DEMAND UNDER MODEL GST LAW

Chapter XIV of the Model Goods and Services Tax Act, 2016 (Act’ for short) provides for the demands and recovery of tax. When a demand can be raised by the Government? The tax is payable on self assessment basis. If the assessee pays the tax on self assessment correctly there will be no problem. If there is any short payment or wrong availment of credit then the Department will initiate action against the assessee to demand and recover the same through due process of law.

The Act provides three circumstances for the determination of tax-

Determination of tax not paid or short paid or erroneously refunded – Section 51;
Tax collected but not deposited with the Central Government or State Government – Section 52;
Determination of tax under Section 51

Section 51 provides two circumstances under which the demand can be raised-

Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful misstatement or suppression of facts – Section 51A;
Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts –Section 51B.
Determination of tax under Section 51A

In this case the procedure of determination of tax is as follows-

The proper officer shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has been erroneously been made or who has wrongly availed or utilized input tax credit, requiring him to show cause why he should not pay the amount specified in the notice along with interest payable and penalty under the provisions of the Act or the rules made there under;
If there is a continuation of default as stated above for further period, the proper officer is not required to issue show cause notice. Instead he may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for such periods other than those covered in the preceding para;
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 for such tax periods are the same as are mentioned in the earlier notice;
If the person on whom notice is issued, pays the amount of tax along with interest on the basis of his own ascertainment or as the tax as ascertained by the proper officer before the issue of show cause notice and inform the officer in writing of such payment. The proper officer, on receipt of information, shall not serve any notice or statement;
If the amount paid by the person as above, falls short of the amount actually payable, the proper officer shall proceed to issue the notice as pointed out in the first point;
If the person pays the tax along with interest within 30 days of the receipt of the show cause notice, no penalty shall be payable and all proceedings in respect of the said tax shall be deemed to be concluded;
If the tax is not paid by the person as stated above and he submits his representation before the proper officer, the proper officer shall, after considering the representation, determine the amount of tax, interest and a penalty not exceeding 10% of tax or ₹ 10,000/- whichever is higher, due from such person and issue an order;
The proper officer shall issue the above said order within 3 years from the due date or the actual date, whichever is earlier, for filing of annual return for the year to which the tax not paid or short paid or input tax credit wrongly availed or utilized relates or, as the case may be, within 3 years from the date of erroneous refund.
Determination of tax under Section 51B

In this case the procedure for determination of tax is as follows-

The proper officer shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made or who has wrongly availed or utilized input tax credit, by reason of fraud or any willful mis statement or suppression of facts to evade tax, requiring him to show cause why he should not pay the amount specified in the notice along with interest payable and a penalty equivalent to the tax specified in the notice;
If there is a continuation of default as stated above for further period, the proper officer is not required to issue show cause notice. Instead he may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for such periods other than those covered in the preceding para;
If the person pays the amount of tax along with interest payable and a penalty equivalent to 15% of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer before the issue of show cause notice and inform the proper officer in writing of such payment;
The proper officer on receipt of such information shall not serve any notice or statement;
If the proper officer is of the opinion that the amount paid falls short of the amount actually payable, he shall proceed to issue the notice in respect of such amount which falls short of the amount actually payable;
If a person pays the tax along with interest and a penalty equivalent to 25% of such tax within 30 days from the date of issue of show cause notice, all proceedings in respect of the said tax shall be deemed to be concluded;
The person without making payment, submitted reply to the proper officer, the proper officer shall, after considering his reply, determine the amount of tax, interest and penalty due from such person and issue an order;
The said order is to be issued within a period of five years from the due date or the actual date whichever is earlier, for filing of annual return for the year to which the tax not paid or short paid or input tax credit wrongly availed or utilized relates or, as the case may be, within 5 years from the date of erroneous refund;
If the person pays the tax along with interest payable and a penalty equivalent to 50% of the such tax within 30 days of the date of communication of the order, all proceedings in respect of the said tax shall be deemed to be concluded.
General provisions relating to demand of tax

Section 51C prescribes the procedure relating to demand of tax as detailed below-

If the service of notice or order is stayed by an order of a Court or Tribunal, the period of such stay shall be excluded in computing the period of three or five years;
If any Appellate Authority or Tribunal or Court concludes that the notice is not sustainable for the reason that the charges of fraud or any willful mis-statement 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 for the period of three years, deeming as if the notice were issued under Section 51A;
An opportunity of personal hearing shall be granted where a request is received in writing from the person;
The proper officer shall, if sufficient cause is shown by the taxable person, grant time, from time to time, and adjourn the hearing for reasons to be recorded in writing;
No such adjournment shall be granted more than 3 times to a person during the proceeding;
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 grounds other than the grounds specified in the notice;
Where the Appellate Authority or 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;
Interest on the tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability;
The adjudication proceedings shall be deemed to be concluded if the order is not issued within three years or as the case may be within five years;
The above said provisions shall be application to the recovery of interest which has not been paid or partly paid or erroneously refunded.
Tax collected but not deposited with the Central or a State Government

Section 52(1) provides that every person who has collected from any other person any amount as representing tax and has not paid the same to the Central Government or a State Government, shall forthwith deposit the same to the credit of the Central or a State Government, regardless of whether the supplies in respect of which such amount was collected are taxable or not.

Section 51(2) provides that in such a case the proper officer may service on the person liable to pay such amount a notice requiring to show cause why the said amount as specified in the notice should not be paid by him to the credit of the Central or a State Government and why a penalty equivalent to the amount specified in the notice should not be imposed on him.

Section 51(3) provides that the proper officer shall, after considering the representation, if any, made by the person, determine the amount due from such person and thereupon such person shall pay the amount so determined;

Section 51(4) provides that the person shall, in addition to the paying the amount, also be liable to pay interest at the specified rate from the date such amount was collected by him to the date paid by him to the credit of the Central or the State Government;

Section 51(5) provides that an opportunity of personal hearing shall be granted if the person requests for the same in writing.

Section 51(6) provides that the proper officer shall issue an order within one year from the date of issue of the notice.

Section 51(7) provides that where the issuance of order is stayed by an order the Court or the Tribunal the period of such stay shall be excluded in computing the period one year.

Section 51(8) provides that the proper officer, in his order, shall set out the relevant facts and the basis of the decision;

Section 51(9) provides that the amount paid to the credit of the Central or the State Government shall be adjusted against the tax payable, if any, by the person in relation to the supplies.

Section 51(10) provides that where any surplus is left after the adjustment the same shall either be credit to the Fund or refunded to the person, who has borne the incidence of such amount.

Section 51(11) provides that the person who has borne the incident of tax amount may apply for the refund of the same.

Tax wrongfully collected and deposited

Section 52 provides that a taxable person who has paid CGST/SGST on a transaction considered by him an intra-state supply, but which is subsequently held to be an inter-state supply, shall upon payment of IGST, be allowed to take the amount of CGST/IGST so paid as refund subject to conditions.