Invoke the extended period of limitation for the financial years 2017-18 and 2018-19, Goods and Services Tax - GST

[vinod jadhav]

Respected Sir,

I require your valuable opinion on the below-mentioned issue. One of my clients has executed a works contract for canal works, serving as a sub-sub-contractor for the F.Y 2017-18 and 2018-19.

Moreover, the department initiated an audit in June 2023, covering the period from April 2017. Below are the specific details of the works contract:

Below are the details of the works contract details;

1. He worked as a sub-sub-contractor within the project.
2. However, he incorrectly claimed a sub-contractor exemption, charging 5% instead of the required 18%.

My questions are:

1. Can the department invoke the extended period of limitation for the financial years 2017-18 and 2018-19, despite the audit commencing in June 2023, and no Show Cause Notice (SCN) being issued within the normal period, i.e., by December 31, 2023?
2. If a demand is raised for the F.Y 2017-18 and 2018-19 under section 74 of the GST Act, can we contest it since there was no suppression of facts? The sales details were already submitted in GSTR-1 to the department and were also provided to the audit party in June 2023.

Posts / Replies

[Amit Agrawal]

1. Can the department invoke the extended period of limitation for the financial years 2017-18 and 2018-19, despite the audit commencing in June 2023, and no Show Cause Notice (SCN) being issued within the normal period, i.e., by December 31, 2023?

Answer: Given facts in your query are too limited, for answering the query. if there is suppression of facts with intention to evade taxes etc., Section 74 can be rightly evoked by Dept.

2. If a demand is raised for the F.Y 2017-18 and 2018-19 under section 74 of the GST Act, can we contest it since there was no suppression of facts? The sales details were already submitted in GSTR-1 to the department and were also provided to the audit party in June 2023.

Answer: Disclosure of tax-liability at lower tax-rate in Form GSTR-1 and admitted short payment of taxes in Form GSTR-3B itself means that there was suppression of facts.

Only question remains is whether mistake was with intention to evade taxes or not (as intention to evade taxes or fraud etc. is essential criteria to sustain proceedings u/s 74 and burden is on the Dept. to prove such charge).

As your query does not through much right on this aspect. And one does not know if there was any decent reason / belief to pay taxes at lower rate etc. or 'tax-payer got no reasons what-so-ever to justify his conduct and same was deliberate / intentional action', view cannot be given about this question (i.e. was there any intention to evade taxes or not?).

P.S. Please also check what was actual tax-rate applicable from time to time on subject work as Notification No. 11/2017-Central Tax (Rate) was amended multiple times during July, 2017 to March, 2019 (For example: Notification No. 20/2017-Central Tax (Rate) dated 22nd August, 2017). And there is good chances that tax-payer's liability was lower from 18% though suggested in your query (say, 12%) during part (even if not for entire period) among the disputed period.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

Answer to Q. No.1 :For 17-18 SCN should have been issued before 30.9.23 . The date 31.12.23 is for issuance of order. For-18-19 SCN can be issued by 31.12.23 by invoking extended period.

Answer to Q.No.2 : Yes You can contest the invocation of extended period on the ground of filing GSTR-1 return. Still the date, 31.12.23 has not crossed.

[Amit Agrawal]

I respectfully disagree with Shri Kasturi Sethi Ji on both of his answers for following reasons:

A. Dates quoted by him (i.e. 30.09.2023 for FY 17-18 & 31.12.2023) are for initiation of proceedings u/s 73 and same are not relevant for initiation of proceedings u/s 74.

B. Disclosure of tax-liability at lower tax-rate in Form GSTR-1 and admitted short payment of taxes in Form GSTR-3B itself means that there was suppression of facts.

B1. Non-disclosure of correct tax-rate and not assessing & disclosing correct tax liability itself amounts to 'suppression of facts'.

B2. In this regard, attention is invited to Explanation 2 given under Section 74, which reads as follows:

"For the purposes of this Act, the expression “suppression” shall mean non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer."

B2. Section 39(1) reads as follows:

"39. (1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, and within such time, as may be prescribed ........................"

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

To add to my earlier posts, one should note relevant portions of Section 65 and same reads as under:

"Audit by tax authorities.

65. (1) The Commissioner or any officer authorised by him, by way of a general or a specific order, may undertake audit of any registered person for such period, at such frequency and in such manner as may be prescribed.

............................................

(7) Where the audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate action under section 73 or section 74."

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Please read Para A from my above post at serial No. 3 as follows:

A. Dates quoted by him (i.e. 30.09.2023 for FY 17-18 & 31.12.2023 for FY 18-19) are for initiation of proceedings u/s 73 and same are not relevant for initiation of proceedings u/s 74.

[Amit Agrawal]

And hence, most crucial aspect in given scenario, is to check if there was any intention to evade taxes or fraud etc. which allows Dept. to sustain proceedings u/s 74 IMHO. And my limitations to opine - in this regard - is explained in my post at Serial No. 1 above.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Sadanand Bulbule]

Dear querist

As far as the scope for invoking the provisions of Section 74, please refer the CBIC Instruction No. 05/2023-GST dated 13/12/2023 issued in pursuance of judgement dated 19/05/2022 of the Hon'ble Supreme Court rendered in the case of Northern Operating Systems Private Limited (NOS) - 2022 (5) TMI 967 - SUPREME COURT. This is self-explanatory.

[Padmanathan Kollengode]

I agree with views of Ld friend Amit Ji, since it is from a very practical stand point.

Is there anything available on records to prove that your client was under a bona fide belief that lower rate was applicable? It could be any opinion sought or correspondence made during FY 17-18 basis which your client has paid at lower rate of 5%/12% etc. These documentation may come in handy when defending your case on section 74.

