QUESTION

Department has conducted audit under Section 65 of CGST Act. One objection was raised on availing of ineligible exemption. It is contested that the exemption is availed with genuine belief and tax is neither charged nor collected and agreed to deposit after recovery from the client. Thus the GST payable has been deposited as soon as received from the client. Department informed that the proceedings can be concluded if and only if the interest is paid. Client is not ready to give the interest payable on this GST amount.
Is there any threat for attachment of bank account? Can the department initiate coercive action under section 83 for recovery of interest or only issue show cause notice for appropriation of tax deposited, recovery of interest and for imposition of penalty.

ANSWER

FACTS OF THE CASE:

Applicability of Section 83 for recovery of interest on tax not paid detected u/s 65.

LAW APPLICABLE:

1. Subsection (1) of Section 83 of CGST Act specifies that:

(1) Where, after the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122, in such manner as may be prescribed.

2. Subsection (7) of Section 65 of CGST Act laid as under:

(7) Where the audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate action under section 73 or section 74.

INTERPRETATION:

Section 83 is applicable on Chapter XII, Chapter XIV or Chapter XV, but section 65 (Chapter XIII) does not fall in any of the aforesaid chapters. However as per sub section (7) of section 65, if any demand of tax is detected, then proceeding may be initiated under Section 73/74.
In case of Proceedings u/s 73/74 notice is served upon the assessee to pay tax along with interest u/s 50 and penalty.

However if the assessee, before service of notice pays tax along with interest then only the proceedings shall be deemed to be concluded. Therefore in any case of delay in payment of tax interest is leviable.

Further if section 73/74 are not complied with i.e. tax is not paid along with interest then section 83 will be applicable for recovery of interest as section 73/74 (Chapter XV) are covered under the purview of Section 83.

CONCLUSION: Yes, proceedings u/s 83 may be initiated (if section 73/74 are not complied with) for recovery of interest on tax not paid detected u/s 65. (Reply dt. 06/04/2022)