The recovery proceedings are the final steps towards the realisation of any tax or amount, which has been confirmed as payable after following the due process of adjudication by the proper officer. Therefore, if the tax dues and other amounts remain unpaid, despite these beneficial provisions, and the tax payer fails to pay the dues after the orders are passed and the statutory limit of 3 months is over, then the proper officer may initiate recovery proceedings. These recovery provisions under the CGST Act, 2017 lay down a well defined procedure which is as follows:
- Any amount payable, in pursuance to any order passed in this matter, is required to be paid within 3 months from the date of receipt of order and the tax payer should pay the same within this time limit. However, it may be mentioned that in certain cases, considering the interest of revenue, this period of 3 months may be reduced.
- If the payable amount is not paid within the specified time limit of 3 months then recovery proceedings shall be initiated and various actions may be taken by the recovery officer, for realisation of Government dues. The options for recovery of Government dues include deduction of money from any amount payable to such tax payer, by detaining and selling any goods, by directing any other person from whom the money is due to such person, attaching any property belonging to the defaulter etc.
- However, considering various business aspects, the provisions for payment of all such amounts, other than self-assessed tax, in instalments have also been made in the Act. A person can avail this benefit of payment in instalments, by making an application to the Commissioner by specifying reasons for such request. On receipt of application, the Commissioner may allow the payment of amount in instalments, subject to maximum 24 monthly instalments and on payment of applicable interest. Here it may be noted that if there is default in payment of any one instalment then the whole outstanding balance shall become due and payable immediately.
Section 78 of CGST Act, 2017 provides for provision in relation to initiations of recovery proceedings where demand has been confirmed.
Accordingly, the demand shall be payable by the taxable person within a period of 3 months from the date of service of the order. The proper officer shall initiate recovery proceedings if the tax demand is not paid within 3 months from the date of service of the order.
Recovery Proceedings in GST
- Recovery proceedings can be initiated by a proper officer u/s 78 of CGST Act, 2017
- As a general rule, any amount payable by taxable person shall be paid within a period of three months from the date of service of order.
- Amount payable shall only be in pursuance of order passed under GST law.
- Amount involved in recovery shall be any amount viz, tax, interest, penalty, fee etc.
- Such amount must be payable by a taxable person in pursuance of an order.
- Who should pay – taxable person.
- When to be paid – within 3 months of service of order of demand
- 3 months are to be counted from date of service of order, not from the date of order.
- No recovery of any amount can be made where matter is at the SCN stage only.
- There should be a confirmed demand to initiate recovery proceedings.
- What if not paid- recovery proceedings to be initiated.
- Proper officer for recovery is jurisdictional Deputy / Assistant Commissioner of Central Tax.
Early recovery proceedings
- Only in exceptional cases, early recovery can be initiated, where revenue is at a risk.
- Proper officer is empowered under section 78 of CGST Act, 2017 to initiate recovery of amount within a period of less than 3 months if:
- Proper officer considers it expedient to do so
- Such early recovery is in the interest of revenue
- He records reasons for early recovery in writing
- Such shorter period will be specified by way of order in writing
- Any order under section 78 can be issued only when the Proper Officer records reasons for doing so in writing.
- Section 78 order not being an adjudication order, does not provide for following the Principles of Natural Justice.
- If the amount so payable is not deposited within the stipulated time, recovery proceedings may be initiated by the proper officer under section 79 to 83 of the CGST Act, 2017.
- Remedy before taxable person is to prefer an appeal under section 107 of the CGST Act, 2017, as order u/s 78 is an appealable order.
- Appeal under section 107 can be filed within 90 days of the service of impugned order.
- However, CBIC has clarified vide Instruction No. 1/2024-GST dated 30.05.2024, that such proposal for recovery at shorter period of less than 3 months shall be examined by jurisdictional Principal Commissioner or Commissioner of Central tax and order / direction shall be issued after his satisfaction for the reasons to be recorded in writing.
- Such reasons should provide specific reasons to taxable person for early payment outlining the circumstances prompting such action for early recovery.
- Such reasons should be recorded and based on credible evidence.
Recovery of Tax
- After demand of tax and other amounts (interest, penalty, fees etc) are confirmed by way of adjudication, next step of recovery follows.
- The process of recovery shall commence against an adjudication order which is final, i.e. not a subject matter of any rectification, revsion or appeal.
- How a recovery of tax can be made, i.e., manner of recovery is stipulated in section 79 of CGST Act, 2017.
- Modes of recovery under section 79 would include one or more of the following:
- Deduction out of money owed to the defaulter
- Detaining and selling the goods belonging to defaulter
- Recovery from any other person who owes money to the defaulter
- Collection by detention of any movable or immovable property belonging to defaulter
- Recovery through district collector
- Recovery through magistrate
- Recovery through execution of bond or instrument.
(To be continued….)
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