Chapter 19 Demands and Recovery

19
DEMANDS AND
RECOVERY
The section numbers referred to in the chapter pertain to CGST Act, unless
otherwise specified.
LEARNING OUTCOMES
After studying this Chapter, you will be able to –
 understand the provisions relating to determination of tax
not paid or short paid or erroneously refunded or input tax
credit wrongly availed or utilised whether for any reason
other than fraud or wilful-misstatement or suppression of
facts, or otherwise.
 explain the consequences in case where tax is collected but
not paid to Government.
 describe the provisions of tax wrongfully collected and paid
to the Government.
 explain the recovery proceedings.
 elaborate the facility of payment of tax and other amount in
instalments.
 identify the cases where the transfer of property is void.
 explain provisions relating to provisional attachment to
protect revenue.
© The Institute of Chartered Accountants of India

19.2 GOODS AND SERVICES TAX
1. INTRODUCTION
Though it is the duty of every taxable person to assess and pay his GST liabilities
voluntarily, tax administration occasionally comes across situations where the tax
dues are not paid correctly by the taxpayers. While in most of these cases, such
non-payment is due to the bonafide belief of the person that his activities do not
attract any tax liability under the GST law; or he is entitled to certain exemption,
etc., in some cases, such non-payment is deliberate with an intention to evade
payment of such tax.
To minimize the inadvertent short payment of taxes, the concept of ‘matching’
the details of ‘outward supplies’ of supplier with the details of ‘inward supplies’ of
recipient has been introduced in the GST law.
Moreover, the self-assessed tax has to be paid by the due date prescribed under
the GST law and in case of any failure to pay the same by the due date, the Input
Tax Credit (ITC) will not be available to customers and also the tax payer will not
be able to file any return for further period. Effectually, these provisions work as a
self-policing system and take care of any mismatch in the payment of taxes.
However, despite these provisions, there may arise some instances where the tax
was not paid correctly. To deal with such situations, Revenue must be empowered
to demand the tax liability and recover such tax from the defaulter.
On one hand, there is a dire need to have a robust demand and recovery
mechanism in place in order to empower the Revenue to exercise said powers, at
the same time, care must also be taken that there should not be arbitrary exercise
of such powers by the Revenue and same should be
appropriately regulated.
Accordingly, the GST law contains elaborate provisions

for the recovery of tax under various situations, which
can be broadly classified into following two categories:
Tax short paid or

erroneously refunded or ITC Non-payment of self-assessed
wrongly availed tax or amount collected as
representing the tax

DEMANDS AND RECOVERY 19.3
Chapter XV of the CGST Act 2017 [Sections 73 to 84] and Chapter XVIII [Rules 142
to 161] of the CGST Rules, 2017 contains various provisions relating to demands
and recovery. There are parallel provisions in SGST laws of various States. The
demand and recovery proceedings will be made either by Central GST Officer or
State GST Officer depending on their jurisdiction over particular taxable person.
Provisions of demands and recovery under CGST Act have also been made
applicable to IGST Act vide section 20 of the IGST Act.
Before proceeding to understand the demands and recovery provisions, let us

first go through few relevant definitions.
2. RELEVANT DEFINITIONS
 Adjudicating authority means any authority, appointed or authorised to

pass any order or decision under this Act, but does not include the Central
Board of Indirect Taxes and Customs, the Revisional Authority, the Authority
for Advance Ruling, the Appellate Authority for Advance Ruling, the
Appellate Authority, the Appellate Tribunal and the Authority referred to in
sub-section (2) of section 171 [Section 2(4)].
 Appellate Authority: means an authority appointed or authorised to hear

appeals as referred to in section 107 [Section 2(8)].
 Appellate Tribunal: means the Goods and Services Tax Appellate Tribunal
constituted under section 109 [Section 2(9)].
 Commissioner: means the Commissioner of central tax and includes the

Principal Commissioner of central tax appointed under section 3 and the
Commissioner of integrated tax appointed under the Integrated Goods and
Services Tax Act [Section 2(24)].

 Market value: shall mean the full amount which a recipient of a supply is
required to pay in order to obtain the goods or services or both of like kind
and quality at or about the same time and at the same commercial level
where the recipient and the supplier are not related [Section 2(73)].
 Proper officer: in relation to any function to be performed under this Act,
means the Commissioner or the officer of the central tax who is assigned that
function by the Commissioner in the Board [Section 2(91)].
3. DETERMINATION OF TAX NOT PAID/ SHORT

PAID/ ERRONEOUSLY REFUNDED/ ITC
WRONGLY AVAILED/ UTILISED [SECTION 73
& SECTION 74]
 Section 73 and section 74 deal with the manner in
which the tax liability of a person should be
determined in case of short payment/ non-
payment of tax/ erroneous refund/ wrong
availment/ utlisation of ITC.
 The incidence of short payment/non-payment of tax or erroneous refund or

wrong availment/utilisation of ITC may be because of an inadvertent
bonafide mistake (Normal Cases) or it may be a deliberate attempt (Fraud
Cases) to evade the tax. Since the nature of offence is totally different in
both the incidences, hence, under GST law, separate provisions for recovery
of the tax and the amount of penalty have been made to deal with such
type of cases. Besides these, there are provisions to encourage voluntary
compliance such as no penalty or lesser penalty if the tax dues along with
interest, are paid within the specified time limit/ incidence.
 Limitation period: One of the fundamental

legal principles is that an element of
certainty must be brought to the legal
proceedings. The law of limitation is based
on this principle. Any action under any law
has to be taken within the limitation period
prescribed otherwise uncertainty would prevail eternally.

The provisions of limitation period gain all the more importance in the
legislation dealing with indirect taxes, where the tax burden is to be passed
on to the next level at every stage.
Therefore, a tax law must have a limitation period, beyond which demands
cannot be raised. Further, while a lesser time limit is available to the
Revenue to raise the demand in normal cases, it would have a longer
limitation period available to raise the demand in fraud cases.
 Show Cause Notice (SCN): In order to adhere to the principles of natural
justice, before raising any tax demand, a notice has to be issued (generally
referred to as Show Cause Notice), asking the person chargeable with tax to
show cause as to why the specified amount of tax should not be demanded
from him. The proper officer may, before serving of such SCN, communicate
to said person, the details of any tax, interest and penalty as ascertained by
him.
 The issuance of SCN grants an opportunity to such person to defend himself

before adjudication. The person to whom such notice has been issued can
contest the demand by filing a reply to the show cause notice and also by
appearing before the adjudicating authority personally. After considering
the reply filed by the person as well as the submissions made during the
personal hearing, the adjudicating authority shall pass a speaking order,
either confirming the tax demand or dropping the same.
The provisions contained in section 73 and section 74 have been discussed

in detail below.
I. Non-payment/short payment etc. on account of reasons other than
fraud, wilful misstatement or suppression of facts [Section 73]
A. Issue of SCN [Section 73(1)]
 In a case, where the non-payment/
short payment/ erroneous refund/
wrong availment/ utilisation of ITC is
on account of reasons other than fraud, wilful misstatement or
suppression of facts by the person chargeable with tax, the
proper officer shall issue a notice, on the person chargeable
such tax, requiring him to show cause as to why he should not
pay the amount specified in the notice.

 The proper officer may, before serving of such SCN,

communicate the details of any tax, interest and penalty as
ascertained by him, in the prescribed form, to the person
chargeable with tax, interest and penalty under section 73.
 The show cause notice would specify the amount of tax along
with interest payable thereon under section 50 [@ 18% p.a.*]
and a penalty leviable under the provisions of this Act or the
rules made thereunder, liable to be paid by him. Needless to
say, the notice should state the grounds based on which such
demand is raised, so that the person against whom the notice is
served is made aware of the basis of the demand.
* as notified by Notification No. 13/2017 CT dated 28.06.2017
B. Time limit to issue SCN [Section 73(2), (3) & (4) read with section
73(10)]
 The notice should be issued at least 3 months
prior to the time limit specified for passing the
order determining the amount of tax, interest
and any penalty payable by defaulter.
 The order referred herein has to be passed
within 3 years from the due date for furnishing the Annual
Return for the Financial Year to which the tax not paid/short
paid/ITC wrongly availed/utilised relates to or within 3 years
from the date of erroneous refund.
Thus, the time-limit for issuance of SCN is 2 years and 9

months from the due date of filing Annual Return for the
Financial Year to which the demand pertains or from the date of
erroneous refund.
 Where a notice has been issued for any period on a person

chargeable with tax, if such person commits such default in
some other period also, instead of issuing a detailed notice, a
mere statement containing the details of tax not paid/short
paid/erroneously refunded/ITC wrongly availed/utilised for such
periods, can be issued. This would expedite the adjudication
process by avoiding duplication and reducing repetitive
paperwork.

