73.1.3 Time limit for issue of SCN = 3 months prior to time limit specified for issue of Order u/s 73(10)

Question-1 [ICSI-P-D20-2A(iii)-5]

A show cause notice (SCN) under section 73(1) of the CGST Act, 2017 is being proposed to be issued to Evergreen Farm Technologies Pvt. Ltd on 31.07.2023 on account of short payment of tax during the period between 1.7.2019 and 31.12.2019. Evergreen Farm Technologies Pvt. Ltd contends that the show cause notice so proposed to be issued on 31.07.2023 is time barred in law and is thus a bad notice. You are required to examine the technical veracity of the contention of Evergreen Farm Technologies Pvt. Ltd as per CGST Act, 2017.

Answer:

1. Statutory Provision

(a) Section 73(2) - PO shall issue the notice u/s 73(1) at least 3 months prior to the time limit specified in sub-section (10) for issuance of order

(b) Section 73(10) - The PO shall issue the order u/ss (9)  

within 3 years from the due date for furnishing of annual return for the FY to which the tax not paid or short paid or ITC wrongly availed or utilised relates to or

within 3 years from the date of erroneous refund.

(c) Section 44 - The annual return for FY needs to be filed by 31^st Dec of the next financial year

2. Facts

(d) Time limit for issue of order u/s 73(9)

Due date of annual return for FY 2019-20 = 31/12/2020

Time limit for issue of order u/s 73(9) = 3 years from due date = 31/12/2023

Time limit for issue of notice u/s 73(2) = 3 months prior to 31/12/2023 = 30/09/2023

3. Conclusion

Date of issue of SCN = 31/07/2023

Due date for issue of SCN for FY 2019-20 = 30/09/2023

Since in the given case, the notice has been issued on 31.07.2023 notice is not time barred and has been issued correctly.

The contention of Evergreen Farm Technologies Pvt. Ltd. is not valid in law.

Question-1A [ICSI-P-J19-3(a)-4]

Green & Green Private Limited has been issued a show cause notice (SCN) on 15th March, 2019 under section 73(1) of the CGST Act, 2017 on account of short payment of tax for the month of April, 2018.

Green & Green Private Limited contends that the show cause notice so issued is time-barred in law

You are required to examine the technical veracity of the contention of Green & Green Private Limited in the context of provisions of the CGST Act, 2017.

Answer

1. Statutory Provision

(a) Section 73(2) - PO shall issue the notice u/s 73(1) at least 3 months prior to the time limit specified in sub-section (10) for issuance of order

(b) Section 73(10) - The PO shall issue the order u/ss (9)  

within 3 years from the due date for furnishing of annual return for the FY to which the tax not paid or short paid or ITC wrongly availed or utilised relates to or

within 3 years from the date of erroneous refund.

(c) Section 44 - The annual return for FY needs to be filed by 31^st Dec of the next financial year

2. Facts

(d) Time limit for issue of order u/s 73(9)

Due date of annual return for FY 2018-19 = 31/12/2019

Time limit for issue of order u/s 73(9) = 3 years from due date = 31/12/2022

Time limit for issue of notice u/s 73(2) = 3 months prior to 31/12/2022 = 30/09/2022

3. Conclusion

Date of issue of SCN = 15/03/2019

Due date for issue of SCN for FY 2018-19 = 30/09/2022

Since in the given case, the notice has been issued on 15/03/2019 notice is not time barred and has been issued correctly.

The contention of Green & Green Private Limited that the SCN is time barred is wrong.

73.6 No waiver of penalty in case of non-payment of self assessed tax/tax collected within 30 days from due date

Question-1 [ICAI-F-N20-5b-4] [Late furnishing of GSTR-3B]

Mr. Jagjeevan has filed Form GSTR 3B after the due date prescribed for filing it. The adjudicating authority is of the opinion that penalty has to be levied under section 73(9) & (11) of the CGST Act, 2017 and has decided to pass an order for levying penalty of 10% of the tax or Rs.10,000, whichever is higher, on the grounds that amount collected as tax has not been paid within a period of 30 days from the due date of payment of tax. Discuss the decision of the adjudication authority as to its correctness or otherwise.

Also, discuss the law of limitation period for issuing the show cause notice and passing the adjudication order under section 73 of the CGST Act, 2017.

Answer

(a)

1. Statutory Provision

(a) As per section 73(11), where self-assessed tax /tax collected is not paid within 30 days from due date of payment of such tax, penalty equivalent to

10% of tax or

Rs.10,000,

whichever is higher, is payable.

(b) Clarification on invoking of section 73(11) on late furnishing of GSTR-3B - Circular No. 76/50/2018-GST dated 31.12.2018

The provisions of section 73(11) of the CGST Act, 2017 can be invoked only when the provisions of section 73 are invoked and the provisions of section 73 are generally not invoked in case of delayed filing of the return in Form GSTR‐3B because tax along with applicable interest has already been paid.

Thus, penalty under the provisions of section 73(11) is not payable in such cases although a general penalty may be imposed since the tax has been paid late in contravention of the provisions of the CGST Act, as clarified vide Circular No. 76/50/2018 GST dated 31.12.2018.

The decision of the adjudicating authority is not correct in law.

(b) Time limit for issue of SCN u/s 73(2) and passing of order

1. Statutory Provision

(a) Section 73(2) - PO shall issue the notice u/s 73(1) at least 3 months prior to the time limit specified in sub-section (10) for issuance of order

(b) Section 73(10) - The PO shall issue the order u/ss (9)  

within 3 years from the due date for furnishing of annual return for the FY to which the tax not paid or short paid or ITC wrongly availed or utilised relates to or

within 3 years from the date of erroneous refund.

