Demands and Recovery

D.P. Nagendra Kumar

Pr. Additional Director General
DGCEI Bengaluru
 Presentation Plan
2

 Determination of tax not/short paid or erroneously refunded [S.51]

 Tax collected but not deposited with the Government [S.52]
 Tax wrongfully collected and deposited with Government [S.53]
 Recovery of tax [S.54]
 Payment of tax and other amounts in instalments [S.55]
 Transfer of property to be void in certain cases [S.56]
 Tax to be first charge on property [S.57]
 Provisional attachment [S.58]
 Continuation of certain recovery proceedings [S.59]
 Liability to pay in certain cases [S.108 to S.115]
 Tax short paid/not paid Reason other than
ITC wrongly availed/utilized Fraud
Erroneous refund Wilful misstatement
Suppression for evasion

Tax, interest paid suo moto or on information

No notice

Payment < payable

Notice for any period

Tax, interest paid within 30 days
Statement for other periods
No order; proceeding concluded
For tax, int. penalty

NO

Tax, interest and penalty

Order, after hearing, higher of 10% of tax evaded or Rs.10000
Within 3 years
 Fraud, wilful misstatement, Tax, interest & 15% penalty paid
Suppression for evasion before notice then NO notice

Payment < payable

Notice for tax, interest,
penalty (100% of tax)
Tax, interest, 25% penalty paid within 30 days
No order, proceeding concluded

NO

Order, after hearing,

Tax, interest and penalty = 100% of tax
within 5 years

Tax, interest, 50% penalty paid within 30 days

Proceeding concluded
"Fraud" means and includes any of the following acts committed by a party to a contract, or
with his connivance, or by his agents, with intent to deceive another party thereto his agent, or
to induce him to enter into the contract; (1) the suggestion as a fact, of that which is not true,
by one who does not believe it to be true; (2) the active concealment of a fact by one having
knowledge or belief of the fact; (3) a promise made without any intention of performing it; (4)
any other act fitted to deceive; (5) any such act or omission as the law specially declares to be
fraudulent.

Material misstatement
A statement/assertion of such consequence, importance or significance as to be likely to
influence the determination of a cause so as to render it incorrect.

Suppression :
When there is an obligation to speak or report, a failure to speak or report constitutes
suppression.
Determination of tax not paid or short paid
or erroneously refunded
6

 Tax not paid / short paid or erroneously refunded or ITC wrongly availed /
utilised, where no fraud/wilful statement/ suppression of facts involved –
notice to be issued and order passed within 3 years from the due / actual
date, whichever is earlier, for filing Annual Return [Sec.51(A)(1) & (6)]

 Service of statement containing details of tax not paid/ITC wrongly availed for
subsequent periods on same grounds [Sec.51(A)(2)]

 Option to pay the tax, interest before service of notice under sub-sec.(1)
either on own ascertainment or informed by the proper officer – no
notice/penalty [Sec.51(A)(3)]

 Where amount paid falls short of the amount actually payable, proper officer
to issue notice for such amount [Sec.51(A)(4)]
.. Determination of tax not paid or short paid
or erroneously refunded
7

 Where any person chargeable with tax under sub-sec.(1) or sub-sec.(2) pays the
tax along with interest [Sec.36] within 30 days of issue of notice, no penalty shall be
payable and all proceedings shall be deemed to be concluded [Sec.51(A)(5)]

 Tax not paid / short paid or erroneously refunded or ITC wrongly availed / utilised,
where fraud/wilful statement/ suppression of facts involved – notice to be issued
and order passed within 5 years from the due / actual date, whichever is earlier,
for filing Annual Return [Sec.51(B)(1)&(7)]

 Service of statement containing details of tax not paid/ITC wrongly availed for
subsequent periods on same grounds [Sec.51(B)(2)]

 Option to pay the tax, interest and 15% of penalty equivalent to such tax before
service of notice under sub-sec.(1) - either on own ascertainment or informed by
the proper officer – no notice [Sec.51(B)(3)]
 .. Determination of tax not paid or short paid
or erroneously refunded
8

 Where amount paid falls short of the amount actually payable, proper officer to
issue notice for such amount [Sec.51(B)(4)]

 Where any person chargeable with tax under sub-sec.(1) or sub-sec.(2) pays the tax
along with interest [Sec.36] and a penalty equivalent to 25% of tax within 30 days
of communication of notice, all proceedings shall be deemed to be concluded
[Sec.51(B)(5)]

 Proper officer to issue the order, after considering the representations if any, made
by the person chargeable with tax, determining the tax, interest and penalty due
from such person [Sec.51(B)(6)]