 The Service of such Statement shall be deemed to be Service of

SCN on such person, subject to the condition that the grounds
relied upon for such tax periods [as covered in the Statement]
are the same as are mentioned in the earlier notice.
C. Payment of tax before issuance of SCN [Section 73(5), (6) & (7)]
The law provides an opportunity to the person chargeable with tax to
pay tax and interest before the issuance of notice. It emphatically
stipulates that in such cases, no notice shall be issued and there shall
be no other consequences (including penalty) for the default. The
detailed provisions are as under:
 The person who is chargeable with tax, but has not paid the tax,
or short paid the tax or wrongly availed/utilized the credit, or
been granted an erroneous refund, may voluntarily come
forward to pay such tax alongwith interest before the issue of
SCN/Statement, as the case may be.
 In such case, he has to pay the amount of tax along with interest
payable thereon under section 50, either on the basis of his own
ascertainment of such tax or the tax as communicated by the
proper officer. Further, he needs to inform the proper officer in
writing of such payment. The proper officer shall issue an
acknowledgement, accepting the payment made by the said
person in prescribed form.
 Where such person has made partial payment of the amount
communicated to him or desires to file any submissions against
the proposed liability, he may make such submission in
prescribed form.
 Such voluntary payment can be made even if the mistake is
pointed out by the Department, before issue of SCN.
 Where such voluntary payment is made, Department shall not
serve any SCN/Statement. The matter closes at this stage itself
and no penalty is imposed on the person.
 The option of paying tax and interest before issuance of SCN
so as to avoid the issuance of SCN and penalty is available in
only those cases where any tax has not been paid/short
paid/erroneously refunded/ITC wrongly availed/utilized for

reasons other than fraud or any wilful misstatement or

suppression of facts to evade tax.
 After the person has voluntarily paid the tax along with interest,
if the proper officer is of the opinion that the amount voluntarily
paid falls short of the amount actually payable, he can issue a
SCN in respect of the amount which falls short of the amount
actually payable.
D. Payment of tax after issuance of SCN [Section 73(8)]
 Where a person is chargeable with tax not paid/short paid etc.
and is issued a notice/statement under this section, misses the
opportunity to pay the tax along with interest before the issue of
SCN resulting in SCN not being issued thereafter and no penalty
being imposed, he has another chance to discharge the tax with
interest payable under section 50 with nil penalty within 30 days
of issuance of SCN. All proceedings in respect of the said SCN
shall be deemed to be concluded.
 In other words, where such person pays the tax demanded along
with interest payable under section 50 within 30 days of issue of
SCN, no penalty shall be payable and all proceedings in respect
of the said notice shall be deemed to be concluded.
E. Adjudication order [Section 73(9) & (11)]
 Where an SCN/Statement is issued to a
person chargeable with tax, he may
furnish a representation to the proper
officer in his defense, if he is the view
that he is not so liable to pay whole/part of the amount
mentioned in the SCN.
 The proper officer after considering the representation made by
the person, if any, pass an order, determining the amount of tax,
interest and penalty** due from such person.
**Quantum of penalty
10% of tax
Quantum
of penalty
`10,000

 The quantum of penalty will remain same whether the tax

amount, alongwith interest is paid within 30 days of the
communication of the order or after 30 days.
**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 30 days from the due date of
payment of such tax [Section 73(11)].
From section 73(11), it is clear that the non-payment of self-assessed
tax or the amount collected as representing the tax has been treated
differently than the other non/short payments as referred in section
73(1) [non payment/ short payment of tax/ erroneous refund of tax/
wrong availment/ utilisation of input tax credit] where penalty can be
reduced or waived. However, in case of non-payment of self-assessed
tax or the amount collected as representing the tax within 30 days,
penalty is mandatory and there is no waiver.
Amount collected as representing tax refers to an amount shown as
GST in tax invoice even if no tax was payable on that transaction. Thus,
if tax was collected in tax invoice, it is to be deposited with the
Government even if no tax was actually payable on that transaction.
In case of non-payment of self-assessed tax and the amount collected
as representing the tax, the only opportunity for paying the same
without incurring any penalty is, if it is paid, with interest, within 30
days from the due date of payment. The option to pay such tax before
issuance of SCN or within 30 days of issuance of SCN and avoid
penalty consequences is not available. 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 30 days from the
due date of payment of such tax.
Clarification on levy of penalty under section 73 in case of
delayed filing of return
Issue: Whether penalty in accordance with section 73(11) should be
levied in cases where the return in Form GSTR-3B has been filed after
the due date of filing such return?
Clarification: The provisions of section 73(11) 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.
It is accordingly clarified that penalty under the provisions of section
73(11) is not payable in such cases. It is further clarified that since the
tax has been paid late in contravention of the provisions of the CGST
Act a general penalty under section 125 may be imposed after
following the due process of law [Circular No. 76/50/2018 GST dated
31.12.2018].
F. Time limit for passing adjudication order [Section 73(10)]
 The proper officer shall issue the
adjudication order within 3 years from
the due date for furnishing of Annual
Return for the Financial Year to which
the tax not paid/short paid/ITC wrongly
availed/utilised relates to. In case of erroneously granted
refunds, such order should be passed within 3 years from the
date of erroneous refund.
 Section 44(1) stipulates that annual return for a financial year
needs to be filed by 31st December of the next financial year.
II. Non-payment/short payment etc. on account of fraud, wilful
misstatement or suppression of facts [Section 74]
A. Issue of SCN [Section 74(1)]
 In a case, where the non-payment /short

payment/erroneous refund /wrong
availment/utilisation of ITC is on account of
any fraud, wilful misstatement or suppression of facts by the
person chargeable to tax, proper officer shall issue a notice, on the
person chargeable with such tax, requiring him to show cause as to
why he should not pay the amount specified in the notice.
 The proper officer may, before serving of such SCN,
communicate the details of any tax, interest and penalty as
ascertained by him, in the prescribed form, to the person
chargeable with tax, interest and penalty under section 74.

 The notice would specify the amount of tax along with interest
payable thereon under section 50 and a penalty equivalent to
the tax specified in the notice, liable to be paid by him.
Needless to say, the notice should state the grounds based on
which such demand is raised, so that the person against whom
the notice is served is made aware of the basis of the demand.
B. Time limit to issue SCN [Section 74(2), (3) & (4) read with
section 74(10)]
 The notice should be issued at least
6 months prior to the time limit for passing
the order determining the amount of tax,
interest and penalty payable by defaulter.
 The said order has to be passed within 5 years from the due
date for furnishing the Annual Return for the Financial Year to
which the tax not paid/short paid/ITC wrongly availed/utilised
relates to or within 5 years from the date of erroneous refund.
Thus, the time-limit for issuance of SCN is 4 years and

6 months from the due date of filing of Annual Return for the
erroneous refund.
 Where a notice has been issued for any period on a person

chargeable with tax, if such person commits such default in
some other period also, instead of issuing a detailed notice, a
mere statement containing the details of tax not paid/short
paid/erroneously refunded/ITC wrongly availed/utilised for such
periods, can be issued.
 The Service of such Statement shall be deemed to be Service of
Notice on such person, subject to the condition that the grounds
relied upon in the said statement, except the ground of fraud, or
any wilful misstatement or suppression of facts to evade tax, for
such tax periods [as covered in the Statement] are the same as
are mentioned in the earlier notice.
C. Payment of tax before issuance of SCN [Section 74(5), (6) & (7)]
The law provides an opportunity to the person chargeable with tax to
pay tax, interest and penalty equivalent to 15% of such tax, before the

issuance of notice. It emphatically stipulates that in such cases, no

notice shall be issued and there shall be no other consequences for
the default. The detailed provisions are as under:
 The person who is chargeable with tax, but has not paid the
tax/short paid the tax/wrongly availed/utilised the credit/been
granted an erroneous refund by reason of fraud etc., may
voluntarily come forward to pay such tax alongwith interest and
specified penalty before the issue of SCN/Statement, as the case
may be.
 In such case, he has to pay the amount of tax along with interest
payable thereon under section 50 and a penalty equivalent to
15% of such tax either on the basis of his own ascertainment of
such tax or the tax as communicated by the proper officer.
Further, he needs to inform the proper officer in writing of such
payment.
 Where such person has made partial payment of the amount
communicated to him or desires to file any submissions against
the proposed liability, he may make such submission in
prescribed form.
 Such voluntary payment can be made even if the mistake is
pointed out by the Department, before issue of SCN.
 Where such voluntary payment is made, Department shall not
serve any SCN/Statement. The matter closes at this stage itself.
 After such person has voluntarily paid the tax along with interest
and penalty, if the proper officer is of the opinion that the
amount voluntarily paid falls short of the amount actually
payable, he can issue a SCN in respect of the amount which falls
short of the amount actually payable.
D. Payment of tax after issuance of SCN [Section 74(8)]
 Where a person is chargeable with tax not paid/short paid etc.
and is issued a notice/statement under this section for reasons
of fraud etc., misses the opportunity to pay the tax along with
interest and penalty equivalent to 15% of tax, before the issue of
SCN resulting in no SCN being issued thereafter, he has another
chance to discharge tax alongwith interest payable under section
50 and penalty equivalent to 25% of tax within 30 days of

