the essay of 8 August 2018 · the untouched capture
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<p align="left"><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2">AUGUST 08, 2018 </font></strong></font></p>
<p align="center"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#623094" span="span"><strong>Starting with Show Cause Notice</strong></font></p>
<p align="center"><u><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2">By Vijay Kumar </font></strong></font></u></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Dispute Resolution - the litigation road</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the proper officer has a doubt (if it appears to him, how it appears is nothing short of a miracle) that</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Any tax has </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. not been paid or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. short paid or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. erroneously refunded </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Input Tax has been <em>wrongly availed orutilised </em></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Some Doubts: Should the credit be wrongly availed or wrongly utilized; that is, should the 'availing' be wrong or should the 'utilisation' be wrong or both and what is availing; what is the difference between availing and utilising. How do you know whether a particular credit is wrongly utilised or rightly done? For those of us who have a nodding acquaintance with Central Excise and Service Tax litigation, these questions are familiar and have gone in and out of several judicial edifices tirelessly. It is a déjà vu. We are going to experience all these in the coming days, </em></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He (The Proper Officer) <strong>shall </strong> issue the Show Cause Notice to the person who appeared to be the offender to the Proper Officer. Don't get confused, the offender (also known as taxpayer) need not appear before the proper officer (at least at this stage); it is enough, if it appears to the Proper Officer that tax has not been paid or credit is availed wrongly. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A little about the basic foundation on which the great edifice stands, that is the Show Cause Notice.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Show Cause Notice culminates in the Adjudication order at the first stage. This order is to be issued within three years from</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. the date of erroneous refund. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Then, when is the Show Cause Notice to be issued? It has to be issued at least three months prior to the due date for adjudication; that is the last date for issue of Show Cause Notice, is 33 months from the relevant date. What will happen if the notice is not issued within 33 months? Don't forget, there is the suppression clause, about which, we will come to a little later. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the Show Cause Notice is issued at the last moment, the adjudicating authority will have just three months to adjudicate. And that includes three adjournments of hearing. Future notices for hearing may stipulate that the hearing is fixed at 3.00pm or 3.10 pm or 3.20 pm or 3.30 pm - all three adjournments over! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You can pay the non-paid/short paid tax even before the Show Cause Notice arrives or even within thirty days from the receipt of the notice, to avoid penalty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If it appears to the proper officer that the demand is due to fraud, or any wilful misstatement or suppression of facts to evade tax, the adjudication order can be issued within five years and the notice can be issued at least six months prior to this five year period. When is fraud, misstatement and suppression invoked - When the three-year period is over. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But who is this <em>'proper Officer'</em>? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 2(91) of the <a href="http://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=29&filename=notification/gst/cgst_act/2017/cgst_act_index_2017.htm" target="_blank"><strong>CGST Act</strong></a> defines, <em>"proper officer" in relation to any function to be performed under this Act, means the <strong>Commissioner </strong> or the officer of the central tax who is assigned that function by the <strong>Commissioner in the Board</strong></em>. Are both the Commissioners mentioned in this definition the same? There is a Commissioner and a <strong><em>Commissioner in the Board. </em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 2 (24) defines the Commissioner <em>as "Commissioner" means the Commissioner of central tax and includes the Principal Commissioner of central tax appointed under section 3 </em>…… </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 2(25) defines the <strong><em>Commissioner in the Board </em></strong>as "Commissioner in the Board" means the Commissioner referred to in section 168. So, you have to go to Section 168 to find out who this <strong><em>Commissioner in the Board </em></strong>is. Section 168 clarifies that the Commissioner specified in Section 2(91) <em>shall mean a Commissioner or Joint Secretary posted in the Board </em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Subject to litigation and clarification, we may assume that the Proper Officer is the officer who is assigned a function by the <strong><em>Commissioner