DEMAND & ADJUDICATION UNDER GST ACT

1. Show Cause Notice can be issued by proper officer to a registered person where it appears to him that tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilized, asking him to show cause as to why the said tax be not demanded and recovered from him.
2. Limitation period for issue of Show Cause Notice (SCN)
3. The normal period for issuing demand Show Cause Notice is 2 years and 9 months from the date of furnishing annual return for the financial year to which the demand pertains A summary of demand has to be furnished electronically in Form GST DRC 01 simultaneously
4. The period for issuing demand SCN is extendable if the reason or its issuance is fraud or any willful misstatement or suppression of facts to evade tax.
5. The extended period for issuing demand SCN in case of fraud etc. is 4 years and 6 months from the date of furnishing annual return for the financial year to which the demand pertains.
6. Period of stay on issuance of SCN ordered by Court/Tribunal to be excluded for determining limitation.
7. Suppression means non-declaration of facts or information in the return, statement, report or any other document or failure to furnish any information on being asked for, in writing, by the proper officer.
8. Dispensation of SCN
9. Once a SCN has been issued, whether for normal period or extended period, for subsequent demand period, a statement showing details of amount demanded can be served if grounds of demand are same.
10. In a normal period demand case, where assessee on the basis of his own ascertainment or ascertainment of the proper officer pays the tax short levied, etc along with interest and informs the proper officer in writing, then no SCN will be issued.
11. In an extended period demand case, where assessee on the basis of his own ascertainment or ascertainment of the proper officer pays the tax short levied, etc. along with interest with15% of the amount as penalty and informs the proper officer in writing, then no SCN will be issued.

Adjudication of SCN - Procedure for

1. The assessee will reply/make representation against SCN in FORM GST DRC 06 within the prescribed time or time as extended.
2. He has a right of being heard personally or through an authorized representative
3. After considering explanation/reply/representation of assessee to SCN, the proper officer shall determine tax payable with interest and penalty.
4. For normal demand period case, the penalty is 10% of demanded amount or Rs 1000 whichever is higher.
5. For extended period demand case, the penalty is 100% of the amount demanded or Rs.10000 whichever is higher.
6. For normal demand period case, the adjudication has to be done within three years from due date of furnishing annual return for the financial year to which the tax demand pertains.
7. : For extended period case, the time for concluding adjudication proceedings is five years from due date of furnishing annual return for the financial year to which the tax demand pertains.
8. A summary of the order issued shall be uploaded electronically in FORM GST DRC-07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax.
9. This order shall be treated as Recovery Notice.
10. Cross empowerment between CGST and SGST/UTGST officers has been done so as to ensure that if a proper officer of one Act (say CGST) passes an order with respect to a transaction, he will also act as the proper officer of SGST for the same transaction and issue the order with respect to the CGST as well as the SGST/UTGST component of the same transaction.
11. Dispensation of Adjudication proceedings and waiver of penalty provisions
12. In a normal period demand case if assessee admits liability and pays demanded amount with interest within 30 days of SCN, then the case would be concluded without resorting to adjudication proceedings and without imposing penalty.
13. In an extended period demand case, if assessee admits liability and pays demanded amount with interest and a penalty of 25% of tax evaded within 30 days of CN, then the case would be concluded without resorting to adjudication proceedings and without imposing penalty.
14. For this purpose, the assessee shall intimate the proper officer of such payment in FORM GST DRC-03  and the proper officer issue an order if GORM GST DRC-05 concluding the proceeding in respect of the said notice.

Conclusion of proceedings

1. When tax with interest and penalty (only in case of fraud etc) is paid prior to issuance of SCN.
2. When tax with interest and penalty (only when SCN is under extended period) is paid within 30 days of issuance of SCN.
3. When tax with interest and penalty or reduced penalty of 50% in extended period demand case is paid within 30 days of issuance of Adjudication order.

Demand/Adjudication- Misc. provisions

1.  
2. Where in appeal it is decided that extended period of demand is not held invocable in appeal demand shall be determined for normal period.
3. Where any order is required to be issued on the direction of the Appellate Authority or Appellate Tribunal or a court, adjudicating authority shall issue such order within two years.
4. An opportunity of hearing shall be granted by adjudicating authority. Adjournments can be granted on written request, but not for more than three times.
5. The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice.
6. Where the Appellate Authority or Appellate Tribunal or court modifies the amount of tax determined by the proper officer, the amount of interest and penalty shall stand modified accordingly.
7. The interest on the tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability.
8. The adjudication proceedings shall be deemed to have been concluded, if the order is not issued within three years or five years as the case may be. However, where on same issue in some other proceedings, department is in appeal as the issue has been decided against it, the period till finalization of proceedings shall be excluded.
9. Where any amount of self-assessed tax in accordance with a return furnished under Section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of Section 79.