2023 (7) TMI 1103 - HC - GST

Jurisdiction - power to issue a notice u/s 61(3), once returns have been submitted by the assessee before initiating action u/s 74 of the Act - HELD THAT - 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 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. The 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 the present petition 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 initiating action under Section 74 of the Act.

Details of Judgment:

Scrutiny of Returns under Section 61:
The petitioner, an assessee under the GST regime, had submitted returns for the assessment year 2018-19. The department initiated proceedings under Section 74 regarding the classification and tax payable of certain goods without pointing out any deficiencies in the returns submitted by the petitioner. The department passed an order demanding a deposit for the shortfall in tax payment, along with interest and penalty.

Proper Officer's Jurisdiction under Section 61:
Section 61 of the Act allows the proper officer to scrutinize returns, inform the assessee of any discrepancies noticed, and seek an explanation. If the explanation is acceptable, no further action is taken. If no satisfactory explanation is provided within the specified period, the officer may initiate appropriate action under various sections, including Section 74.

Separate Exigencies of Scrutiny and Section 74 Proceedings:
The scrutiny of returns and proceedings under Section 74 are distinct. The absence of a notice under Section 61(3) does not prevent the department from taking action under Section 74. The statutory scheme permits the department to proceed with Section 74 even without pointing out deficiencies in the returns.

Judicial Precedent and Remedy of Appeal:
A judgment cited by the petitioner does not restrict the department from exercising jurisdiction under Section 74 without issuing a notice under Section 61(3). The petitioner is granted permission to file an appeal within two weeks, and any such appeal will be entertained without objections regarding limitation.

Conclusion:
The petition is dismissed, emphasizing that the absence of notices under Section 61 does not preclude the department from addressing classification or tax payment issues under Section 74. The petitioner is given the opportunity to file an appeal within the specified timeframe.