Demands and Recovery

Q 1. Which are the applicable sections for the purpose of recovery of tax short paid or not paid or amount erroneously refunded or input tax credit wrongly availed or utilized?

Ans. Section 73 deals with the cases where there is no
invocation of fraud/suppression/mis-statement etc. Section
74 deals with cases where the provisions related to
fraud/suppression/mis-statement etc. are invoked.

Q 2. What if person chargeable with tax, pays the amount along with interest before issue of show cause notice under section 73?

Ans. In such cases notice shall not be issued by the proper
officer. {sec.73 (6)}

Q 3. If show cause notice is issued under Section 73 and thereafter the noticee makes payment along with applicable interest, is there any need to adjudicate the case?

Ans. If the person pays the tax along with interest within 30
days of issue of notice, no penalty shall be payable and all
proceedings in respect of such notice shall be deemed to be
concluded. {sec.73 (8)}

Q 4. What is the relevant date for issue of Show Cause Notice?

Ans.

(i) In case of section 73(cases other than fraud/
suppression of facts/willful misstatement),
the relevant date shall be counted from the
due date for filing of annual return for the
financial year to which demand relates to.
The SCN has to be adjudicated within at
period of three years from the due date of
filing of annual return. The SCN is required to
be issued at least three months prior to the
time limit set for adjudication.
{sec.73(2&10)}

(ii) In case of section 74(cases involving fraud/
suppression of facts/willful misstatement),
the relevant date shall be counted from the
due date for filing of annual return for the
financial year to which demand relates to.
The SCN has to be adjudicated within at
period of five years from the due date of filing
of annual return. The SCN is required to be
issued at least six months prior to the time
limit set for adjudication.
{sec.74(2&10)}

Q 5. Is there any time limit for adjudication the cases?

Ans:

(i) In case of section 73(cases other than fraud/
suppression of facts/willful misstatement),
the time limit for adjudication of cases is 3
years from the due date for filing of annual
return for the financial year to which demand
relates to or the date of erroneous refund/ITC
wrongly availed. {sec.73(10)}

(ii) In case of section 74(cases of
fraud/suppression of facts/willful
misstatement), the time limit for adjudication
is 5 years from the due date for filing of
annual return for the financial year to which
demand relates to or the date of erroneous
refund/ITC wrongly availed. {sec.74(10)}

Q 6. Is there any immunity to a person chargeable with tax in cases of fraud/suppression of facts/ willful misstatement, who pays the amount of demand along-with interest before issue of notice?

Ans. Yes. Person chargeable with tax, shall have an option to
pay the amount of tax along with interest and penalty equal
to 15% percent of the tax involved, as ascertained either on
his own or ascertained by the proper officer, and on such
payment, no notice shall be issued with respect to the tax so
paid. {sec. 74(6)}

Q 7. If notice is issued under Section 74 and thereafter the noticee makes payment, is there any need to adjudicate the case?

Ans. Where the person to whom a notice has been issued
under sub-section (1) of section 74, pays the tax along with
interest with penalty equal to 25% of such tax within 30
days of issue of notice, all proceedings in respect of such
notice shall be deemed to be concluded. {sec.74 (8)}

Q 8. In case a notice is adjudicated under Section 74 and order issued confirming tax demand and penalty, does the noticee have any option to pay reduced penalty?

Ans. Yes. If any person pays the tax determined by the order
along with interest and a penalty equivalent to 50% of such
tax within thirty days of the communication of order, all
proceedings in respect of the said tax shall be deemed to be
concluded. {sec.74 (11)}

Q 9. What will happen in cases where notice is issued but order has not been passed under section 73 & 74 within time specified for adjudication under these sections?

Ans. Section 75 (10) provides for deemed conclusion of the
adjudication proceedings if the order is not issued within
time limit prescribed under these sections.

Q 10. What happens if a person collects tax from another person but does not deposit the same with Government?

Ans. It is mandatory to pay amount, collected from other
person representing tax under this act, to the government.
For any such amount not so paid, proper officer may issue
SCN for recovery of such amount and penalty equivalent to
such amount. {Sec.76 (1&2)}

Q 11. In case the person does not deposit tax collected in contravention of Section 76(1), what is the proper course of action to be taken?

Ans. SCN may be issued and if so, an order shall be passed
following Principles of natural justice within one year of
date of issue of such notice. {sec.76 (2 to 6)}

Q 12. What is the time limit to issue notice in cases under Section 76 i.e. taxes collected but not paid to Government?

Ans. There is no time limit. Notice can be issued on
detection of such cases without any time limit.

Q 13. What are the modes of recovery of tax available to the proper officer?