 Where any person served with an order under sub-section (6) pays the tax along
with interest and penalty equivalent to 50% of tax, within 60 days of the
communication of the order, all proceedings in respect of such tax, shall be deemed
to be concluded [Sec.51(B)(8)]
 General provisions relating to
demand of tax
9

 Where the service of notice / issuance of order is stayed by an order of a

Court or Tribunal, period of such stay shall be excluded for computing the
period of three/five years [Sec.51(C)(1)]

 Where any Appellate Authority holds that the charges of fraud/

suppression/wilful mis-statement is not established, the proper officer shall
determine the tax payable for the period of three years, deeming as if the
notice is issued under sub-section A(1) or A(2) [Sec.51(C)(2)]

 Opportunity of personal hearing shall be granted where a request is received

in writing, or where any adverse decision is contemplated against any person
[Sec.51(C)(3)]

 Maximum 3 adjournments of hearing, during the proceeding

[Sec.51(B)(4)]
 .. General provisions relating to
demand of tax
1 0

 Proper officer shall set out the relevant facts and the basis of decision in his order
[Sec.51(C)(5)]

 Amount of tax, interest and penalty demanded in the order shall not be in excess
of the amount specified in the notice – no demand shall be confirmed on grounds
other than the grounds specified in the notice [Sec.51(C)(6)]
 Where Appellate Authority modifies the amount of tax determined earlier, the
amount of interest and penalty shall stands modified, taking into account, the
amount of tax revised [Sec.51(C)(7)]

 Interest on tax short / not paid shall be payable whether or not specified in the
order determining the tax liability [Sec.51(C)(8)]

 Deemed conclusion of adjudication proceedings, if order not issued within three

/five years [Sec.51(C)(9)]

 Above provisions applicable to demand erroneous refunds [Sec.51(D)(1)]

 Tax collected but not deposited with
the Government
1 1

 Every person who has collected any amount as representing the tax shall
deposit the amount to the credit of Central / State Government, regardless of
whether the supplies in respect of which such amount collected are taxable or
not; [Sec.52(1)]

 Proper officer to serve a notice on the person who has not paid the amount to
the credit of Central / State Government under sub-sec.(1) requiring him to
show cause as to why the amount should not be paid and why a penalty
equivalent to the amount shall not be imposed [Sec.52(2)]

 Proper officer to pass an order within one year, following principles of natural
justice, determining the amount due from such person and interest payable
thereon [Sec.52(4) (5) (6) (7) & (8)]

 Amount paid under sub-sec. (1) or sub-sec. (3) to be adjusted against the tax
payable and the balance to be credited to the Fund or the person who has borne
the incidence of such amount [Sec.52(9)&(10)]
 Tax wrongfully collected & deposited
with Government
1 2

 A taxable person who has paid CGST on a transaction considered by him

to be an intra-state supply, which is subsequently held to be an inter-
state supply, shall, on payment of IGST, be allowed to take the amount of
CGST so paid as refund subject to the provisions of section 38 and such
other conditions as may be prescribed [Sec.53 CGST Act]

 A taxable person who has paid SGST on a transaction considered by him

to be an intra-state supply, which is subsequently held to be an inter-
state supply, shall, on payment of IGST, be allowed to take the amount of
SGST so paid as refund subject to the provisions of section 38 and such
other conditions as may be prescribed [Sec.53 SGST Act]
 Recovery of tax
1 3

 Modes of Recovery

 Proper officer may deduct or may require any other specified officer to deduct the
amount so payable from any money owing to such person which may be under
the control of the proper officer or such other specified officer
 Proper officer may recover or may require any other specified officer to recover
the amount so payable by detaining and selling any goods belonging to such
person which are under the control of the proper officer or such other specified
officer
 Proper officer may, by notice in writing, require any other person from whom
money is due or may become due to such person to pay the amount to the
Government

 Every person to whom the notice is issued shall be bound to comply with such
notice
[Sec.54 CGST Act]
 .. Recovery of tax
1 4

 Any person who fails to make the payment in pursuance to a notice under this section shall be
deemed to be a defaulter for the amount specified in the notice

 Proper officer may on authorization by the competent authority, distrain any moveable or
immovable property belonging to or under the control of such person, and detain the same
until the amount payable is paid

 Proper officer may prepare a certificate specifying the amount and send it to the Collector of
the district in which such person owns any property or resides or carries out his business,
and on receipt of such certificate, the Collector shall proceed to recover the amount as if it
were an arrear of land revenue

 A CGST officer during the course of recovery of CGST arrears may recover the arrears of SGST
from such person as if it were an arrear of CGST and credit the amount so recovered to the
account of State Government [SGST Act]

