230.            The taxable person is manufacturing lighting lamps. GST was charged on glasses used in lamps @ 5% under the head “lamps & lantern”. The proper officer noticed that the glass shall be classified under the head “toughened glass” @ 12% & is a case of misclassification. He issued a show cause notice on 1.4.2017 raising the following demand:

Tax short levied = 10 lacs

Interest u/s 50

Penalty = 100% tax short paid with an option to pay nil penalty if paid within 30 days.

What shall be the liability if:

a.                   A- has paid full tax= 10 lacs & full interest = 150,000 on 27.4.2017

b.                  B- has short paid tax = 8 lacs & short paid interest = 120,000 on 30.4.2017

c.                   C- has paid tax = Rs 10 lacs, interest paid= nil on 30.4.2017

d.                  D- has neither paid any tax nor interest

As per section 73(8) of the CGST Act, where an assessee pays the amount of tax & interest in full within 30 days of issue of SCN, then no penalty shall be payable by the assessee.

(i) A has discharged his tax & interest liability in full within 30 days of SCN. The proceeding is said to be concluded and no penalty shall be charged

(ii) B has short paid tax & interest by Rs. 2 lacs & Rs 30,000. The proper officer shall after giving an opportunity of being heard to B pass order demanding:

Tax = Rs 2 lacs

Interest u/s 50 =Rs 30,000

Penalty = 10% of tax or 10,000 (whichever is more), to be paid within 30 days of order  

= 10% (2 lacs) or 10,000 (whichever is more)

= 20,000

(iii) C has paid his tax liability in full but no interest is paid within 30 days of SCN. The proper officer shall after giving an opportunity of being heard to the taxable person, issue order demanding:

 interest = 1,50,000  &

 Penalty = 10% of tax or 10,000 (whichever is more), to be paid within 30 days of order.

            = 10% (10 lacs) or 10,000 (whichever is more)

            = 1 lacs

(iv) D has not paid any amount within 30 days of SCN, therefore, the proper officer shall after giving an opportunity of being heard to the taxable person, issue an order demanding:

Tax = Rs. 10 lacs

Interest u/s 50 =Rs. 150,000

Penalty = 10% of tax or 10,000 (whichever is more), to be paid within 30 days of order 

 = 10% (1,00,000)

= 1,00,000