issuance of SCN. All proceedings in respect of the said SCN shall

be deemed to be concluded.
 In other words, where such person pays the tax demanded along
with interest payable under section 50 and a penalty equivalent to
25% of such tax within 30 days of issue of SCN, all proceedings in
respect of the said notice shall be deemed to be concluded.
E. Adjudication order [Section 74(9) & (11)]
 Where an SCN/Statement is issued to a
person chargeable with tax, he may
furnish a representation to the proper
officer in his defense, if he is the view that
he is not so liable to pay whole/part of
the amount mentioned in the SCN.
 The proper officer after considering the representation made by
the person, if any, pass an order, determining the amount of tax,
interest and penalty due from such person.
 Where any person served with an adjudication order pays the tax
along with interest payable thereon under section 50 and a
penalty equivalent to 50% of such tax within 30 days of
communication of the order, all proceedings in respect of the
said notice shall be deemed to be concluded.
F. Time limit for passing adjudication order [Section 74(10)]
 The proper officer shall issue the
adjudication order within 5 years from the
due date for furnishing of Annual Return
for the Financial Year to which the tax not
paid/short paid/ITC wrongly
availed/utilised relates to. In case of
erroneously granted refunds, such order should be passed within
5 years from the date of erroneous refund.
Section 44(1) stipulates that annual return for a financial year
needs to be filed by 31st December of the next financial year.
I. For the purposes of section 73 and section 74:

(i) the expression “all proceedings in respect of the said notice” shall
not include proceedings under section 132. Section 132 is in relation to

prosecution. Thus, the person can be prosecuted under GST law even if no further
demand can be raised for tax, interest or penalty. Prosecution in criminal court is
independent of and can be in addition to, penalty imposed under GST law.
(ii) where the notice under the same proceedings is issued to the main
person liable to pay tax and some other persons, and such proceedings
against the main person have been concluded under section 73 or
section 74, the proceedings against all the persons liable to pay penalty
under sections 122, 125, 129 and 130 are deemed to be concluded.
Sometimes, if a notice is issued to a company, notice may be also issued to its
executive director, employees, transporter etc. for same cause of action. These are
termed as ‘co-noticees’, while company is the ‘main noticee’. Conclusion of
proceedings against main noticee would be deemed to be conclusion of proceedings
against all co-noticees also and the entire case will stand closed.
II. For the purposes of this Act, the expression “suppression” shall mean
non-declaration of facts or information which a taxable person is required
to declare in the return, statement, report or any other document furnished
under this Act or the rules made thereunder, or failure to furnish any
information on being asked for, in writing, by the proper officer. Thus,
definition of ‘suppression’ is very clear that only if information that was required to
be disclosed under the GST law (e.g. in return, statement or report or when specific
query was raised) is not disclosed, that would amount to ‘suppression’. It is not duty
of a taxable person to disclose each material fact to the Department, if it is not asked
for.
The above provisions have been summarized in the following tables:

Table A:
S. No. Action by tax Amount of penalty payable Remarks

payer
Normal Cases Fraud Cases
1. Tax amount, along No penalty 15% of the The penalty

with the interest, and no notice tax amount shall also be
paid before shall be issued payable as not
issuance of notice penalty and chargeable
no notice in cases
shall be not where the
be issued self-assessed

2. Tax amount, along No penalty. All 25% of the tax or any

with the interest, proceedings tax amount amount
paid within 30 days deemed to be payable as collected as
of issuance of concluded penalty. All tax is paid
notice proceedings (with
deemed to interest)
be within 30
concluded. days from
the due date
3. Tax amount, along 10% of the tax 50% of the of payment.
with the interest, amount or tax amount
paid within 30 days ` 10,000/-, payable as
of communication whichever is penalty. All
of order higher proceedings
deemed to
be
concluded.
4. Tax amount, along 10% of the tax 100% of the

with the interest, amount or tax amount
paid after 30 days ` 10,000/-,
of communication whichever is
of order higher
Table B:
S. No. Nature of Time for issuance of Time for issuance of

case notice order
1. Normal Cases Within 2 years and 9 Within 3 years from the

months from the due due date of filing of
date of filing Annual Annual Return for the
Return for the Financial Financial Year to which
Year to which the the demand pertains or
demand pertains or from the date of
from the date of erroneous refund.
erroneous refund.

2. Fraud Cases Within 4 years and 6 Within 5 years from the

months from the due due date of filing of
date of filing of Annual Annual Return for the
Return for the Financial Financial Year to which
Year to which the the demand pertains or
demand pertains or from the date of
from the date of erroneous refund
erroneous refund
3. Any amount No time limit Within 1 year from the

collected as tax date of issue of notice
but not paid [to be discussed
subsequently in this
chapter]
4. Non- payment No need to issue a SCN Recovery proceedings

of self- can be started directly [to
assessed tax be discussed subsequently
in this chapter]
Monetary limits prescribed for issuance of SCNs by different level of officers

Board has assigned the officers mentioned in table below, the functions as the
proper officers in relation to issue of SCNs and orders under sections 73 and
74 1, up to the prescribed monetary limits of tax (including cess) not paid/ short
paid/ erroneously refunded/ ITC of CGST wrongly availed/utilized for issuance of
SCNs and passing of orders under sections 73 and 74:
CGST Officer Monetary limit Monetary limit Monetary limit

of CGST of IGST of CGST and IGST
Superintendent Not exceeding Not exceeding Not exceeding

of Central Tax ` 10 lakh ` 20 lakh ` 20 lakh
Deputy or Above ` 10 lakh Above ` 20 lakh Above ` 20 lakh

Assistant and not and not exceeding and not exceeding
Commissioner exceeding ` 1 ` 2 crores ` 2 crores
of Central Tax crore
1
made applicable to matters in relation to IGST vide section 20 of the IGST Act

Additional or Above ` 1 crore Above ` 2 crores Above ` 2 crores

Joint without any limit without any limit without any limit
Commissioner
of Central Tax
The central tax officers of Audit Commissionerates and Directorate General of

Goods and Services Tax Intelligence (hereinafter referred to as “DGGSTI”) shall
exercise the powers only to issue SCNs. An SCN issued by them shall be
adjudicated by the competent central tax officer of the Executive
Commissionerate in whose jurisdiction the noticee is registered.
In case SCNs have been issued on similar issues to a noticee(s) and made
answerable to different levels of adjudicating authorities within a
Commissionerate, such SCNs should be adjudicated by the adjudicating authority
competent to decide the case involving the highest amount of central tax and/or
integrated tax (including cess) [Circular No. 31/05/2018 GST dated 09.02.2018]
4. GENERAL PROVISIONS RELATING TO

DETERMINATION OF TAX [SECTION 75]
General provisions relating to determination of tax are contained in section 75 of
CGST Act. These provisions are applicable both in case of determination of tax
not paid/short paid/ erroneously refunded/ITC wrongly availed/ utilised whether
by reason of fraud/any wilful misstatement/suppression of facts or otherwise.
These provisions have been discussed are as follows:
A. Period of stay order to be excluded in computing the limitation
period [Section 75(1)]
Where the service of notice or issuance of order
is stayed by an order of a Court or Appellate
Tribunal, the period of such stay shall be
excluded in computing the period for issuance of
notice and issuance of adjudication order**, as
the case may be.
**period as specified in sub-sections (2) and (10) of section 73 or sub-sections
(2) and (10) of section 74

B. In case charges of fraud/any wilful misstatement/suppression of

facts are not established for a notice issued in a fraud case, tax to
be determined deeming the demand notice to be issued in normal
case [Section 75(2)]
Where any Appellate Authority or Appellate Tribunal or court concludes that
the notice issued under section 74(1) is not sustainable for the reason that
the charges of fraud or any wilful misstatement or suppression of facts to
evade tax has not been established against the person to whom the notice
was issued, the proper officer shall determine the tax payable by such
person, deeming as if the notice were issued under section 73(1).
C. Adjudication order issued in pursuance of Appellate Authority/
Appellate Tribunal/ Court’s direction be issued with 2 years [Section
75(3)]
Where any order is required to be issued in pursuance of the direction of
the Appellate Authority or Appellate Tribunal or a court, such order shall be
issued within 2 years from the date of communication of the said direction.
D. Opportunity of being heard [Section 75(4)]
An opportunity of hearing shall be granted where a request is received in
writing from the person chargeable with tax or penalty, or where any
adverse decision is contemplated against such person.
Adjournment of hearing to grant time to person chargeable with tax
[Section 75(5)]
The proper officer shall, if sufficient cause is shown by the person
chargeable with tax, grant time to the said person and adjourn the hearing
for reasons to be recorded in writing.
However, such adjournment shall be granted for a maximum of 3 times to
a person during the proceedings.
E. Adjudication order should be a speaking order [Section 75(6)]
The proper officer, in his order, shall set out the
relevant facts and the basis of his decision.