 A SGST officer during the course of recovery of SGST arrears may recover the arrears of CGST
from such person as if it were an arrear of SGST and credit the amount so recovered to the
account of Central Government [CGST Act]
 Payment of tax and other amounts
in instalments
1 5

 Chief Commissioner/Commissioner may for reasons to be

recorded in writing, extend the time for payment or allow
payment of any amount due, other than the amount due as per
the liability self-assessed in any return, by such persons in
monthly instalments not exceeding 24, subject to payment of
interest under sec. 36

 Where there is default in payment of any one instalment on its

due date, the whole outstanding balance payable on such date
shall become due and payable forthwith, which shall be
recovered without any further notice
[Sec. 55]
 Transfer of property to be void
in certain cases
1 6

 Where a person, after any tax has become due from him, creates
a charge on or parts with the property belonging to him or in his
possession by way of sale, mortgage, exchange, or any other
mode of transfer in favor of any other person with an intention of
defrauding the government revenue, such charge or transfer shall
be void as against any claim in respect of any tax or other dues
payable by the said person

 Such charge or transfer shall not be void if it is made for adequate

consideration and without notice of pendency of such
proceeding, or without notice of such tax or other sum payable
by the said person or with the previous permission of the proper
officer
[Sec. 56]
 Tax to be first charge on property
1 7

 Any amount payable by a taxable person or any other person

on account of tax , interest or penalty, which he is liable to pay
to the Central or a State Government shall be a first charge on
the property of such taxable person or such other person
[Sec. 57]
 Provisional attachment
1 8

 During the pendency of any proceedings under sec. 46, sec. 47,
sec. 48 or sec. 51, if the Commissioner is of the opinion that for
the purpose of protecting the interest of the government
revenue, he may by order in writing attach provisionally any
property belonging to the taxable person in the manner
prescribed

 Every such provisional attachment shall cease to have effect

after the expiry of a period of one year from the date of the
order
[Sec. 58]
 Continuation of certain
recovery proceedings
1 9

 Where any notice of demand for tax, interest, penalty is served

upon any taxable person and any appeal, revision is filed or other
proceedings initiated in respect of such dues, then

 where dues are enhanced in appeal/revision/proceeding, the

Commissioner shall serve upon the person another notice of demand
only in respect of the amount by which such dues are enhanced and any
recovery proceeding in relation to the dues covered by the notice of
demand served on such person before the disposal of such
appeal/revision/proceeding may without service of any fresh notice of
demand, be continued from the stage at which such proceedings stood
immediately before such disposal

[Sec. 59]
 .. Continuation of certain
recovery proceedings
2 0

 where dues are reduced in appeal/revision/proceeding, it shall not be

necessary for the Commissioner to serve upon the taxable person a fresh
notice of demand

 the Commissioner shall give an intimation of such reduction to the person

or the appropriate authority with whom the recovery proceeding is
pending

 any recovery proceedings initiated on the basis of demand served upon

him prior to the disposal of such appeal/revision/proceeding may be
continued in relation to the amount so reduced from the stage at which
such proceedings stood immediately before such disposal
[Sec. 59]
 Liability to pay in certain cases
2 1

Transfer of Business:
 Where any person liable to pay tax transfers his business in whole/part,
by sale, gift, lease, leave and license, hire, or in any other manner, then
such person and the person to whom the business is transferred shall
jointly and severally be liable to pay the tax, interest or penalty due from
the taxable person up to the time of such transfer, whether such dues
has been determined before such transfer, but has remained unpaid or is
determined thereafter

 Whether the transferee/lessee of the business carries on such business

either in his name or in some other name, he shall be liable to pay tax on
supplies effected by him from the date of such transfer and if he is an
existing taxable person, apply within the prescribed time for amendment
of his certificate of registration
[Sec.108]
 .. Liability to pay in certain cases
2 2

Amalgamation / Merger of companies :

 Where by an order of Court/Tribunal or of the Central Government
amalgamation/merger of two or more companies takes effect from a date earlier
to the date of such order, the companies who have supplied or received any
goods and/or services to or from each other during the period commencing
from the date on which the order takes effect till the date of the order, such
transactions of supply and receipt shall be included in the turnover of supply or
receipt of the respective companies and shall be liable to tax accordingly

 Notwithstanding anything contained in the order, for the purposes of this Act,
the two or more companies shall be treated as distinct companies up to the date
of the such order and registration certificates of the said companies shall be
cancelled, with effect from the date of the such order

