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TMI Blog2024 (7) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no reference to scrutiny under Section 61. Instead, data from the GSTR-01 and GSTR-3B returns are set out to indicate the mismatch. From the material on record, it is not possible to record a definitive conclusion that the petitioner's returns were selected for scrutiny under Section 61. In any event, nothing turns on the answer because such scrutiny was not the foundation for adjudication under Section 73. Both the show cause notice and the impugned order refer expressly to a scrutiny under Section 61 and to discrepancies being noticed. Thus, the two conditions necessary to trigger the obligation to issue the ASMT-10 notice were fulfilled in this case. As a consequence of not issuing the ASMT-10 notice, any conclusions drawn in course of scrutiny would stand vitiated and cannot be the basis for adjudication. In this case, the show cause notice specifies the outward supply value from the petitioner's GSTR-3B returns and the purchase value as reflected in the auto-populated GSTR-2A. Since the petitioner was provided an opportunity to show cause, it cannot be said that the adjudication was based only on the scrutiny under Section 61 or that the petitioner was prejudice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the following contentions: (i) The show cause notice discloses that proceedings were initiated against the petitioner on the basis of scrutiny of returns and the discrepancies noticed during such scrutiny. She contends that Section 61 of applicable GST enactments is attracted in relation to scrutiny of returns. She further submits that Section 61 should be read with Rule 99 of applicable GST Rules and that Rule 99 prescribes that a notice in Form GST ASMT-10 shall be issued to the registered person if discrepancies are noticed upon scrutiny of the returns of such person. By further submitting that the non-issuance of such notice vitiates the subsequent adjudication proceedings, she submits that the petitioner's failure to reply to the show cause notice does not stand in the way of the above contention. (ii) In respect of the identical discrepancy in the petitioner's returns for assessment period 2019-20, learned counsel submits that notice in Form ASMT-10 was issued. In this regard, she relied upon the judgment of this in Court in CIT v. Hi Tech Arai Ltd, [2014] 368 ITR 577 (Mad), particularly paragraph 11 thereof, wherein the rule of consistency was endorsed. (iii) By r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which imposed the requirement of a pre-show cause notice intimation in Form DRC-01A, was held to be mandatory, until such rule was subsequently amended, by recognizing the use of the mandatory word 'shall' in pre-amended Rule 142. For this proposition, she relied on the judgment of this Court in Shri Tyres v. State Tax Officer (Shri Tyres)[2021] 133 taxmann.com 319 (Madras). 5. Mr.Prakash made the following submissions: (i) By relying on the judgment of the Calcutta High Court in WPA.No.9391 of 2024, particularly paragraphs 1 and 6 thereof, learned counsel contended that the Calcutta High Court directed that the order under Section 73(9) be kept in abeyance until the notice in ASMT-10 was issued. (ii) His last contention was that prejudice is caused to the tax payer if notice in Form ASMT-10 is not issued because such tax payer loses the opportunity of remitting the tax dues and interest before issuance of show cause notice under Section 73, and thereby avoiding payment of penalty in terms of sub sections 5 and 6 of Section 73. 6. The above contentions were refuted by Mr.C.Harsha Raj on the following grounds: (i) He contended that GST statutes enable the proper officer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgments of the Hon'ble Supreme Court in Sathyanath Another v. Sarojamani, Civil Appeal No.3680 of 2022 and the judgment in Amardeep Singh v. Harveen Kaur, Civil Appeal No.11158 of 2017 , he contended that the Hon'ble Supreme Court held that procedural provisions are intended to be a handmaid of justice. On the facts of these cases, he contended that the adjudication was initiated by issuing a show cause notice. Consequently, he contended that the tax payer had the opportunity to contest the tax proposal. In effect, he submitted that the non-issuance of notice in Form ASMT-10 did not cause any prejudice to the respective petitioner. (v) His last contention was that any procedural defect in the assessment proceedings, which does not cause prejudice to the tax payer, would be saved by Section 160 of applicable GST statutes if such adjudication proceedings are in substance and effect in conformity with or according to the intents, purposes and requirements of applicable GST statutes. 7. By way of a brief rejoinder, Ms.G.Vardini Karthik, reiterated that her case falls squarely within sub-section 1 of Section 61 because there was a scrutiny of returns followed by the discovery of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest and any other amount payable in relation to such discrepancy .