in the Board. </em></strong>And for issue of Show Cause Notices and adjudication, the <strong><em>Commissioner in the Board </em></strong>has assigned the functions to the various officers with monetary limits for Central Tax vide Circular 31/05/2018-GST dt.09.02.2018: </font></p>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Superintendent of Central Tax </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Not exceeding Rupees 10 lakhs </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Deputy or Assistant Commissioner of Central Tax </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Above Rupees 10 lakhs and not exceeding Rupees 1 crore </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Additional or Joint Commissioner of Central Tax </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Above Rupees 1 crore without any limit </font></p></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It may be noted that as per Section 5(2), An officer of central tax may exercise the powers and discharge the duties conferred or imposed under this Act on any other officer of central tax who is subordinate to him.This would mean that the Commissioner can issue a SCN and adjudicate the same but as of now his services are not requisitioned by the CBIC. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Once you get the order from the Superintendent, Deputy Commissioner or Additional Commissioner, as the case maybe, what are you supposed to do? You can safely assume that all the orders by these officers will be against you, if you are the person liable to pay the tax. Well, the Law has provided for an efficacious (this only means efficient, but law sounds better when you use such high-sounding words.)appellate remedy. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 107 of the <a href="http://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=29&filename=notification/gst/cgst_act/2017/cgst_act_index_2017.htm" target="_blank"><strong>CGST Act</strong></a> stipulates,<em> "Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person."</em><em> </em> Please note this is one complex sentence without a comma anywhere. And <em>complex </em> as in grammar not in GST. What is there in a comma when far more serious issues are involved? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There are two appellate authorities, the Commissioner (Appeals) and the Additional Commissioner (Appeals). Any person aggrieved by any decision or order passed by the Deputy or Assistant Commissioner or Superintendent under CGST or SGST or UTGST, may appeal to the Additional Commissioner (Appeals) and for the orders passed by the Additional or Joint Commissioner, appeal lies to the Commissioner (Appeals). [Rule 109A of <a href="http://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=29&filename=notification/gst/cgst-rules/cgst_rules_2017.htm" target="_blank"><strong>CGST Rules, 2017</strong></a>] </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 107(6) states: </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>No appeal <strong>shall be filed </strong> under sub-section (1), unless the appellant has paid— </em></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order, in relation to which the appeal has been filed. </font></em></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This provision puts a bar on the appellant that he shall not file an appeal unless he has made the pre-deposit. Is it mandatory to make the mandatory deposit at the time of filing the appeal or hearing the appeal? In the earlier avatar, the law [s.35F of the CEA, 1944, s.129E of the Customs Act, 1962] stipulated that the appellate authorities <em>"shall not entertain"</em> the appeals unless the pre-deposit is made. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CESTAT, in <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTg0NzI=" target="_blank"><strong>2014-TIOL-2637-CESTAT-MUM</strong></a>, while dismissing the appeals held - </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>A plain reading of the provisions make it abundantly clear that the Tribunal or Commissioner (Appeals) shall not entertain any appeal under section 128, unless the appellant has made a pre-deposit of 7.5% of the duty in such cases, where duty and penalty is in dispute and appeal is filed before tribunal. Therefore, in terms of amended section 129E with effect from 06/08/2014, this tribunal is barred from entertaining any appeal unless the pre-deposit as mentioned in section 129E is complied with. The law is very clear and there is no ambiguity in the matter. In view of the above, we hold that the appeal is not admissible before this Tribunal, inasmuch as the appellants have not complied with the pre-deposit requirements envisaged in section 129E. </em></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Interestingly, the appellant in the said case, later arranged for Demand Drafts of the pre-deposit amount, and approached the CESTAT with an application for restoration of appeal. Subject to the Revenue filing a compliance report, the appeals were restored to their original numbers. See <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTAxNTMw" target="_blank"><strong>2015-TIOL-658-CESTAT-MUM</strong></a>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <strong><a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTI2NDQ3" target="_blank">2017-TIOL-990-HC-AHM-CUS</a></strong>, the Gujarat High Court observed,<em> "Filing of an appeal and entertaining of an appeal are not synonymous. A party may file an appeal within the prescribed period of limitation though it may not be in a position to make the pre-deposit within such time."