[KASTURI SETHI]

Sh. Vinod Jadhav Ji,

If any contributor does not agree with me, I do not bother at all. I always express my original thoughts and am not clouted by any big name or legendary. or any case law.

I am not supposed to make understand any person about intricacies of laws.

I am not answerable to any expert/contributor/legendary.

I am answerable only to the management of TMI website.

I am here for the welfare of visitors of TMI Website who are, actually, in need of knowledge on GST/ST/Central Excise Laws.

There is no dearth of knowledgeable persons and I am for those who actually need my services with discipline.

I always post my replies after thorough examination of the issue and if I am in the wrong, I never hesitate to withdraw my reply. The concept must be clear to the querists. That is my goal.

I always stand for brevity.

Brevity is the spice of life.--A quote.

[Sadanand Bulbule]

Dear all

A true expert will always try to satisfy the querist and not the co-readers. If the co-readers do not agree with the reply, their graceful dignity and maturity lies in quitely swallowing it. And he is the genius expert. The co-readers have an opportunity to express their opinion in hundred beautiful ways without hurting the other authors. That is the real expertise. Even the judgements of Hon’ble Supreme Court are not infallible.

That being the factual truth, here no one is expert and perfect in taxation, much less in life. I don’t deny that the authors know the subject little better than the querist.

I admire the true professional sportive quality of Sh. Sethi Sir in expressing his hurtful sentiments. Human maturity lies in dignified silence when anything is not palatable. Hope this trend ends soon.

"If anyone waits for perfect replies, he will never get anything".

[Amit Agrawal]

In continuation & support of my earlier posts, attention is invited to NOTIFICATION NO. 09/2023 – CENTRAL TAX dated 31.03.2023 (in partial modification of earlier notifications as quoted therein).

As one can see, this notification deals with time-limit to issue SCN u/s 73(2)) and order u/s 73(10). And it has got nothing to do with the time-limit OR its extension to issue SCN u/s 74(2) and order u/s 74(10).

And I stand with everything I said in my earlier posts. I believe that both querist, co-contributors and readers deserves to understand the reasons behind me taking a particular view or me non-agreeing with a particular view. And whenever time permits, I will continue explaining them in an elaborate manner.

After-all, this is a 'Discussion Forum' and not merely a 'Question & Answer Forum'.

While I respect all those who sees things differently, but than does not mean that I have to agree with those views. And out of respect for everyone i.e. other contributors, querist/s and numerous visitor on this website, I will continue explaining my reasons for disagreement wherever time permits.

Hence, I intent to continue meaningfully contribute on TMI in a way which I feel will be relevant & rewarding (if not, at-least worth their time reading) for both querist/s and other readers of this forum.

Hence, most of the time, I ignore not-relevant posts (i.e. which does not deal with legal issues per se under discussion) and I will continue ignoring them that so as to ensure meaningful contributions on TMI.

After-all, there is nothing personal against anyone in my posts. And I do not see any reason to even defend myself in such matters.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, Your outpourings are a world for me. Rather, I should classify your outpourings as, "Being-in-the-world" for me.

[Padmanathan Kollengode]

Learned friend Amit Ji,

I am also in agreement with the views:

After-all, this is a 'Discussion Forum' and not merely a 'Question & Answer Forum'.

Whenever a reply is given to a query in this forum, it is pertinent for the contributor to give sufficient explanation as to why and how he has arrived at that reply. I find no meaning in posting one line answers or copy pasting case laws just for statistical purposes, as TMI recognizes "experts" only by number of posts and not be quality of posts.

Further I am unable to understand here why anyone's sentiments would be hurt by your respectful disagreement to views, that to on a legal issue in a discussion forum.

I strongly believe that a person can understand different views and fresh perspectives, and also grow himself professionally and academically through healthy debates and disagreements in various forums including TMI. At the end of the day, we also have a life lies outside TMI forum, and we are here to both contribute and take something meaningful from our discussions to our professional/ academic pursuits.

Your contributions has always been new learning for me and I am sure for many others like me.

[Amit Agrawal]

@ Shri Padmanathan Ji,

I agree with your perspective about "effective utility" of such 'public discussion forums' from point of view of Querists, other visitors / readers of TMI & contributors / professionals like you & me (i.e. who see effective utility of such forums in this way).

I am also glad to know that you always find my contributions on TMI forum as new learning for you. I am more glad to know that many others feel the same.

This makes "me spending so-many hours on this forum" to give elaborate replies backed with legal reasoning to the queries posted (as well as for giving elaborate reasoning if I disagree with any particular view) purposeful, mentally satisfying and emotionally rewarding.

Hence, as said before & subject to time limitations, I intent to continue meaningfully contributions on TMI to the best of my abilities in a way which I feel will be relevant & rewarding (if not, at-least worth their time reading) for the querist/s, professionals & contributors like you and regular visitors & readers of this forum.

[KALLESHAMURTHY MURTHY]

Dear Sir,

With due respect to all the discussions by the learned Experts, I have expressed my views on the query as I understand the case that the Sub-Sub-Contractor has paid taxes at a lower rate of 5% than the actual liability of 18%. This is only a short payment of tax and the differential tax may be payable along with interest at any subsequent period within the provisions of the relevant provisions and limitations. So, it is not a case of suppression and there is no case for invoking Sec. 74. Further, the Queriest stated that they have submitted details to Audit Pary. That means the audit in that case has been concluded u/s 65. The Authority who has concluded the audit may rectify any error which is apparent on the face of the record on its own motion within a period of six months from the date of issue of such order. as per sec. 161.

As per Sec. 108, the case can be taken up for Suo Moto Revision by the competent Authority under section 108 within 3 years subject to the provision of sub-section (2)(b).

This is only my view of the understanding of the case and the provisions of the GST Law and is not to be construed as statutory advice.