Liability Paid, Yet Recovery Being Initiated!, Goods and Services Tax - GST

[Narayan Pujar]

An order u/s 74 was passed against one of my clients by the CGST Department, imposing a 100% penalty. This was because, at the time of passing the order, the officer couldn’t confirm if the client would avail the relief under Section 74(11), which allows a 50% penalty reduction if payment is made within 30 days.

The client has since made the payment within the stipulated time and adjusted all liabilities using the DRC-03A functionality. However, the SGST Department, which handles recovery, is still demanding the remaining 50% penalty. They argue it’s recoverable solely because it appears in the E-Liability Ledger, which they claim they cannot update.

Despite discharging all liabilities as per law, the SGST officer is threatening bank attachment for the so-called "outstanding" penalty. The Central GST Officer is reluctant in rectifying order to 50% penalty as it does not fall within Section 161.

What could be a possible solution to resolve this situation?

Posts / Replies

[Sadanand Bulbule]

Dear

Make a suitable and factual written representation to the concerned Joint Commissioner and submit in person. Many a times officers work like machines without application of mind.

[KASTURI SETHI]

   (i) After deposit of tax along with interest and 25 % penalty within stipulated period, all the proceedings in respect of the said notice shall be deemed to be concluded as per Section 74 (11). The emphasis is laid on the words ,'shall'' and  'deemed'.

(ii) The word,' shall' signifies mandatory nature. and the word, 'deemed' means, ''considered' supposed'', construed'', thought'', taken to be'', presumed'', judged'', decided''.

(iv)  In this situation, the benefit of reduced penalty is mandatory  for the tax payer/noticee and inherent in Section 74(11) even without mentioning  the option for the benefit of reduced penalty''  in  the order portion of the Order-in-Original.

(v)  You can take shelter of the following judgement of Delhi High Court which is in favour of the assessee  on the same issue. 

2017 (48) S.T.R. 353 (Del.)

IN THE HIGH COURT OF DELHI

S. Ravindra Bhat and Najmi Waziri, JJ.

FUTURE LINK INDIA

Versus

COMMISSIONER OF CENTRAL EXCISE, DELHI-II

SERTA No. 31 of 2016 and C.M.A. No. 44560 of 2016, decided on 6-12-2016

Penalty - Quantum of - Option to pay demand with interest, within 30 days resulting in reduction of penalty to 25% - If such option is not given, it does not per se invalidate penalty under Section 78 of Finance Act, 1994 - On facts, as assessee had paid substantial amount during adjudication, they were entitled to limited relief under third proviso to Section 78 ibid and option envisaged there given to assessee. [para 10]

Demand - Limitation - Assessee registered itself with Service Tax authorities about 3 years before issuance of show cause notice - HELD : Assessee’s defence that they had no knowledge about inclusion of its business activity in statute is quite probable - It was moreso as there was no material pointing to deliberate their inaction - In that view, extended period was not invocable - Section 78 of Finance Act, 1994. [para 9]

Appeal allowed.

(vi) The department cannot demand the remaining amount of penalty now.

(vii) You must see the jurisdictional Commissioner in person. 

(viii) As per Section 74 (11) all proceedings stand concluded now because you have fulfilled the conditions as mentioned by you.

(ix)  Pl. note that Sections 132 and  122 are out of the scope of Section 74 (11) for the purpose of deemed conclusion.

[Shilpi Jain]

Portal law cannot override the Statute. This is enough to understand this situation. Any action initiated by the department officer stating it to be due to portal, can be challenged.

[KASTURI SETHI]

I have read one judgment to this effect as advised by Madam Shilpi Jain. One has to work hard to trace out the same.