[Sec.109]
 .. Liability to pay in certain cases
2 3

Liquidation of company :
 Every person appointed by an order of the Court/Tribunal as receiver of any assets
of a company (liquidator) shall within thirty days of his appointment, give
intimation of his appointment to the Commissioner

 Commissioner to notify the liquidator within 3 months from the date on which he
receives intimation of the appointment of the liquidator, the amount of tax,
interest or penalty which is payable by the company

 When any company is wound up and any tax or other dues determined whether
before or after liquidation that remains unrecovered, every person who was a
director of the company during the period for which the tax was due, shall jointly
and severally be liable for payment of dues unless he proves to the satisfaction of
the Commissioner that such non-recovery is not attributed to any gross neglect,
misfeasance or breach of duties on his part in relation to the affairs of the company
[Sec.110]
 .. Liability to pay in certain cases
2 4

Partners of a firm:
 Partners of any firm shall jointly and severally liable for payment
of any tax, interest or penalty
 Firm/partner shall intimate the retirement of any partner to the
Commissioner by a notice in writing – liability to pay tax, interest
or penalty up to the date of such retirement, whether
determined on that date or subsequently, shall be on such
partner
 If no intimation is given within one month from the date of
retirement, the liability of such partner shall continue until the
date on which such intimation is received by the Commissioner
[Sec.111]
 .. Liability to pay in certain cases
2 5

Guardians / Trustees:
 Where the business in respect of which any tax is payable is carried on by
any guardian / trustee / agent of a minor or other incapacitated person on
behalf of and for the benefit of such minor/incapacitated person, the tax,
interest or penalty shall be levied upon and recoverable from such
guardian / trustee / agent [Sec.112]

Court of Wards :
 Where the estate of a taxable person owning a business in respect of
which any tax, interest or penalty is payable is under the control of the
Court of Wards/Administrator General / Official Trustee / Receiver or
Manager appointed under any order of a Court, the tax, interest or penalty
shall be levied and recoverable from such Court of Wards/Administrator
General / Official Trustee / Receiver or Manager to the same extent as it
would be determined and recoverable from a taxable person [Sec.113]
 .. Liability to pay in certain cases
2 6

Special provisions in certain cases :

 Where a person liable to pay tax dies, then
 if the business is continued by his legal representative or any other person, such legal / any
other person shall be liable to pay tax, interest or penalty due from such person
 if the business is discontinued whether before or after his death, his legal representative
shall be liable to pay out of the estate of the deceased to the extent to which the capable
of meeting the charge, tax, penalty or interest due from such person, whether such dues
have been determined before his death but has remained as unpaid or is determined after
his death [Sec.114(1)]

Partition of Hindu Undivided Family / Association of Persons:

 Where a taxable person is liable to pay tax is HUF or AOP and the property of
HUF / AOP is partitioned among various members or groups of members, each
member shall jointly and severally be liable to pay the tax, interest or penalty due
from the taxable person up to the time of partition whether such dues has been
determined before partition but has remained unpaid or is determined after the
partition [Sec.114(2)]
 .. Liability to pay in certain cases
2 7

Dissolution of a firm:
 Where a taxable person liable to pay tax is a firm and the firm is dissolved,
then every person was partner shall jointly and severally be liable to pay the
tax, interest or penalty up to the time of dissolution whether such tax,
interest or penalty has been determined before the dissolution but has
remained unpaid or is determined after dissolution [Sec.114(3)]

Guardian / Trustee:
 Where a taxable person liable to pay tax is the guardian of a ward on whose
behalf the business is carried on by the guardian or a trustee who carries on
the business under a trust for a beneficiary, if the guardianship or trust is
terminated, the ward or, as the case may be, the beneficiary shall be liable
to pay the tax, interest or penalty due from the taxable person up to the
time the termination of the guardianship or trust whether such dues have
been determined before the termination of the guardianship or trust but has
remained as unpaid or is determined thereafter [Sec.114(4)]
 .. Liability to pay in certain cases
2 8

Other Cases :
 Where a firm / AOP / HUF has discontinued the business, the tax payable
by such entity up to the date of discontinuance may be determined as if no
such discontinuance has taken place; and

 every person who was at the time of discontinuance, a partner of

firm/member of AOP/HUF notwithstanding such discontinuance shall be
liable jointly and severally for the payment of tax, interest or penalty whether
determined prior to or after such discontinuance as if every such
partner/member were himself a taxable person [Sec.115(1)]

 where a change has occurred in the constitution of a firm or an association of

persons, the partners of the firm or the members of the association as it
existed before and as it exists after the reconstitution, shall without prejudice
to the provisions of sec. 111, jointly and severally be liable to pay the due from
such firm or association for any period before its reconstitution [Sec.115(2)]