F. Tax, interest and penalty demanded in order not to exceed amount

specified in notice [Section 75(7)]
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.
G. In case of modification of tax by the Appellate
Authority/Tribunal/Court, penalty and interest to be modified
accordingly [Section 75(8)]
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, taking into account the amount of
tax so modified.
H. Payment of interest mandatory even if not specified in the
adjudication order [Section 75(9)]
The interest on the tax short paid or not paid shall be payable whether or
not specified in the order determining the tax liability.
I. Adjudication order to be passed mandatorily within stipulated time
[Section 75(10)]
The GST law ensures timely disposal of cases by providing that if the
adjudication order is not issued within the stipulated time limit of 3 years in
normal cases or 5 years in fraud cases, as the case may be, the adjudication
proceedings shall be deemed to be concluded.
J. In case of appeal filed by Department against prejudicial decision of
the Appellate Authority/Appellate Tribunal/High Court, period
between the date of decision of the higher authority and that of the
lower authority to be excluded [Section 75(11)]
An issue on which the Appellate Authority or the Appellate Tribunal or the
High Court has given its decision which is prejudicial to the interest of
revenue in some other proceedings and an appeal to the Appellate Tribunal
or the High Court or the Supreme Court against such decision of the
Appellate Authority or the Appellate Tribunal or the High Court is pending,
the period spent between the date of the decision of the Appellate
Authority and that of the Appellate Tribunal or the date of decision of the
Appellate Tribunal and that of the High Court or the date of the decision of
the High Court and that of the Supreme Court shall be excluded in

computing the time limit for passing adjudication order, where proceedings
are initiated by way of issue of a SCN under the sections 73 and 74.
K. Amount of self-assessed tax or interest remaining unpaid to be
recovered under section 79 [Section 75(12)]
Notwithstanding anything contained in section 73 or section 74, 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 directly recovered
under the provisions of section 79 [discussed subsequently in this chapter].
L. In case of penalty being imposed under section 73/74, no other
penalty to be imposed for the same act/omission [Section 75(13)]
Where any penalty is imposed under section 73 or section 74, no penalty for
the same act or omission shall be imposed on the same person under any
other provision of this Act.
5. TAX COLLECTED BUT NOT DEPOSITED

[SECTION 76]
The provisions of this section are based on the
principle that nobody should be unjustly enriched in
the name of Revenue. If any amount is collected in
the name of tax, the same must be deposited with the
Government.
Such situation may arise in case where tax is collected
on supplies on which the tax is leviable, but such tax
is not deposited with the Government or where tax is collected on supplies on
which tax is not leviable at all, and thus, tax collected is not deposited with the
Government.
The detailed provisions of this section have been discussed hereunder:
A. Amount representing tax collected from any person to be paid to the
Central Government [Section 76(1)]
Notwithstanding anything to the contrary contained in any order or
direction of any Appellate Authority or Appellate Tribunal or Court or in any
other provisions of this Act or the rules made thereunder or any other law
for the time being in force, every person who has collected from any other

person any amount as representing the tax under this Act, and has not paid
the said amount to the Government, shall forthwith pay the said amount to
the Government, irrespective of whether the supplies in respect of which
such amount was collected are taxable or not.
B. Issue of SCN [Section 76(2)]
Where any amount is required to be paid to the Government under sub-
section (1), and which has not been so paid, the proper officer may serve on
the person liable to pay such amount a notice requiring him to show cause as
to why the said amount as specified in the notice, should not be paid by him to
the Government and why a penalty equivalent to the amount specified in the
notice should not be imposed on him under the provisions of this Act.
C. Determination of amount due [Section 76(3)]
The proper officer shall, after considering the representation, if any, made by
the person on whom SCN is served, determine the amount due from such
person and thereupon such person shall pay the amount so determined.
D. Interest payable on the amount [Section 76(4)]
 The person who has collected any amount as representing the tax, but
not deposited the same with the Government shall in addition to
paying the said amount determined by the proper officer shall also be
liable to pay interest thereon.
 Interest is payable at the rate specified under section 50.
 Interest is payable from the date such amount was collected by him to
the date such amount is paid by him to the Government.
E. Opportunity of being heard [Section 76(5)]
An opportunity of hearing shall be granted where a request is received in
writing from the person to whom SCN was issued.
F. Time limit for issuance of order [Section 76(6) & (7)]
The proper officer shall issue an order within 1 year from the date of issue
of the notice.
Where the issuance of order is stayed by an order of the Court or Appellate Tribunal,
the period of such stay shall be excluded in computing the period of 1 year.
G. Order must be a speaking order [Section 76(8)]
The proper officer, in his order, shall set out the relevant facts and the basis
of his decision.

H. Adjustment of amount payable under section 76(1) and (3) [Section

76(9), (10) & (11)]
The amount paid to the Government under sub-section (1) or sub-section
(3) shall be adjusted against the tax payable, if any, by the person in relation
to the supplies referred to in sub-section (1).
Where any surplus is left after the adjustment under sub-section (9), the
amount of such surplus shall either be credited to the Consumer Welfare Fund
or refunded to the person who has borne the incidence of such amount.
The person who has borne the incidence of the amount, may apply for the
refund of the same in accordance with the provisions of section 54.
6. TAX WRONGFULLY COLLECTED AND PAID

TO CENTRAL GOVERNMENT OR STATE
GOVERNMENT [SECTION 77]
A registered person who has paid the CGST and SGST or, as the case may be, the
CGST and the UTGST on a transaction considered by him to be an intra-State
supply, but which is subsequently held to be an inter-State supply, shall be
refunded the amount of taxes so paid in such manner and subject to such
conditions as may be prescribed.
A registered person who has paid IGST on a transaction considered by him to be
an inter-State supply, but which is subsequently held to be an intra-State supply,
shall not be required to pay any interest on the amount of CGST and SGST or, as
the case may be, the CGST and the UTGST tax payable.
Similar provisions are contained in section 19 of the IGST Act, 2017.
Section 19 provides that a registered person who has paid IGST on a supply
considered by him to be an inter-State supply, but which is subsequently held to
be an intra-State supply, shall be granted refund of the amount of IGST so paid in
such manner and subject to such conditions as may be prescribed. A registered
person who has paid CGST and SGST or, as the case may be, the CGST and the
UTGST, on a transaction considered by him to be an intra-State supply, but which
is subsequently held to be an inter-State supply, shall not be required to pay any
interest on the amount of IGST payable.

(1) Ram Associates, a registered person, pays IGST on a transaction

treating the same as inter-State supply by mistake, though it was an
intra-state supply. In this case, Ram Associates has to pay CGST and
SGST/UTGST, without any interest. He can thereafter claim refund of IGST which
was erroneously paid.
7. RECOVERY PROCEEDINGS [SECTIONS 78 & 79]

The recovery proceedings are final steps towards the realisation of any tax or
amount, which has been confirmed as payable after following the due process of
adjudication by the proper officer. These recovery provisions under the
CGST Act, 2017 lay down a well-defined procedure which is as follows:
A. Initiation of recovery proceedings [Section 78]

Any amount payable by a taxable person in
pursuance of an order passed under this Act must
be paid by such person within a period of 3 months
from the date of service of such order. If a taxable
person fails to dos so, recovery proceedings are initiated against him.
However, where the proper officer considers it expedient in the interest of
revenue, he may, for reasons to be recorded in writing, require the said
taxable person to make such payment within such period less than a
period of 3 months as may be specified by him.
B. Recovery of tax [Section 79]
If the payable amount is not paid by a person within the specified time limit
of 3 months, recovery proceedings shall be initiated and various actions
may be taken by the recovery officer, for realisation of Government dues.
Recovery of taxes can also be made from distinct persons [referred to in
section 25(4) & (5) 2] present in different States/ UTs.
The options for recovery of Government dues include deduction of money
from any amount payable to such tax payer, detaining and selling any
goods, directing any other person from whom the money is due to such
person, attaching any property belonging to the defaulter etc.
2
Concept of distinct persons has been explained in detail in Chapter 2 – Supply under GST in
Module 1 of the Study Material.