</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There was an interesting case before the Supreme Court in <em>Ranjit Impex v. Appellate Deputy Commissioner and another </em>decided on 03/09/2013. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellant preferred an appeal before the Deputy Commissioner, Commercial Taxes and at the time of presentation, a sum of Rs.8,52,472/- was required to be deposited as per the calculation made under Section 51 of the Tamil Nadu Value Added Tax Act, 2006 but as it was not done, the Memorandum of Appeal was returned to him. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Division Bench of the Madras High Court held that the proof of deposit of tax has to be produced at the time when the appeal is taken for consideration but not at the time of presentation of appeal. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court observed that the conclusion arrived at by the Division Bench is absolutely justified, for a condition to entertain an appeal does not mean that the Memorandum of Appeal shall be returned because of such non-compliance pertaining to pre-deposit. The only consequences that the appeal shall not be entertained which means the appeal shall not be considered on merits and eventually has to be dismissed on that ground. The Supreme Court granted time up to 30th September 2013 to make the pre-deposit. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will the appeal u/s 107 of the <a href="http://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=29&filename=notification/gst/cgst_act/2017/cgst_act_index_2017.htm" target="_blank"><strong>CGST Act, 2017</strong></a>, therefore, be rejected at the initial stage itself for not paying the pre-deposit? Who will reject the appeal, the appellate authority or the clerk accepting the appeal form? Can the appellate authority reject the appeal without hearing the appellant? Can the pre-deposit be made just before hearing? Can the appellate authority reject the appeal even if pre-deposit is made before the hearing? Will the appellate authority have the power to allow pre-deposit at a later date? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can an appeal filed within time but without the mandatory pre-deposit be considered an appeal in the first place? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">From the appellate authority, you can go in further appeal to the Tribunal, then High Court and Supreme Court. The route map is </font></p>
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<table width="90%" border="1" align="center" cellpadding="3" cellspacing="0">
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<td valign="top"><p><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Authority </strong></font></p></td>
<td valign="top"><p><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Appellate Authority </strong></font></p></td>
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<tr bgcolor="#D9D8F3">
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Superintendent, </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Deputy Commissioner, </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Assistant Commissioner </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Additional Commissioner (Appeals) </font></p></td>
</tr>
<tr bgcolor="#D9D8F3">
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Additional or Joint Commissioner </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Commissioner (Appeals) </font></p></td>
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<tr bgcolor="#D9D8F3">
<td rowspan="2" valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Additional Commissioner (Appeals)</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Commissioner (Appeals) </font></p></td>
<td valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> TRIBUNAL NATIONAL BENCH if one of the issues involved relates to the place of supply.</font></td>
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<td valign="top" bgcolor="#D9D8F3"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TRIBUNAL STATE BENCH in other cases </font></td>
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<td valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> TRIBUNAL STATE BENCH </font></td>
<td valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">High Court </font></td>
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<tr bgcolor="#D9D8F3">
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">High Court </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TRIBUNAL NATIONAL BENCH </font></p></td>
<td valign="top"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Supreme Court </font></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In case you are a determined litigant and manage to reach the Supreme Court and actually win there, do understand that in tax matters, the Supreme Court is not the final authority. The Government can get the law amended retrospectively to undo the Supreme Court Judgement and you are back with your original authority, for the next round. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Charlie Chaplin visualized this long ago. Please click on the link below.</font></p>
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<p align="center"> </p>
<p align="center"><font face="Verdana, Arial, Helvetica, sans-serif"><a href="https://ytcropper.com/cropped/Zd5b67750f21ade" target="_blank"><font size="2">Charlie Chaplin Swallowed by a Factory Machine - Modern Times (1936) </font></a></font></p></td>
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