Are you also confused about provisions related to tax and interest during the investigation ?

Are you also confused about provisions related to tax and interest during the investigation ?

Then This Blog is for you, in this blog we will understand the situation through Case Study :-

CASE NAME : DEEM DISTRIBUTORS PVT. LTD V. UNION OF INDIA (TELANGANA HIGH COURT)

About petitioner : Partnership firm registered under Telangana GST Act, 2017. Dealing in Goods and services Related to Scrap.

Issue : Payment towards tax, interest, penalty while investigation underway is allowed or not ?

Facts : Taxpayer has availed ITC on Fake Invoices, Invoices issued by certain fictitious Supplier or firms and in that case officer requested to Reverse ITC on such invoices.

Regarding this issue provision under law is as follows:

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:-

1. Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilized by reason of fraud, or any willful-misstatement or suppression of facts to evade tax, he 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, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under Section 50 and a penalty equivalent to tax specified in the notice.
2. The proper officer shall issue the notice under sub-section (1) at least 6 months prior to the time limit specified in sub-Section (10) for issuance of order.
3. Where a notice has been issued for any period under sub-Section (1), the proper Officer 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 under sub-Section (1), on the person chargeable with tax.
4. The service of statement under sub-Section (3) shall be deemed to be service of notice under sub-Section (1) of Section 73, subject to the condition that the grounds relied upon in the said statement, except the ground or fraud, or any wilful- misstatement or suppression of facts to evade tax, for periods other than those covered under sub-Section (1) or the same as are mentioned in earlier notice.
5. The persons chargeable tax may, before service of notice under sub-Section (1), pay the amount of tax along with interest payable under Section 50 and a penalty equivalent to 15 per cent of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper office and inform the proper officer in writing of such payment.
6. The proper officer, on receipt of such information, shall not serve any notice under sub-Section (1), in respect of the tax so paid or any penalty payable under the provisions of this Act or the Rules made there under.
7. Where the proper officer is of the opinion that the amount paid under sub- Section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-Section (1) in respect of such amount which falls short of the amount actually payable.
8. Where any person chargeable tax under sub-Section (1) pays the said tax alongwith interest payable under Section 50 and a penalty equivalent to 25 per cent of such tax within 30 days of issue of the notice, all proceedings in respect of the saidnotice shall be deemed to be concluded.
9. The proper officer shall, after considering the representation, if any, made bythe person chargeable with tax, determine the amount of tax, interest and penaltydue from such person and issue an order.
10. The proper office shall issue the order under Section 9 within a period of fiveyears from 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 utilizedrelates to or within 5 years from the date of erroneous refund.
11. Where any person served with an order issued under sub-Section (9) pays thetax along with interest payable thereon under Section 50 and a penalty equivalentto 50 per cent 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.

On reading of above provision, We found that while investigation demand can be raised for tax, interest, penalty.