MODES OF RECOVERY OF TAX [SECTION 79(1)]

Where any amount payable by a person to the
Government under any of the provisions of this Act
or the rules made thereunder is not paid, the
proper officer shall proceed to recover the amount
by one or more of the following modes, namely:
(i) Recovery by deduction from any money owed [Section 79(1)(a)
read with rule 143]
The proper officer may deduct or may require any other specified
officer to deduct the amount so payable from any money owing to
such person [referred as ‘defaulter’] which may be under the control of
the proper officer or such other specified officer.
Specified officer shall mean any officer of the Central Government or

a State Government or the Government of a Union territory or a local
authority, or of a Board or Corporation or a company owned or
controlled, wholly or partly, by the Central Government or a State
Government or the Government of a Union territory or a local
authority.
(ii) Recovery by sale of goods under the control of proper officer

[Section 79(1)(b) read with rule 144]
 The proper officer may recover or may require any other
specified officer to recover the amount so payable from a
defaulter by detaining and selling any goods [through a process
of auction, including e-auction] belonging to such person which
are under the control of the proper officer or such other
specified officer.
 The proper officer shall prepare an inventory and estimate the
market value of such goods and proceed to sell only so much of
the goods as may be required for recovering the amount
payable along with the administrative expenditure incurred on
the recovery process.
 Where the defaulter pays the amount under recovery, including
any expenses incurred on the process of recovery, before the
issue of the notice for auction, the proper officer shall cancel the
process of auction and release the goods.

(iii) Garnishee proceedings - Recovery from a third person [Section

79(1)(c) read with rule 145]
 The proper officer may, by a notice in prescribed form, in
writing, require any other person:
 from whom money is due/may become due to such person or
 who holds/may subsequently hold money for/on account
of such person to pay to the Government
 either forthwith upon the money becoming due or being
held, or
 within the time specified in the notice not being before the
money becomes due or is held,
so much of the money as is sufficient to pay the amount due
from such person or the whole of the money when it is equal to
or less than that amount.
 Every person to whom the notice is issued hereunder shall be
bound to comply with such notice.
 Where any such notice is issued to a post office, banking
company or an insurer, it shall not be necessary to produce any
pass book, deposit receipt, policy or any other document for the
purpose of any entry, endorsement or the like being made
before payment is made, notwithstanding any rule, practice or
requirement to the contrary.
 In case the person to whom notice is issued hereunder, fails to
make the payment in pursuance thereof to the Government, he
shall be deemed to be a defaulter in respect of the amount
specified in the notice and all the consequences of this Act or
the rules made thereunder shall follow.
 The officer issuing such notice may, at any time, amend or
revoke the notice or extend the time for making any payment in
pursuance of the notice.
 Any person making any payment in compliance with the notice
issued hereunder shall be deemed to have made the payment
under the authority of the person in default.

 Further, such payment being credited to the Government shall

be deemed to constitute a good and sufficient discharge of the
liability of such person to the person in default to the extent of
the amount specified in the receipt.
 Any person discharging any liability to the person in default
after service on him of the notice shall be personally liable to the
Government to the extent of the liability discharged or to the
extent of the liability of the person in default for tax, interest and
penalty, whichever is less.
 Where a person on whom a notice is served hereunder proves to
the satisfaction of the officer issuing the notice that:
 the money demanded/any part thereof was not due to the
person in default or
 he did not hold any money for/on account of the person in
default, at the time the notice was served on him, nor is
the money demanded or any part thereof, likely to become
due to the said person/be held for/on account of such
person,
nothing contained in this section shall be deemed to require the
person on whom the notice has been served to pay to the
Government any such money or part thereof.
 Where the third person makes the payment of the amount
specified in the notice, the proper officer shall issue a certificate
in prescribed form to the third person clearly indicating the
details of the liability so discharged.
(iv) Recovery by sale of movable/immovable property [Section
79(1)(d) read with rules 147, 148, 149, 150 and 154]
 The proper officer may, in accordance with the rules to be made
in this behalf, distrain any movable or immovable property
belonging to or under the control of such person, and detain the
same until the amount payable is paid; and in case, any part of
the said amount payable or of the cost of the distress or keeping
of the property, remains unpaid for a period of 30 days next
after any such distress, may cause the said property to be sold
[through auction including e-auction] and with the proceeds of

such sale, may satisfy the amount payable and the costs
including cost of sale remaining unpaid and shall render the
surplus amount, if any, to such person [Section 79(1)(d)].
 The proper officer shall prepare a list of movable and immovable
property belonging to the defaulter, estimate their value as per
the prevalent market price and issue an order of attachment or
distraint and a notice for sale prohibiting any transaction with
regard to such movable and immovable property as may be
required for the recovery of the amount due.
In case of
attachment/distraint of
an immovable property order shall be affixed on the

property till the confirmation of
sale
a movable property proper officer shall seize the

property and take its custody.
 Stamp duty/any other tax/fee payable on transfer of such

property shall be paid by the transferee to the Government.
 Any property in a debt not secured by a negotiable instrument, a
share in a corporation, or other movable property not in the
possession of the defaulter except for property deposited in/in
the custody of any Court shall be attached in the manner
provided in rule 151 [discussed subsequently in this chapter].
 Where any claim is preferred/any objection is raised with regard
to the attachment/distraint of any property by a person claiming
that he had some interest in/was in possession of, the property
in question, proper officer shall investigate the same and
postpone the sale till such time.
 If proper officer finds merit in his claims/objection upon
investigation, proper officer will release the property, wholly or
partly. Otherwise, the proper officer will reject the claim and
proceed with the process of sale through auction.

 Where the defaulter pays the amount under recovery, including

any expenses incurred on the process of recovery, before the
issue of the notice for auction, the proper officer shall cancel the
process of auction and release the goods.
 The amounts so realised from the sale of goods, movable or
immovable property, for the recovery of dues from a defaulter
shall,:-
(a) first, be appropriated against the administrative cost of the
recovery process;
(b) next, be appropriated against the amount to be recovered;
(c) next, be appropriated against any other amount due from
the defaulter under the CGST Act or the IGST Act or the
UTGST Act or any of the SGST Act and the rules made
thereunder; and
(d) any balance, be paid to the defaulter.
 Where the property to be sold is a negotiable instrument or a
share in a corporation, the proper officer may, instead of selling
it by public auction, sell such instrument or a share through a
broker and the said broker shall deposit to the Government so
much of the proceeds of such sale, reduced by his commission,
as may be required for the discharge of the amount under
recovery and pay the amount remaining, if any, to the owner of
such instrument or a share.
 Any officer/other person who has a duty to perform in
connection with such sale will not acquire any interest in
property sold.
 No such sale will take place on Sundays/other general holidays
recognized by Government.
 Proper officer may seek assistance from jurisdictional police
station.

(v) Recovery as arrears of land revenue [Section 79(1)(e) read with

rule 155]
 The proper officer may prepare a certificate in prescribed form
signed by him specifying the amount due from such person and
send it to the Collector of the district in which such person owns
any property or resides or carries on his business or to any
officer authorised by the Government and the said Collector or
the said officer, on receipt of such certificate, shall proceed to
recover from such person the amount specified thereunder as if
it were an arrear of land revenue.
(vi) Recovery as fine imposed by Magistrate [Section 79(1)(f) read
with rule 156]
Notwithstanding anything contained in the Code of Criminal
Procedure, 1973, the proper officer may file an application to the
appropriate Magistrate in prescribed form to recover from the person
concerned the amount specified thereunder and such Magistrate shall
proceed to recover from such person amount specified thereunder as
if it were a fine imposed by him.
(vii) Recovery through execution of a decree, etc. [Rule 146]
Where any amount is payable to the defaulter in the execution of a
decree of a Civil Court for the payment of money or for sale in the
enforcement of a mortgage or charge, the proper officer shall send a
request to the said court and the court shall, subject to the provisions
of the Code of Civil Procedure, 1908, execute the attached decree, and
credit the net proceeds for settlement of the amount recoverable.
(viii) Recovery through surety [Rule 157]
Where any person has become surety for the amount due by the
defaulter, he may be proceeded against under this Chapter as if he
were the defaulter.
(ix) Recovery from company in liquidation [Rule 160]
Where the company is under liquidation as specified in section 88, the
Commissioner shall notify the liquidator for the recovery of any
amount representing tax, interest, penalty or any other amount due
under the Act in prescribed form.

