ADJUDICATION UNDER GST (PART-1)

[Dr. Sanjiv Agarwal]

Meaning of Adjudication

Adjudication is the process of deciding an issue relating to tax matters through departmental authorities empowered to determine issues relating to classification, valuation, refund claim, tax or duty payable etc. The department raises demands by way of Show Cause Notices (SCNs) to the assessees when irregularities are observed or suspected.

Adjudication pre-supposes issuance of a show cause notice (SCN) - an intimation to show cause, explain or defend the proposed action as mentioned in the SCN. Infact, SCN is the first limb of principle of natural justice i.e., no one should be condemned unheard. SCN should be clear, precise and unambiguous.

Adjudication’ has not been defined in the Act but according to www. wikipedia. org, “Adjudication is the legal process by which an arbiter or judge reviews evidence and argumentation including legal reasoning set forth by opposing parties or litigants to come to a decision which determines rights and obligation between the parties involved. Three types of dispute are resolved through adjudication:

• Disputes between private parties, such as individuals or corporations.
• Disputes between private parties and public officials.
• Disputes between public officials or public bodies.”

Adjudication proceedings in any assessment or penal proceedings is a very important aspect of tax administration. It provides an opportunity to the assessee to be heard and show cause before any action is taken in proceedings relating to him. Issue of show cause notice is a pre-condition to a proper adjudication which is an intimation to assessee of the proposed action by the department. The adjudicating officer adjudicates the show cause notice by considering the reply to show cause notice and other available or produced evidences by the noticee. A SCN should follow certain principles to be legally sustainable.

To adjudicate means to decide, determine or to settle. Literally, it means the act of adjudicating, the process of trying and determining a case judicially. The application of the law to the facts and an authoritative declaration of the result.

‘An adjudication in favour of natural rights’. A solemn or deliberate determination by the judicial power: the act of giving judgment.

Black’s Law Dictionary defines the term ‘adjudicate’ so as to mean ‘to settle in the exercise of judicial authority; to determine finally’.

Provisions of determination of tax not paid/short paid or erroneously refunded (section 73 and 74) at a glance

Relevant Sub- section	Particulars	Defaults made under section 73 (For reasons other than fraud etc.)	Defaults made under section 74 (For reasons of fraud etc.)
1	Issuance of show cause notice	For defaulted sum along with interest and penalty under Act	For defaulted sum along with interest and penalty equal to tax amount
2	Time limit for issue of Show cause notice	Atleast three months prior to time limit specified for issuance of order	Atleast six months prior to time limit specified for issuance of order
3	Issue of recurring show cause notice (follow-on SCN)	Issued by way of a statement	Issued by way of a statement
4	Status of statement issued on recurring SCN	Deemed to be a notice	Deemed to be a notice
5	Intimation by taxable person of deposit prior to issue of notice.	Deposit of tax and interest thereon	Deposit of tax, interest on such tax and penalty equal to 15% of tax amount
6	Proper officer not to issue SCN on receipt of information of deposit	On receipt of information under sub section 5	On receipt of information under sub section 5
7	Short receipt of tax under sub section (5) as per opinion of proper officer	Issue show cause notice for the sum short paid under sub section (1)	Issue show cause notice for the sum short paid under sub section (1)
8	Conclusion of proceedings within 30 days of issue of SCN	On deposit of sum of tax as per SCN along with interest on such tax	On deposit of sum of tax as per SCN, interest on such tax and penalty equal to 25% of such tax.
9	Considering representation and issue of order of SCN	Order for payment of tax + interest + penalty not more than 10% of tax or INR 10,000/- whichever is higher	Order for payment of tax + interest + penalty due from such person
10	Limitation period for issuance of an order	Within 3 Years from due date of annual return or actual date of submission of annual return, whichever is earlier	Within 5 years from due date of annual return or actual date of submission of annual return, whichever is earlier
11	Deemed conclusion of proceedings	-	On deposit of sum of tax as per order + interest thereon + penalty equal to 50% of such tax within 30 days of communication of order.

(To be continued ….)

Discussions to this article

[Biren Soren]

For FY 2017-18, if the actual date of filing the annual return is 31.12.2018, and extended due date for filing for Odisha is 07.02.2020, then, can a Show Cause Notice be issued under section 73 of CGST Act, 2017 after 31.09.2021.