to limitation. Petition dismissed.

Summary

Issues:
The main issue in this case is whether the department is required to issue a notice under subsection 3 of Section 61 of the Central Goods and Service Tax Act, 2017 after the assessee has submitted returns before taking action under Section 74 of the Act.

Details of the Judgment:
The petitioner, an assessee under the GST regime, had submitted returns for the assessment year 2017-18. The department initiated proceedings under Section 74 against the petitioner regarding the classification and tax payable of certain goods. The department found a shortfall in the tax previously paid and demanded the deposit of the shortfall along with interest and penalty.

The petitioner argued that since returns were submitted, the department should have pointed out any deficiencies in the returns before proceeding under Section 74. Section 61 of the Act allows the proper officer to scrutinize returns and inform the assessee of any discrepancies noticed. If no satisfactory explanation is provided, the officer can initiate appropriate action under various sections, including Section 74.

The court clarified that the scrutiny of returns under Section 61 and proceedings under Section 74 are separate. The department can proceed under Section 74 even if no notice is issued under Section 61(3). The court rejected the argument that the department must first point out deficiencies before initiating action under Section 74.

Regarding a judgment cited by the petitioner, the court noted that it did not restrict the exercise of jurisdiction under Section 74 based on a notice under Section 61(3). The court emphasized that the absence of notices under Section 61 does not prevent issues like classification or tax payment from being addressed under Section 74.

The court allowed the petitioner to file an appeal within two weeks, without objections on limitation, considering the circumstances preventing the earlier filing of the appeal. The petition was dismissed, subject to the permission to file an appeal within the specified timeframe.