Other provisions governing recovery of tax [Section 79(2), (3) & (4)]
 Where the terms of any bond or other instrument executed under this Act or
any rules or regulations made thereunder provide that any amount due under
such instrument may be recovered in the manner laid down in sub-section (1),
the amount may, without prejudice to any other mode of recovery, be
recovered in accordance with the provisions of that sub-section [Section 79(2)].
 Where any amount of tax, interest or penalty is payable by a person to the
Government under any of the provisions of this Act or the rules made
thereunder and which remains unpaid, the proper officer of State tax or
Union territory tax, during the course of recovery of said tax arrears, may
recover the amount from the said person as if it were an arrear of State tax
or Union territory tax and credit the amount so recovered to the account of
the Government [Section 79(3)].
 Where the amount recovered under sub-section (3) is less than the amount
due to the Central Government and State Government, the amount to be
credited to the account of the respective Governments shall be in
proportion to the amount due to each such Government [Section 79(4)].
8. PAYMENT OF TAX AND OTHER AMOUNT IN

INSTALMENTS [SECTION 80]
Considering various business aspects, the provisions for
payment of all such amounts, other than self-assessed
tax, in instalments have also been made in the Act.
A person can avail this benefit of payment in instalments, by making an
application to the Commissioner by specifying reasons for such request.
On receipt of application, the Commissioner may allow the payment of amount in
instalments, subject to maximum 24 monthly instalments and on payment of
applicable interest.
If there is default in payment of any one instalment then the whole outstanding
balance shall become due and payable immediately.
Provisions of section 80 read alongwith rule 158 of the CGST Rules, 2017 have
been explained in detail as under:
 A taxable person, seeking extension of time for the payment of taxes or any
amount due under the Act or for allowing payment of such taxes or amount
in instalments, shall furnish an application for the same in prescribed form.

 Commissioner shall call for a report from the jurisdictional officer about the
financial ability of the taxable person to pay the said amount.
 Commissioner may, upon consideration of the same, for reasons to be
recorded in writing, extend the time for payment or allow payment of any
amount due under this Act, other than the amount due as per the liability
self-assessed in any return, by such person in monthly instalments not
exceeding 24, subject to payment of interest under section 50 and subject
to such conditions and limitations as may be prescribed.
 However, where there is default in payment of any one instalment on its due
date, the whole outstanding balance payable on such date shall become
due and payable forthwith and shall, without any further notice being
served on the person, be liable for recovery.
 Facility of payment in instalments not allowed in certain cases: The
facility of payment in instalments shall not be allowed where -
(a) the taxable person has already defaulted on the payment of any
amount under the CGST Act or IGST Act or UTGST Act or any of the
SGST Act, for which the recovery process is on;
(b) the taxable person has not been allowed to make payment in
instalments in the preceding financial year under the Act or the IGST
Act or UTGST Act or any of the SGST Act;
(c) the amount for which instalment facility is sought is less than ` 25,000.
9. TRANSFER OF PROPERTY TO BE VOID IN

CERTAIN CASES [SECTION 81]
 Where a person, after any amount has become due
from him, creates a charge on or parts with the
property belonging to him or in his possession by way of sale, mortgage,
exchange, or any other mode of transfer whatsoever of any of his properties in
favour of any other person with the intention of defrauding the Government
revenue, such charge or transfer shall be void as against any claim in respect of
any tax or any other sum payable by the said person.
 However, such charge or transfer shall not be void if it is made for adequate
consideration, in good faith and without notice of the pendency of such
proceedings under this Act or without notice of such tax or other sum payable
by the said person, or with the previous permission of the proper officer.

10. TAX TO BE FIRST CHARGE ON PROPERTY

[SECTION 82]
Notwithstanding anything to the contrary contained in any law for the time being
in force, save as otherwise provided in the Insolvency and Bankruptcy Code, 2016,
any amount payable by a taxable person or any other person on account of tax,
interest or penalty which he is liable to pay to the Government shall be a first
charge on the property of such taxable person or such person.
11. PROVISIONAL ATTACHMENT TO PROTECT

REVENUE IN CERTAIN CASES [SECTION 83]
 Where during the pendency of any proceedings under
section 62 or section 63 or section 64 or section 67 or
section 73 or section 74, the Commissioner is of the
opinion that for the purpose of protecting the interest
of the Government revenue, it is necessary so to do,
he may, by order in writing attach provisionally any property, including bank
account, belonging to the taxable person in such manner as may be
prescribed [Section 83(1)].
 Every such provisional attachment shall cease to have effect after the expiry
of a period of one year from the date of the order made under sub-section
(1) [Section 83(2)].
The related provisions contained in CGST Rules are as follows:
(i) Provisional attachment of property [Rule 159]
 Where the Commissioner decides to attach any property, including
bank account in accordance with aforesaid provisions, he shall pass an
order to that effect mentioning therein, the details of property which
is attached.
 The Commissioner shall send a copy of the order of attachment to the
concerned Revenue Authority or Transport Authority or any such
Authority to place encumbrance on the said movable or immovable
property, which shall be removed only on the written instructions from
the Commissioner to that effect.

 Where the property attached is of perishable or hazardous nature, and

if the taxable person pays:
(i) an amount equivalent to the market price of such property
or
(ii) the amount that is or may become payable by the taxable
person
whichever is lower
then such property shall be released forthwith, by an order in
prescribed form, on proof of payment.
 However, where the taxable person fails to pay the amount referred
above in respect of the said property of perishable/hazardous nature,
the Commissioner may dispose of such property and the amount
realized thereby shall be adjusted against the tax, interest, penalty, fee
or any other amount payable by the taxable person.
 Any person whose property is attached may within 7 days of the
attachment, file an objection to the effect that the property attached
was or is not liable to attachment, and the Commissioner may, after
affording an opportunity of being heard to the person filing the
objection, release the said property by an order.
 The Commissioner may, upon being satisfied that the property was, or
is no longer liable for attachment, release such property by issuing an
order.
(ii) Attachment of debts and shares, etc. [Rule 151]
 A debt not secured by a negotiable instrument, a share in a
corporation, or other movable property not in the possession of the
defaulter except for property deposited in, or in the custody of any
court shall be attached by a written order in prescribed form
prohibiting:
(a) in the case of a debt, the creditor from recovering the debt and
the debtor from making payment thereof until the receipt of a
further order from the proper officer;
(b) in the case of a share, the person in whose name the share may
be standing from transferring the same or receiving any
dividend thereon;

(c) in the case of any other movable property, the person in

possession of the same from giving it to the defaulter.
 A copy of such order shall be affixed on some conspicuous part of the
office of the proper officer, and another copy shall be sent, in the case
of debt, to the debtor, and in the case of shares, to the registered
address of the corporation and in the case of other movable property,
to the person in possession of the same.
 A debtor, prohibited hereunder, may pay the amount of his debt to
the proper officer, and such payment shall be deemed as paid to the
defaulter.
(iii) Attachment of property in custody of courts or Public Officer [Rule
152]
 Where the property to be attached is in the custody of any Court or
Public Officer, the proper officer shall send the order of attachment to
such court or officer, requesting that such property, and any interest
or dividend becoming payable thereon, may be held till the recovery
of the amount payable.
(iv) Attachment of interest in partnership [Rule 153]
 Where the property to be attached consists of an interest of the
defaulter, being a partner, in the partnership property, the proper
officer may make an order charging the share of such partner in the
partnership property and profits with payment of the amount due
under the certificate, and may, by the same or subsequent order,
appoint a receiver of the share of such partner in the profits, whether
already declared or accruing, and of any other money which may
become due to him in respect of the partnership, and direct accounts
and enquiries and make an order for the sale of such interest or such
other order as the circumstances of the case may require.
 The other partners shall be at liberty at any time to redeem the
interest charged or, in the case of a sale being directed, to purchase
the same.

12. CONTINUATION AND VALIDATION OF

CERTAIN RECOVERY PROCEEDINGS
[SECTION 84]
Where any notice of demand in respect of any tax, penalty, interest or any other
amount payable under this Act, (hereafter in this section referred to as
Government dues), is served upon any taxable person or any other person and
any appeal or revision application is filed or any other proceedings is initiated in
respect of such Government dues, then:
(a) where such Government dues are enhanced in such appeal, revision or other
proceedings, the Commissioner shall serve upon the taxable person or any
other person another notice of demand in respect of the amount by which
such Government dues are enhanced and any recovery proceedings in
relation to such Government dues as are covered by the notice of demand
served upon him before the disposal of such appeal, revision or other
proceedings may, without the service of any fresh notice of demand, be
continued from the stage at which such proceedings stood immediately
before such disposal;
(b) where such Government dues are reduced in such appeal, revision or in
other proceedings ––
(i) it shall not be necessary for the Commissioner to serve upon the
taxable person a fresh notice of demand;
(ii) the Commissioner shall give intimation of such reduction to him and
to the appropriate authority with whom recovery proceedings is
pending;
(iii) any recovery proceedings initiated on the basis of the demand served
upon him prior to the disposal of such appeal, revision or other
proceedings may be continued in relation to the amount so reduced
from the stage at which such proceedings stood immediately before
such disposal.

