Section 61 of the CGST Act, 2017:
61.Scrutiny of returns.
“(1) The proper
officer may scrutinize the return and related particulars furnished by the
registered person to verify the correctness of the return and inform him of the
discrepancies noticed, if any, in such manner as may be prescribed and seek his
explanation thereto.
(2) In case the
explanation is found acceptable, the registered person shall be informed
accordingly and no further action shall be taken in this regard.
(3) In case no
satisfactory explanation is furnished within a period of thirty days of being
informed by the proper officer or such further period as may be permitted by
him or where the registered person, after accepting the discrepancies, fails to
take the corrective measure in his return for the month in which the
discrepancy is accepted, the proper officer may initiate appropriate action
including those under section 65 or section 66 or section 67, or proceed to
determine the tax and other dues under section 73 or section74.”
Rule
99 of the CGST Rules,2017:
(1) Where any
return furnished by a registered person is selected for scrutiny, the proper
officer shall scrutinize the same in accordance with the provisions of section
61 with reference to the information available with him, and in case of any
discrepancy, he shall issue a notice to the said person in FORM GST ASMT-10,
informing him of such discrepancy and seeking his explanation thereto within
such time, not exceeding thirty days from the date of service of the notice or
such further period as may be permitted by him and also, where possible,
quantifying the amount of tax, interest and any other amount payable in
relation to such discrepancy.
(2) The
registered person may accept the discrepancy mentioned in the notice issued
under sub-rule (1), and pay the tax, interest and any other amount arising from
such discrepancy and inform the same or furnish an explanation for the
discrepancy in FORM GST ASMT-11 to the proper officer.”
Moreover, in instruction
No. 02/2022-GST dated 22.03.2022 issued by CBIC the procedure
that needs to be followed before invoking section 73 or section 74 has been
stated. The same has been reproduced below:
“6.8 In case no
satisfactory explanation is furnished by the registered person in FORM GST
ASMT-11 within a period of thirty days of being informed by the proper officer
or such further period as may be permitted by him or where the registered
person, after accepting the discrepancies, fails to pay the tax, interest and
any other amount arising from such discrepancies, the proper officer, may
proceed to determine the tax and other dues under section 73 or section 74.
Needless to mention, for proceeding under section 73 or section 74, monetary
limits as specified in Circular No. 31/05/2018-GST dated 9th February 2018
shall be adhered to. However, if the proper officer is of the opinion that the
matter needs to be pursued further through audit or investigation to determine
the correct liability of the said registered person, then he may refer the
matter to the jurisdictional Principal Commissioner / Commissioner through the
divisional Assistant / Deputy Commissioner, for the decision whether the matter
needs to be referred to Audit Commissionerate or Anti-evasion Wing of the
Commissionerate, as the case may be.”
On a cumulative
reading of the above provisions and the corresponding Rules, the following
position appears to emerge:
a) The proper officer may scrutinize returns and
related particulars and in case any discrepancies are noticed, the same shall
be informed in ASMT 10 seeking explanation from the taxable person
b) If the explanation offered by the petitioner in
ASMT 11 is acceptable, no further action shall be taken.
c) In case the explanation is not satisfactory or no
explanation is offered or the taxable person fails to take corrective measures
in the return for the month in which the discrepancies were noticed and
accepted, the proper officer may proceed to initiate appropriate action under
Section 65, 66, 67, 73 or 74 of the Act.
d) Thereafter, the proper officer shall proceed to
pass order in GST DRC-07 under Section 73 and 74 after issuing GST DRC-01A in
terms of Rule 142 (1A) and GST DRC-01.
The legislative
intent is evident from the aforementioned provisions and instructions,
stipulating that subsequent to a thorough examination of the returns, any
disparities must be communicated to the taxpayer in the prescribed Form ASMT 10
& DRC-01A. Should the taxpayer either fail to provide a satisfactory
explanation or acknowledge the disparities but neglect to remit the
corresponding tax, it is only then that the authorized officer may consider
invoking Section 73 or Section 74 of the Central Goods and Services Tax (CGST)
Act, 2017. However, if the authorized officer deems it necessary to further
pursue the matter through an audit or investigation in order to ascertain the
accurate tax liability of the aforementioned registered individual, they may subsequently
forward the matter to the Principal Commissioner / Commissioner having
jurisdiction.
In accordance
with the judgment rendered in the case of Vadivel Pyrotech Private Limited vs.
Assistant Commissioner (ST) (Madras High Court); W.P. (MD)No. 22642 of 2022 and
W.M.P.(MD )Nos.16803 and 16804 of 2022; dated 27/09/2022, it was
conclusively established that...
“5. (e) It is thus clear that any proceeding in GST DRC-01A/1
culminating in an Order in GST DRC-07, if pursuant to Scrutiny under Section 61
of the TNGST Act ought to be preceded by issuance of Form ASMT 10. In the
present case, though ASMT 10 was issued on 22.12.2021 pointing out certain
discrepancies, the GST DRC-01 dated 15.02.2022 and the impugned order in GST
DRC-07 dated 09.05.2022 are made on the basis of issues that are completely
different from what was set out in Form ASMT 10 dated 22.12.2021. ASMT 10 is mandatory before proceeding to issue GST DRC-01,
failure to issue the same in respect of the discrepancies forming the subject
matter in GST DRC-01 dated 15.02.2022 culminating in GST DRC-07 dated
09.05.2022 would vitiate the entire proceedings. It is trite law that when the
Act prescribes the method and manner for performing an act, such act shall be
performed in compliance with the said method and manner and no other manner. “
Accordingly,
when the Act stipulates a specific method and manner for executing an action,
said action must strictly adhere to the prescribed method and manner, without
deviation. The designated officer is precluded from initiating the issuance of
DRC-01 in relation to matters that were not previously communicated to the
taxpayer in form ASMT 10 & DRC-01A subsequent to the examination of
returns.