Question

In our area there so many suppliers registered under GST have filed their GSTR-1 but not filed GSTR-3B returns and refrains from payment of tax. The tax department have cancelled their registration under Section 29 of Central GST Act, 2017 for non filing of continues six months returns. Further the Tax department also imitated recovery proceedings under Section 79 read with Section 75(12) of Central GST Act, 2017 on the basis of considering taxable value shown under GSTR-1 as self assessed returns without issuing Show Cause Notices. Whether such proceedings are legally? Is there any remedy for them?

Answer

Show cause notice is required to be issued for demand of tax if the tax is demanded u/s 73 or 74 of CGST Act, 2017 depending upon whether demand is relating to fraud or evasion or not. Sub section (1) of both sections required to issue of demand notice where you can get an opportunity to give reply and also opportunity of personal hearing if the same is desired.

Now coming to Section 75 sub section(12) of CGST Act says that SECTION 75 OF CGST ACT,2017
Notwithstanding anything contained in section 73 or section 74, where any amount of self-assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79.
It means that provisions mentioned in section 73 and 74 of CGST Act, 2017 are not applicable when the proceedings are initiated U/s 75(12). The intention of law maker is very clear. Under Section 73 and 74 the demand is raised on the basis of certain grounds and this is the demand which is not declared under self assessment, that is the reason a SCN is required and opportunity of hearing should be given before starting any recovery proceeding.
But the intention of law maker is to not raise the point again relating to taxability because the taxability & the amount of tax are already admitted under self assessment. So there should be no need to issue the SCN and the law maker is simply demanding the tax which is already assessed by you. The need of SCN will arise if the Assessing Officer is demanding tax on different rate or on higher value.
If you observe that the amount demanded is not correct or excess then you can file a request under sub section (4) of section 75 of CGST Act. So that the proper officer may give an opportunity of personal hearing and reconsider the demand which is calculated in excess or calculated wrongly. (Reply dt. 22/01/2019)