TEST YOUR KNOWLEDGE

1. Mohan Enterprises is entitled for exemption from tax under GST law. However,
it collected tax from its buyers worth ` 50,000 in the month of August. It has
not deposited the said amount collected as GST with the Government. You are
required to brief to Mohan Enterprises the consequences of collecting tax, but
not depositing the same with Government as provided under section 76.
2. Discuss briefly the time limit for issue of show cause notice as contained
under sections 73 and 74.
3. Is there any time limit prescribed for adjudication of the cases under CGST
Act, 2017? If yes, discuss the same.
4. A person is chargeable with tax in case of fraud. He decides to pay the
amount of demand alongwith interest before issue of notice. Is there any
immunity available to such person?
5. Briefly discuss the modes of recovery of tax available to the proper officer.
6. Enlist the circumstances for which a show cause notice can be issued by the
proper officer under section 73. Specify the time limit for issuance of such
show cause notice as also the time period for issuance of order by the proper
officer under section 73.
7. Subharti Enterprises collected GST on the goods supplied by it from its
customers on the belief that said supply is taxable. However, later it
discovered that goods supplied by it are exempt from GST.
The accountant of Subharti Enterprises advised it that the amount mistakenly
collected by Subharti Enterprises representing as tax was not required to be
deposited with Government. Subharti Enterprises has approached you for
seeking the advice on the same. You are required to advise it elaborating the
relevant provisions.
8. Rajul Associates has been issued a show cause notice (SCN) on 31.12.2021
under section 73(1) on account of short payment of tax during the period
between 01.07.2017 and 31.12.2017. It has been given an opportunity of
personal hearing on 15.01.2022.
Advice Rajul Associates as to what should be the written submissions in the
reply to the show cause notice issued to it.
9. Everest Technologies Private Limited has been issued a show cause notice
(SCN) on 31.01.2022 under section 73(1) on account of short payment of tax

during the period between 01.07.2018 and 31.12.2018. Everest Technologies

Private Limited contends that the show cause notice issued to it is time-barred
in law.
You are required to examine the technical veracity of the contention of
Everest Technologies Private Limited.
10. Anant & Co. self-assessed its tax liability as ` 90,000 for the month of April,
but failed to make the payment.
Subsequently the Department initiated penal proceedings against Anant &
Co. for recovery of penalty under section 73 for failure to pay GST and issued
show cause notice on 10th August which was received by Anant & Co. on 14th
August.
Anant & Co. deposited the tax along with interest on 25th August and
informed the department on the same day.
Department is contending that he is liable to pay a penalty of ` 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. Explain the relevant provisions in brief.
ANSWERS
1. It is mandatory to pay amount, collected from other person representing tax
under GST law, to the Government. Every person who has collected from
any other person any amount as representing the tax under GST law, and
has not paid the said amount to the Government, shall forthwith pay the
said amount to the Government, irrespective of whether the supplies in
respect of which such amount was collected are taxable or not.
For any such amount not so paid, proper officer may issue SCN for recovery
of such amount and penalty equivalent to amount specified in notice.
The proper officer shall, after considering the representation, if any, made
by the person on whom SCN is served, determine the amount due from
such person and thereupon such person shall pay the amount so
determined alongwith interest at the rate specified under section 50 from
the date such amount was collected by him to the date such amount is paid
by him to the Government.
2. The provisions relating to ‘relevant date’ as contained in CGST Act, 2017 are
as under:

(i) In case of section 73 (cases other than fraud/suppression of

facts/willful misstatement), the time-limit for issuance of SCN is
2 years and 9 months from the due date of filing Annual Return for
the Financial Year to which the demand pertains or from the date of
erroneous refund.
(ii) In case of section 74 (cases involving fraud/suppression of facts/willful
misstatement), the time-limit for issuance of SCN is 4 years and
6 months from the due date of filing of Annual Return for the
erroneous refund.
3. The provisions relating to time-limit for adjudication of cases as contained
in section 73 and 74 are as under:
(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 [Section 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 [Section 74(10)].
4. Yes. Person chargeable with tax, shall have an option to pay the amount of
tax along with interest and penalty equal to 15% per cent 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 [Section 74(6)].
5. 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
30 days, 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) By 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
[Section 79].
6. As per section 73, a show cause notice can be issued by the proper officer if
it appears to him that:
 tax has not been paid; or
 tax has been short paid; or
 tax has been erroneously refunded; or
 input tax credit has been wrongly availed or utilized,
for any reason other than the reason of fraud or any wilful misstatement or
suppression of facts to evade tax.
The notice should be issued at least 3 months prior to the time limit
specified for passing the order determining the amount of tax, interest and
any penalty payable by defaulter [Sub-section (2) of section 73].
The order referred herein has to be passed within three years from the due
date for furnishing the 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 [Sub-section (10)
of section 73].
Thus, the time-limit for issuance of show cause notice is 2 years and 9
months from the due date of filing annual return for the financial year to
which the demand pertains or from the date of erroneous refund. As per

section 44(1), the due date of filing annual return for a financial year is
31st day of December following the end of such financial year.
7. The provisions of section 76 make it mandatory on Subharti Enterprises to
pay amount collected from other person representing tax under this Act, to
the Government.
Section 76 stipulates that notwithstanding anything to the contrary
contained in any order or direction of any Appellate Authority or Appellate
Tribunal or Court or in any other provisions of the CGST Act or the rules
made thereunder or any other law for the time being in force, every person
who has collected from any other person any amount as representing the
tax under this Act, and has not paid the said amount to the Government,
shall forthwith pay the said amount to the Government, irrespective of
whether the supplies in respect of which such amount was collected are
taxable or not.
Where any amount is required to be paid to the Government as mentioned
above, and which has not been so paid, the proper officer may serve on the
person liable to pay such amount a notice requiring him to show cause as to
why the said amount as specified in the notice, should not be paid by him
to the Government and why a penalty equivalent to the amount specified in
the notice should not be imposed on him under the provisions of this Act.
The proper officer shall, after considering the representation, if any, made
by the person on whom show cause notice (SCN) is served, determine the
amount due from such person and thereupon such person shall pay the
amount so determined.
The person who has collected any amount as representing the tax, but not
deposited the same with the Government shall in addition to paying the
said amount determined by the proper officer shall also be liable to pay
interest thereon. Interest is payable at the rate specified under section 50.
Interest is payable from the date such amount was collected by him to the
date such amount is paid by him to the Government.
The proper officer shall issue an order within 1 year [excluding the period of
stay order] from the date of issue of the notice. The proper officer, in his
order, shall set out the relevant facts and the basis of his decision.
8. The written submissions in reply to SCN issued to Rajul Associates are as
follows:

i. The show cause notice (SCN) issued for normal period of limitation
under section 73(1) is not sustainable.
ii. The SCN under section 73(1) can be issued at least 3 months prior to
the time limit specified for issuance of order under section 73(10). The
adjudication order under section 73(10) has to be issued within
3 years from the due date for furnishing of annual return for the
financial year to which the short-paid tax relates to.
The due date for furnishing annual return for a financial year ison or
before the 31st day of December following the end of such financial
year [Section 44]. Thus, SCN under section 73(1) can be issued within
2 years and 9 months from the due date for furnishing of annual
return for the financial year to which the short-paid tax relates to.
iii. The SCN has been issued for the period between 01.07.2017 to
31.12.2017 which falls in the financial year (FY) 2017-18. Due date for
furnishing annual return for the FY 2017-18 is 31.12.2018 and 3 years’
period from due date of filing annual return lapses on 31.12.2021.
Thus, SCN under section 73(1) ought to have been issued latest by
30.09.2021.
iv. Since the notice has been issued after 30.09.2021, the entire
proceeding is barred by limitation and deemed to be concluded under
section 75(10).
9. The contention of Everest Technologies Private Limited is not valid in law.
The SCN under section 73(1) can be issued at least 3 months prior to the
time limit specified for issuance of order under section 73(10)
[Section 73(2)]. The adjudication order under section 73(10) has to be issued
within 3 years from the due date for furnishing of annual return for the
financial year to which the short-paid/not paid tax relates to.
The due date for furnishing annual return for a financial year is 31st day of
December following the end of such financial year [Section 44]. Thus, SCN
under section 73(1) can be issued within 2 years and 9 months from the due
date for furnishing of annual return for the financial year to which the short-
paid/not paid tax relates to.
The SCN has been issued for the period between 01.07.2018 to 31.12.2018
which falls in the financial year (FY) 2018-19. Due date for furnishing annual
return for the FY 2018-19 is 31.12.2019 and 3 years’ period from due date of
filing annual return lapses on 31.12.2022. Thus, SCN under section 73(1)

ought to have been issued latest by 30.09.2022. Since in the given case, the
notice has been issued on 31.01.2022, notice is not time-barred.
10. Due date for payment of tax for the month of April is 20th May.
As per section 73, where self-assessed tax is not paid within 30 days from
due date of payment of such tax, penalty equivalent to 10% of tax or
` 10,000, whichever is higher, is payable. 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, Anant & 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., ` 9,000 (10% of ` 90,000) or
(ii) ` 10,000,
whichever is higher, is payable by him. Thus, penalty payable is ` 10,000.
Hence, the stand taken by the Department that penalty will be levied on
Anant & Co. is correct, but the amount of penalty of ` 45,000 is not correct.
Examples/Illustrations/Questions and Answers, as the case may be, given in the
Chapter are based on the position of GST law existing as on 30.04.2021.