Question-2 [ICAI-F-M18-O-5a-4] [Tax paid after 30 days]

(a) (i) Checker not has self-assessed tax liability under IGST Act, 2017, as Rs.80,000. He fails to pay the tax within 30 days from the due date of payment of such tax.

Determine the interest and penalty payable by him explaining the provisions of law, with the following particulars available from his records:

Date of collection of tax   18^th December, 2017

Date of payment of tax    26^th February, 2018

No Show Cause Notice (SCN) has been issued to him so far, while he intends to discharge his liability, even before it is issued to him, on the assumption that no penalty is leviable on him as payment is made before issue of SCN.

Ans

(a) (i) Due date for payment of tax collected on 18.12.2017 is 20.01.2018. However, since tax is actually paid on 26.02.2018, interest @ 18% p.a. is payable for the period for which the tax remains unpaid [37 days]in terms of section 50 of CGST Act, 2017 read with Notification No. 13/2017 CT dated 28.06.2017. Amount of interest is:

= Rs.80,000 × 18% × 37/365 = Rs.1,460 (rounded off)

(b) Clarification on invoking of section 73(11) on late furnishing of GSTR-3B - Circular No. 76/50/2018-GST dated 31.12.2018

The provisions of section 73(11) of the CGST Act, 2017 can be invoked only when the provisions of section 73 are invoked and the provisions of section 73 are generally not invoked in case of delayed filing of the return in Form GSTR‐3B because tax along with applicable interest has already been paid.

Thus, penalty under the provisions of section 73(11) is not payable in such cases although a general penalty may be imposed since the tax has been paid late in contravention of the provisions of the CGST Act, as clarified vide Circular No. 76/50/2018 GST dated 31.12.2018.

Old answer As per Suggested

As per section 73(11) of CGST Act, 2017, where self-assessed tax/any amount collected as tax is not paid within 30 days from due date of payment of tax, then, inter alia, option to pay such tax before issuance of SCN to avoid penalty, is not available. Consequently, penalty equivalent to

(i) 10% of tax, viz., Rs.8,000 or

(ii) Rs.10,000,

whichever is higher,

is payable in terms of section 73(9) of CGST Act, 2017. Therefore, penalty of Rs.10,000 will have to be paid by Checker not.

Question-3 [ICAI-F-N18-5b-5] [ICAI-F-Ch19-8] [Tax not paid]

Mr. Anant Kumar Gupta self-assessed his tax liability as Rs.90,000 for the month of April 2018 but failed to make the payment.

Subsequently the Department initiated penal proceedings against Mr. Anant Kumar Gupta for recovery of penalty under section 73 of CGST Act, 2017 for failure to pay GST and issued show cause notice on 10-08-2018 which was received by Mr. Anant Kumar Gupta on 14-08-2018.

Mr. Anant Kumar Gupta deposited the tax along with interest on 25/08/2018 and informed the department on the same day.

Department is contending that he is liable to pay a penalty of Rs.45,000 (i.e. 50% of 90000).

Examine the correctness of the stand taken by the Department with reference to the provisions of the CGST Act, 2017, explain the relevant provisions in brief.                                      [M-5]

Answer

1. Statutory Provision

(a) As per section 73, where self-assessed tax /tax collected is not paid within 30 days from due date of payment of such tax, penalty equivalent to

10% of tax or

Rs.10,000,

whichever is higher, is payable.

2. Conclusion

Thus, option to pay tax within 30 days of issuance of SCN to avoid penalty, is not available in case of self-assessed tax.

Since in the given case, Mr. Anant Kumar Gupta has not paid the self-assessed tax within 30 days of due date [i.e. 20.05.2018], penalty equivalent to:

(i) 10% of tax, viz., Rs.9,000 (10% of Rs.90,000) or

(ii) Rs.10,000,

whichever is higher, is payable by him. Thus, penalty payable is Rs.10,000.

Hence, the stand taken by the Department that penalty will be levied on Mr. Anant Kumar Gupta is correct, but the amount of penalty Rs.45,000 is not correct.

Quesiton-3A [ICSI-P-D22-3(e)-4]

J & Co. self-assessed its tax liability as Rs. 80,000 for the month of April, 2022 but failed to make the payment. Subsequently the Department initiated penal proceedings against J & Co. for recovery of penalty under section 73 of the CGST Act, 2017 for failure to pay GST and issued show cause notice on 9th August, 2022 which was received by J & Co. on 13th August, 2022 J & Co. deposited the tax along with interest on 25th August, 2022 and informed the department on the same day. Department is contending that company is liable to pay a penalty of Rs. 40,000 (i.e. 50% of Rs. 80,000). Examine the correctness of the stand taken by the Department with reference to the provisions of the CGST Act, 2017. Explain the relevant provisions in brief.

Ans:

1. Statutory Provision

(a) As per section 73, where self-assessed tax /tax collected is not paid within 30 days from due date of payment of such tax, penalty equivalent to

10% of tax or

Rs.10,000,

whichever is higher, is payable.

(b) Due date for payment of tax for the month of April is 20th May.

2. Conclusion

Thus, option to pay tax within 30 days of issuance of Show Cause Notice (SCN) to avoid penalty, is not available in case of self-assessed tax.

Since in the given case, J & Co. has not paid the self-assessed tax within 30 days of due date (i.e. 20th May).

Penalty equivalent to: (i) 10% of tax, viz., Rs.8,000 (10% of Rs. 80,000) or (ii) Rs. 10,000, Whichever is higher, is payable by him. Thus, penalty payable is Rs. 10,000. Hence, the stand taken by the Department that penalty will be levied on J & Co. is correct, but the amount of penalty of Rs. 40,000 as sought to be imposed on J & Co., is not correct.