2021 (11) TMI 865 - HC - GST

Initiation of recovery proceedings of tax - requirement of service of order of assessment - section 78 of FA - HELD THAT - Perusal of Notice (Annexure P-10) would show that in two of the notices i.e. Recovery No.34 of 2021 and 35 of 2021, order date is mentioned as 18.8.2021. Under Section 78 of the Act of 2017, the period of three months is provided for making payment of the tax assessed/ascertained by the Proper Officer but the letter/notice Annexure P-10 to third party under Section 79 (1) (c) of the Act of 2017 was issued on 1.10.2021 which is less than three months period from the date of the recovery order No.34 of 2021 and 35 of 2021. It is not disputed by learned counsel for the respondents that no specific reasons have been assigned for issuing notice under Section 79 (1) (c) of the Act of 2017 for initiating proceedings under Section 78 of the Act before lapse of three months period. Considering that no order was served upon the petitioner as required under Section 78 of the act of 2017, as an interim measure, it is directed that effect and operation of order /notice dated 01.10.2021 (Annexure P-10) shall remain stayed till the next date of hearing subject to petitioner depositing 50% of the total payable tax amount within a period of three weeks from today, adjusting amount which is already paid by the petitioner, pursuance to the notice. List this case in the week commencing 6th December 2021.

Summary

Issues:
1. Validity of recovery proceedings under the Central Goods and Services Tax Act, 2017.
2. Compliance with procedural requirements for initiation of recovery.
3. Service of notice and order of assessment to the petitioner.
4. Timeliness of recovery proceedings under Sections 78 and 79 of the Act.
5. Dispute regarding the payment of GST liability by the petitioner.

Analysis:
1. The petitioner challenges the validity of the recovery proceedings initiated under the Central Goods and Services Tax Act, 2017 (hereinafter referred to as "the Act of 2017"). The petitioner argues that the order in Annexure P-10 was issued without following the prescribed procedure under the Act of 2017. It is contended that the respondents failed to issue a notice as required under Section 73(1) of the Act of 2017 and did not serve the order of adjudication determining the GST liability to the petitioner. The petitioner asserts that for the initiation of recovery proceedings, a notice under Section 73(1) and an order of adjudication specifying the tax liability, interest, and penalty must be served, as per Section 78 of the Act of 2017.

2. The petitioner further argues that the respondents' actions were arbitrary as the recovery proceedings were initiated before the lapse of the three-month period specified under Section 78 of the Act. The petitioner highlights that the notice under Section 79(1)(c) for recovery from a third party was issued on 1.10.2021, which is less than three months from the date of the recovery order. The petitioner emphasizes that the Proper Officer must record reasons in writing if initiating proceedings before the prescribed period, which was not done in this case. Therefore, the petitioner asserts that the notice under Section 79(1)(c) (Annexure P-10) is not sustainable due to non-compliance with the Act of 2017.

3. The State, representing the respondents, counters the petitioner's arguments by stating that the Proper Officer had issued notices under Sections 61 and 73 of the Act of 2017, followed by proceedings under Section 78 for non-payment of the assessed tax. The State highlights that the petitioner's liability to pay GST was not disputed, as evidenced by the documents submitted with the writ petition. The State contends that the petitioner cannot dispute the recovery proceedings initiated against them.

4. The Court, after hearing arguments from both parties and examining the documents, notes discrepancies in the timelines of the recovery proceedings. It observes that the notice under Section 79(1)(c) was issued before the completion of the three-month period specified under Section 78 for payment of the assessed tax. The Court acknowledges the petitioner's partial payment of the taxable amount and, as an interim measure, stays the effect and operation of the order/notice dated 01.10.2021 (Annexure P-10) until the next hearing date, subject to the petitioner depositing 50% of the total payable tax amount within three weeks.

5. In conclusion, the Court directs the case to be listed for further proceedings in December 2021, considering the arguments presented and the need for compliance with the procedural requirements outlined in the Act of 2017 for the initiation of recovery proceedings in GST matters.