(emphasis added) (2) The registered person may accept the discrepancy mentioned in the notice issued under sub-rule (1), and pay the tax, interest and any other amount arising from such discrepancy and inform the same or furnish an explanation for the discrepancy in FORM GST ASMT-11 to the proper officer. (3) Where the explanation furnished by the registered person or the information submitted under sub-rule (2) is found to be acceptable, the proper officer shall inform him accordingly in FORM GST ASMT-12. Section 73 Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful- misstatement or suppression of facts. 73.(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason , other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proper officer shall , after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue an order. (emphasis added) (10) The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund. (11) Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax. 9. On examining the language of sub-section (1) of Section 61, it is noticeable that the permissive word 'may' is used. The use of the permissive word 'may' is indicative of and raises the presumption that the prescription is not mandatory. In order to determine conclusively whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sub-sections (1) to (3) make it clear that the purposes of such notice are to: enable the registered person to provide an explanation; discontinue action if the explanation is in order; or, either if the explanation is not satisfactory or corrective measures are not taken, initiate action under Sections 65, 66 or 66, or determine the tax or other dues under Sections 73 or 74. Because the notice requirement is intended to enable the registered person to explain or accept the discrepancy and pay tax and interest and thereby avoid a penalty [see Section 73(5)], I conclude that the ASMT-10 notice is mandatory if the two conditions set out above are satisfied. 12. This conclusion, in turn, raises two inter-related legal questions and one factual question. The legal questions are: what is the consequence of non-compliance? Does it vitiate the subsequent adjudication either under Sections 73 or 74? The factual question: whether the two conditions specified above were fulfilled in this case? I discuss the legal questions first. 13. Sub-section 3 of Section 61 prescribes that the proper officer may initiate appropriate action under Sections 65 or 66 or 67 or proceed to determine the tax an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No.15307 of 2024 refers to scrutiny of returns and the discovery of discrepancies. On examining the preceding show cause notice, there is no reference to scrutiny under Section 61. Instead, data from the GSTR-01 and GSTR-3B returns are set out to indicate the mismatch. In addition, details of supplies received from two suppliers are set out and the petitioner was called upon to show cause as to why the input tax credit claimed in respect thereof should not be disallowed under Section 17(5) of applicable GST statutes. From the material on record, it is not possible to record a definitive conclusion that the petitioner's returns were selected for scrutiny under Section 61. In any event, nothing turns on the answer because such scrutiny was not the foundation for adjudication under Section 73. 16. As regards W.P. No.15330 of 2024, both the show cause notice and the impugned order refer expressly to a scrutiny under Section 61 and to discrepancies being noticed. Thus, the two conditions necessary to trigger the obligation to issue the ASMT-10 notice were fulfilled in this case. As a consequence of not issuing the ASMT-10 notice, any conclusions drawn in course of scrutiny would s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as, in that case, notice in Form ASMT-10 was issued and such notice was replied to. Thereafter, the adjudication covered discrepancies not covered in the earlier ASMT-10 notice and learned AGP agreed to issue a notice in Form ASMT-10 before proceeding further. All that remains is to examine the merits of the adjudication. 18. Since the order of adjudication was issued ex parte, Ms.G.Vardini Karthik made the fall-back submission that the petitioner in W.P.No.15307 of 2024 agrees to remit 10% of the disputed tax demand as a condition for remand in case the Court is not persuaded to accept the contention that the issuance of notice in Form GST ASMT-10 is mandatory. On perusal of the order impugned in W.P.No.15307 of 2024, it is clear that the tax proposal was confirmed because the tax payer failed to reply. Since the petitioner asserted that such failure to participate was on account of not being aware of proceedings, the interest of justice warrants that an opportunity be provided to the petitioner to contest the tax demand on merits by putting the petitioner on terms. 19. As regards the petitioner in W.P.No.15330 of 2024, it was contended that the petitioner's reply was not t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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