AMENDMENTS MADE VIDE THE FINANCE (NO. 2)

ACT, 2019
The Finance (No. 2) Act, 2019 came into force from 01.08.2019. However, the
amendments made in section 2(4) of the CGST Act vide the Finance (No. 2) Act,
2019 would become effective only from a date to be notified by the Central
Government in the Official Gazette. Such a notification has not been issued till
30.04.2021. Therefore, the applicability or otherwise of such amendment for May
2022 and/or November 2022 examinations shall be announced by the ICAI only
after such notification is issued by the Central Government.
In the table given below, the existing provisions 3 of section 2(4) are compared
with the provisions as amended by the Finance (No. 2) Act, 2019.
Once the announcement for applicability of such amendments for examination(s)
is made by the ICAI, students should read the amended provisions given
hereunder in place of the related provisions discussed in the Chapter.
Existing provisions Provisions as amended by Remarks

the Finance (No. 2) Act, 2019
Section 2(4) Section 2(4) The definition

“adjudicating authority” “adjudicating authority” means of adjudicating
means any authority, any authority, appointed or authority
appointed or authorised to authorised to pass any order or proposed to be
pass any order or decision decision under this Act, but does amended to
under this Act, but does not not include the Central Board of exclude the
include the Central Board of Indirect Taxes and Customs, the proposed
Indirect Taxes and Customs, Revisional Authority, the National
the Revisional Authority, the Authority for Advance Ruling, Appellate
Authority for Advance Ruling, the Appellate Authority for Authority for
the Appellate Authority for Advance Ruling, National Advance Ruling
Advance Ruling, the Appellate Authority for from the
Appellate Authority, the Advance Ruling, the Appellate purview of
Appellate Tribunal and the Authority, the Appellate Tribunal adjudicating
Authority referred to in sub- and the Authority referred to in authority.
section (2) of section 171; sub-section (2) of section 171;
3
Provisions existing as on 30.04.2021

AMENDMENTS MADE VIDE THE FINANCE ACT, 2021

The Finance Act, 2021 has come into force from 28.03.2021. However, the
amendments made in the CGST Act and the IGST Act vide the Finance Act, 2021
would become effective only from a date to be notified by the Central
Government in the Official Gazette. Such a notification was not issued till
30.04.2021. Therefore, the applicability or otherwise of such amendments for
May 2022 and/or November 2022 examinations shall be informed by the ICAI by
way of an announcement.
In the table given below, the existing provisions 4 of sections 74, 75 and 83 of the
CGST Act, 2017 are compared with the provisions as amended by the Finance Act,
2021.
Once the announcement for applicability of such amendments for examination(s)
is made by the ICAI, students should read the amended provisions given
hereunder in place of the related provisions discussed in the Chapter.
Existing provisions Provisions as amended Remarks

by the Finance Act,
2021
Section 74 Section 74 Section 74 is being

Sub-section (11) Sub-section (11) amended so as make
seizure and
Where any person Where any person ………
confiscation of goods
………........ concluded. concluded.
and conveyances in
Explanation (1) Explanation (1) transit a separate
(i) …………. (i) …………. proceeding from
(ii) where the notice (ii) where the notice recovery of tax.
under the same under the same
proceedings is proceedings is
issued to the main issued to the main
person liable to pay person liable to pay
tax and some other tax and some other
persons, and such persons, and such
proceedings against proceedings
the main person against the main
4
Provisions existing as on 30.04.2021

have been person have been

concluded under concluded under
section 73 or section section 73 or
74, the proceedings section 74, the
against all the proceedings
persons liable to pay against all the
penalty under persons liable to
sections 122, 125, pay penalty under
129 and 130 are sections 122 and
deemed to be 125 are deemed to
concluded. be concluded.
Section 75 Section 75 An explanation to

Sub-section (12) Sub-section (12) sub-section (12) of
section 75 is being
Notwithstanding anything Notwithstanding
inserted to clarify that
contained ……… section anything contained ………
“self-assessed tax”
79. section 79.
shall include the tax
Explanation.––For the payable in respect of
purposes of this sub- outward supplies, the
section, the expression details of which have
"self-assessed tax" shall been furnished under
include the tax payable section 37, but not
in respect of details of included in the return
outward supplies furnished under
furnished under section section 39.
37, but not included in
the return furnished
under section 39.
Section 83 Section 83 Section 83 is being

Sub-section (1) Sub-section (1) amended so as to
provide that
Where during the Where, after the
provisional
pendency of any initiation of any
attachment shall
proceedings under section proceeding under
remain valid for the
62 or section 63 or section Chapter XII, Chapter
entire period starting
64 or section 67 or section XIV or Chapter XV, the
from the initiation of
73 or section 74, the Commissioner is of the
any proceeding under

Commissioner is of the opinion that for the Chapter XII, Chapter

opinion that for the purpose of protecting XIV or Chapter XV till
purpose of protecting the the interest of the the expiry of a period
interest of the Government revenue it of one year from the
Government revenue, it is is necessary so to do, date of order made
necessary so to do, he he may, by order in thereunder.
may, by order in writing writing, attach
attach provisionally any provisionally, any
property, including bank property, including
account, belonging to the bank account,
taxable person in such belonging to the
manner as may be taxable person or any
prescribed. person specified in sub-
section (1A) of section
122, in such manner as
may be prescribed.

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19

© The Institute of Chartered Accountants of India

Accordingly, the GST law contains elaborate provisions

Tax short paid or

© The Institute of Chartered Accountants of India

Before proceeding to understand the demands and recovery provisions, let us

 Adjudicating authority means any authority, appointed or authorised to

 Appellate Authority: means an authority appointed or authorised to hear

 Commissioner: means the Commissioner of central tax and includes the

© The Institute of Chartered Accountants of India

3. DETERMINATION OF TAX NOT PAID/ SHORT

 The incidence of short payment/non-payment of tax or erroneous refund or

 Limitation period: One of the fundamental

© The Institute of Chartered Accountants of India

 The issuance of SCN grants an opportunity to such person to defend himself

The provisions contained in section 73 and section 74 have been discussed

© The Institute of Chartered Accountants of India

 The proper officer may, before serving of such SCN,

Thus, the time-limit for issuance of SCN is 2 years and 9

 Where a notice has been issued for any period on a person

© The Institute of Chartered Accountants of India

 The Service of such Statement shall be deemed to be Service of

© The Institute of Chartered Accountants of India

reasons other than fraud or any wilful misstatement or

© The Institute of Chartered Accountants of India

 The quantum of penalty will remain same whether the tax

© The Institute of Chartered Accountants of India

section 73 are generally not invoked in case of delayed filing of the

 In a case, where the non-payment /short

© The Institute of Chartered Accountants of India

Thus, the time-limit for issuance of SCN is 4 years and

 Where a notice has been issued for any period on a person

© The Institute of Chartered Accountants of India

issuance of notice. It emphatically stipulates that in such cases, no

© The Institute of Chartered Accountants of India

issuance of SCN. All proceedings in respect of the said SCN shall

I. For the purposes of section 73 and section 74:

© The Institute of Chartered Accountants of India

The above provisions have been summarized in the following tables:

S. No. Action by tax Amount of penalty payable Remarks

1. Tax amount, along No penalty 15% of the The penalty

© The Institute of Chartered Accountants of India

2. Tax amount, along No penalty. All 25% of the tax or any

4. Tax amount, along 10% of the tax 100% of the

S. No. Nature of Time for issuance of Time for issuance of

1. Normal Cases Within 2 years and 9 Within 3 years from the

© The Institute of Chartered Accountants of India

2. Fraud Cases Within 4 years and 6 Within 5 years from the

3. Any amount No time limit Within 1 year from the

4. Non- payment No need to issue a SCN Recovery proceedings

Monetary limits prescribed for issuance of SCNs by different level of officers

CGST Officer Monetary limit Monetary limit Monetary limit

Superintendent Not exceeding Not exceeding Not exceeding

Deputy or Above ` 10 lakh Above ` 20 lakh Above ` 20 lakh

© The Institute of Chartered Accountants of India

Additional or Above ` 1 crore Above ` 2 crores Above ` 2 crores

The central tax officers of Audit Commissionerates and Directorate General of

4. GENERAL PROVISIONS RELATING TO

© The Institute of Chartered Accountants of India

B. In case charges of fraud/any wilful misstatement/suppression of