Ascertainment u/s 74(5) CGST is of either self-ascertainment or an ascertainment by the proper officer: Madras HC

Ascertainment u/s 74(5) CGST is of either self-ascertainment or an ascertainment by the proper officer: Madras HC

Shivani Bhati | Nov 21, 2021 |

Ascertainment u/s 74(5) CGST is of either self-ascertainment or an ascertainment by the proper officer: Madras HC

Ascertainment u/s 74(5) CGST is of either self-ascertainment or an ascertainment by the proper officer: Madras HC

Writ Petition filed before Madras HC under Article 226 of the Constitution of India praying to Writ of Mandamus, direction restraining the 1st and 2nd respondent from demanding any amount from the petitioner except by following due process of law and further direct to refund of Rs. 2 crores along with statutory interest under CGST Act 2017 and also return the documents seized at the time of search on 22.10.2019.

The issue raised by the Respondent as to whether the petitioner is entitled to the refund of the amounts paid during the investigation and the revenue relies upon the provisions of Section 74(5) of the Act. It would be relevant, in this context, to understand the Scheme of assessment as set out under Section 74.

Facts

  • The petitioner is registered as a Small-Scale Industry under the MSME Act and is an assessee under the provisions of the Goods and Service Tax Act, 2017 (Act).
  • The petitioner is a dealer in pulses, dhals, and flour and manufactures food products, grain mill products, and dhal. The dispute revolves around the short compass of whether the products sold are branded or unbranded.
  • If unbranded, then there is no liability to GST. While the petitioner uses the trademarks Shivam, Trishul, Cycle, and Nandhi, they claim that these are not registered marks and moreover that the petitioner voluntarily forgoes any actionable claim or enforceable right in regard to the usage of the aforesaid marks.
  • This is a matter of assessment and the veracity or otherwise of the affidavit filed by the petitioner on 29.09.2017 will have to be tested by the Assessing Authority in the course of the assessment itself.
  • An investigation was conducted in the premises of the petitioner on 22.10.2019 and various documents and registers were seized. In the course of that investigation, a statement was recorded from one S.A.Kumar, who has also deposed to the affidavit filed in support of this writ petition, to the effect that the petitioner has not discharged its GST liability correctly.
  • In the statement, he accepts the mistakes in the computation of GST and assures the respondents that the liability would be discharged at the earliest with applicable interest. A scheme of payment has also been set out for the tax remaining unpaid.
  • The petitioner has stated that it has no liability to tax, that the MD and officials were forced to accept liability to tax and the admission was, by no means, voluntary. The petitioner has also made serious allegations about the high-handedness of the authorities during the conduct of the search.
  • The aforesaid allegations have been strenuously denied by the respondents. According to the respondents, the petitioner has been engaging in large-scale tax evasion and has not been paying tax that it is legitimately bound to pay. It was for this reason that it had voluntarily offered to remit tax. that the payments were voluntary as, if they had been coerced as alleged, the payments would have stopped with the first installment.

Findings

Section 74(5) provides is the first opportunity for an assessee to pay tax, interest, and penalty liability even prior to the issuance of a show-cause notice and such acceptance will have to be in the form of either self-ascertainment or an ascertainment by the proper officer.

The Statement recorded at the time of search admitting GST liability and setting the scheme of installments have been retracted by the petitioner on 05.11.2019 and the petitioner has consistently and vehemently been contested the liability to tax. Importantly, the records also do not contain any ascertainment by the officer. The tabulation of payments, in this case, is joint, the petitioner offering a sum of Rupees Seven Crores (since retracted) and the Officer to ascertain the balance. This exercise has not been carried out and, with this, the requirement of ‘ascertainment’ under Section 74(5), fails. In this case, inquiry and investigation are ongoing, personal hearings have been afforded and both the parties are fully geared towards issuing/receiving a show-cause notice and taking matters forward. Thus, the understanding and application of Section 74(5) in this case, is, in my view, wholly misconceived.

Judgment

Madras HC held that the mandamus as sought for by the petitioner is issued. The amount collected, of Rupees Two Crores shall be refunded to the petitioner within a period of four (4) weeks from today.

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