Guidelines for initiation of recovery proceedings before three monthsfrom the date of service of demand order- regarding
Attention is invited to sub-section (1) of section 79 of the Central Goods and ServicesTax Act, 2017 (hereinafter referred to as the ‘CGST Act’), which provides that where anyamount payable by a personthe Government under any of the provisions of CGST Act orRules made thereunder is not paid, the proper officer shall proceed to recover the amount byone or more of the modes specified in the said sub-section. Attention is further invited toSection 78 of the CGST Act, which provides for the time for initiationsuch recoveryproceeding. These sections are reproduced below for ease of reference:
Section 78: Initiation of recovery proceedings.
Any amount payable by a taxable person in pursuance of an order passedunder this Act shall be paid by such person within a period of three months from thedate of service of such order failing which recovery proceedings shall be initiated:
Provided that where the proper officer considers it expedient in the interest ofrevenue, he may, for reasons to be recorded in writing, require the said taxableperson to make such payment within such period less than a period of three months asmay be specified by him.
Section 79: Recovery of tax.
Where any amount payable by a person to the Government under any of theprovisions of this Act or the rules made thereunder is not paid, the proper officer shallproceed to recover the amount by one or more of the following modes, namely:
1.2On reading the above sections, it becomes clear that the general rule for initiatingrecovery proceedings is that, where any amount payable by a taxable person in pursuance ofan order passed under the CGST Act is not paid within a period of three months from the dateof service of such order, recovery proceedings shallinitiated by the proper officer onlyafterexpiry of the said period of three months.
1.3
Only
exceptional cases, where it is necessaryproper officer may require the said taxable personthe interest of revenue, theless than the period of three months from the date of service of the order, as may benpay the said amount within a periodspecified by him, after recording the reasons for doing so in writing. If the said amount isnot paid by the said taxable person within the period specified by the proper officer underthe proviso to section 78 of CGST Act or even after the expiry of three months from thedate of the service of the order, the same can then be recovered by the proper officer as perprovisions of sub-section (1) of section 79 of CGST Act.
2.It has been brought to the notice of the Board that some of the field formations areinitiating recovery before the specified period of three months from the date of service of theorder, eventhe cases where the taxable person has not been specifically required byproper officer, for reasons to be recorded in writing, for payment of such amount within anperiod less than the period of three months fromorder to ensure uniformity in the implementation of the provisions of law across the fieldadateservice of the order. Therefore, informations, the Board,exerciseits powers conferred by section 168 of the CGST Act,hereby issues the following instructions to be followedinterest of revenue, to initiate recovery before the period of three months from the date ofcases where it is necessary, in theservice of the order.
3.1As per Circular No. 3/3/2017- GST dated the 5th July 2017, the proper officer forrecovery under Section 79 of the CGST Act is the jurisdictional Deputy or AssistantCommissioner of Central Tax. It is also mentioned that the proper officer under provisoSection 78 is the jurisdictional Principal Commissioner/ Commissioner of Central Tax.
3.2
Therefore, while recovery proceedings under sub-section (1) of section 79 of CGSTAct are required to be undertaken by the jurisdictional Deputy or Assistant Commissioner ofCentral Tax, however, in the cases, where it is felt that recovery proceedingsamount payable by a taxable person in pursuance of an order need to be initiated inrespect of antinterest of revenue before completion of three months from the date of service of the order,the matter needs to be placed by the jurisdictional Deputy or Assistant Commissioner ofCentral Tax before the jurisdictional Principal Commissioner/ Commissioner of Central Tax,along with the reasons/ justification for such an action. The jurisdictional PrincipalaCommissioner/ Commissioner of Central Tax shall examine the reasons/ justification given bythe jurisdictional Deputy or Assistant Commissioner at the earliest and if he is satisfied that itexpedientthe interestrevenue to ask the said taxable person to pay the said amountabefore completion of three months from the date of servicewriting, the reasons as to whythe order, he must record inconcerned taxable person is required to make payment ofsuch amount within such period, less than a period of three months, as may be specified byhim. After recording such reasons in writing, he may issue directionsperson to pay the said amount within the period specified by him inthe concerned taxablenof such directions must also be sent to the jurisdictional Deputy or Assistant Commissioner ofsaid directions. CopyCentral Tax for information.
3.3 It is further mentioned that jurisdictional Principal Commissioner/ Commissioner ofCentral Tax should provide the specific reason(s) for asking the taxable person for earlypayment of the said amount, clearly outlining the circumstances prompting such earlyaction. Such reasons could include high risk to revenue involved in waiting till thecompletion of the three month period due to apprehension that the concerned taxable personmay close the business operations in near future, or due to possibility of default by thetaxable person due to his declining financial conditions or impending insolvency, or likely.
initiation of proceedings under Insolvency and Bankruptcy Act, etc. Reasons to believe forapprehension of riskrevenue should be based on credible evidence, which may bekept on record to the extent possible. While issuing any such directions, the proper officermust duly consider the financial health, status of business operations, infrastructure, andcredibility of the taxable person, and strike a balance between the interest of the revenueand ease of doing business. It is implicit that such directions for early payment of theconfirmed demand should not be issued in a mechanical manner, and must be issued only incases where interest of revenue is required to be safeguarded due to specific apprehension/circumstances in the said case.
3.4Wherever such directions are issued by the jurisdictional Principal Commissioner/Commissioner of Central Tax as per powers conferred under proviso to section 78 of CGSTAct, and where the taxable person fails to make payment of the said amount within the periodspecified in the said directions, the jurisdictional Deputy or Assistant Commissioner ofCentral Tax shall proceed to recover the said amount as per the procedure specified in subsection (1) of section 79 of CGST Act.
4.Difficulties, if any, in implementation of these instructions may be informed to theBoard (gst-cbec@gov.in).