Ans.
The proper officer may recover the dues in following
manner:

(a) Deduction of dues from the amount owned by the tax
authorities payable to such person.

(b) Recovery by way of detaining and selling any goods
belonging to such person;

(c) Recovery from other person, from whom money is due or
may become due to such person or who holds or may
subsequently hold money for or on account of such person,
to pay to the credit of the Central or a State Government;

(d) Distrain any movable or immovable property belonging
to such person, until the amount payable is paid. If the dues
not paid within 30days, the said property is to be sold and
with the proceeds of such sale the amount payable and cost
of sale shall be recovered.

(e) Through the Collector of the district in which such person
owns any property or resides or carries on his business, as if
it was an arrear of land revenue.

(f) By way of an application to the appropriate Magistrate
who in turn shall proceed to recover the amount as if it
were a fine imposed by him.

(g) Through enforcing the bond /instrument executed under
this Act or any rules or regulations made thereunder.

(h) CGST arrears can be recovered as an arrear of SGST and
vice-versa.
{sec.79 (1,2,3,4)}

Q 14. Whether the payment of tax dues can be made in installments?

Ans. On receipt of any such request, Commissioner/Chief
Commissioner may extend the time for payment or allow
payment of any amount due under the Act, other than the
amount due as per the liability self-assessed in any return,
by such person in monthly installments not exceeding
twenty four, subject to payment of interest under section 50
with such limitations and conditions as may be prescribed.
However, where there is default in payment of any one
installment on its due date, the whole outstanding balance
payable on such date shall become payable and recovered
without any further notice. {sec.80}

Q 15. What is the course of recovery in cases where the tax demand confirmed is enhanced in appeal/ revision proceedings?

Ans. The notice of demand is required to be served only in
respect of the enhanced dues. In so far as the amount
already confirmed prior to disposal of appeal/revision, the
recovery proceedings may be continued from the stage at
which such proceedings stood immediately before such
disposal of appeal/revision. (Sec.84(a))

Q 16. If a taxable person with pending tax dues, transfers his business to another person, what would happen to the tax dues?

Ans. The person, to whom the business is transferred, shall
jointly and severally be liable to pay the tax, interest or
penalty due from the taxable person up to the time of such
transfer, whether such dues has been determined before
such transfer, but has remained unpaid or is determined
thereafter. {Sec. 85(1)}

Q 17. What happens to tax dues where the Company (taxable person) goes into liquidation?

Ans. When any company is wound up, every appointed
receiver of assets (“Liquidator”) shall give intimation of his
appointment to Commissioner within 30 days. On receipt of
such intimation Commissioner may notify amount sufficient
to recover tax liabilities/dues to the liquidator within 3
months. {Sec. 88(1,2)}

Q 18. What is the liability of directors of the Company (taxable person) under liquidation?

Ans: When any private company is wound up and any tax or
other dues determined whether before or after liquidation
that remains unrecovered, every person who was a director
of the company during the period for which the tax was due,
shall jointly and severally be liable for payment of dues
unless he proves to the satisfaction of the Commissioner
that such non-recovery is not attributed to any gross
neglect, misfeasance or breach of duties on his part in
relation to the affairs of the company. {Sec.88(3), 89}

Q 19. What is the liability of partners of a partnership firm (Taxable person) to pay outstanding tax?

Ans. Partners of any firm shall jointly and severally be liable
for payment of any tax, interest or penalty.
Firm/ partner shall intimate the retirement of any partner
to the Commissioner by a notice in writing.
Liability to pay tax, interest or penalty up to the date of such
retirement, whether determined on that date or
subsequently, shall be on such partner.
If no intimation is given within one month from the date of
retirement, the liability of such partner shall continue until
the date on which such intimation is received by the
Commissioner. {Sec.90}

Q 20. What happens to the tax liability of a taxable person, whose business is carried on by any guardian/ trustee or agent of a minor?

Ans. Where the business in respect of which any tax is
payable is carried on by any guardian / trustee / agent of a
minor or other incapacitated person on behalf of and for the
benefit of such minor/incapacitated person, the tax, interest
or penalty shall be levied upon and recoverable from such
guardian / trustee / agent. {Sec.91}

Q 21. What happens when the estate of a taxable person is under the control of Court of Wards?

Ans. Where the estate of a taxable person owning a business
in respect of which any tax, interest or penalty is payable is
under the control of the Court of Wards/ Administrator
General / Official Trustee / Receiver or Manager appointed
under any order of a Court, the tax, interest or penalty shall
be levied and recoverable from such Court of
Wards/Administrator General / Official Trustee / Receiver
or Manager to the same extent as it would be determined
and recoverable from a taxable person. {Sec.92}