2025 (5) TMI 914 - HC - GST

Recovery of dues payable by the petitioner by invoking the provisions of Section 75(12) of the WBGST CGST Act 2017 - discrepancies in the returns filed by the petitioner - HELD THAT - Having regard to the explanation provided under Section 75(12) of the said Act the expression self-assessed tax shall include tax payable in respect of the details of outward supplies furnished under Section 37 of the said Act which are not included in the return furnished under Section 39 of the said Act. Admittedly in this case it would transpire that the self-assessed tax of the petitioner under Section 37 of the said Act has been included in the returns under Section 39 of the said Act. It is not the case of the respondents that the self-assessed tax furnished under Section 37 of the said Act has not been included in the returns under Section 39 of the said Act. Once the self-assessed tax as per Section 37 is included in the return furnished under Section 39 of the said Act Section 75(12) of the said Act can no longer be invoked as is clear from the above explanation. Further a bare perusal of the notice issued in ASMT 10 dated 20th September 2024 would in no uncertain terms disclose that the returns filed by the petitioner in Form GSTR1 had been included in Form GSTR-3B. It would also transpire from the order impugned that the respondents have proceeded to determine late fees and interest by proceeding to demand the same from the date of filing of return under Section 39 of the said Act in Form GSTR-3B. The respondents could not have invoked the provisions of Section 75(12) of the said Act nor could the respondents claim that the demands made by the respondents are based on admission made by the petitioner. Further having regard to the provisions of the said Act as provided in Section 61(3) of the said Act in case the explanation furnished by the petitioner is found unacceptable there is no option but to initiate appropriate action under the provisions of Section 65 or 66 or 67 or 73 or 74 of the said Act and not Section 75(12) of the said Act. Since the order dated 20th December 2024 has been set aside the consequential demand raised by the respondents in Form GST DRC 07 dated 6th January 2025 for the tax period 2020-21 stands quashed - Petition disposed off.

The core legal questions considered by the Court in this matter are:

1. Whether the respondents could invoke Section 75(12) of the WBGST & CGST Act, 2017 (the "Act") to recover alleged dues without issuing a show-cause notice or following the adjudication procedures prescribed under Sections 73 or 74 of the Act.

2. Whether the expression "self-assessed tax" under Section 75(12) of the Act includes tax payable in respect of details of outward supplies furnished under Section 37 but already included in the return furnished under Section 39.

3. Whether the procedure adopted by the respondents, including issuing demand notices and recovery under Section 75(12) without prior adjudication, is legally permissible in the facts of this case.

4. Whether the petitioner's admissions in response to the notice ASMT 10 can be treated as admission justifying summary recovery without adjudication.

Issue-wise Detailed Analysis

1. Legality of invoking Section 75(12) for recovery without show-cause notice or adjudication under Sections 73/74

The legal framework involves the provisions of the WBGST & CGST Act, 2017, particularly Sections 61, 73, 74, 75, and 79, and the relevant rules under the WBGST Rules, 2017. Section 61 mandates issuance of a notice in Form ASMT 10 to the registered taxpayer upon detection of discrepancies in returns, requiring explanation within 30 days. If the explanation is unsatisfactory or corrective measures are not taken, the proper officer may initiate adjudication proceedings under Sections 73 or 74.

Section 75(12) provides that where any amount of self-assessed tax in accordance with a return furnished under Section 39 remains unpaid, the same shall be recovered under Section 79 without the need for separate adjudication. However, the Explanation to Section 75(12) clarifies that "self-assessed tax" includes tax payable on details of outward supplies furnished under Section 37 but not included in the return furnished under Section 39.

The Court examined the respondents' contention that since the petitioner admitted delayed filing and dues, recovery under Section 75(12) without adjudication was permissible. The petitioner argued that Section 75(12) applies only to self-assessed tax not included in returns under Section 39, and hence the respondents could not bypass Sections 73/74 adjudication.

The Court interpreted the statutory scheme and held that once self-assessed tax under Section 37 is included in the return furnished under Section 39, Section 75(12) cannot be invoked for recovery. The respondents could not ignore the mandatory adjudication process under Sections 73 or 74 after issuance of ASMT 10 and the petitioner's explanation. The Court emphasized that the statutory scheme under Section 61 requires initiation of appropriate action under Sections 65, 66, 67, 73, or 74 if explanations are unsatisfactory, and not summary recovery under Section 75(12).

The Court reasoned that the respondents' failure to issue a show-cause notice or follow adjudication procedures rendered the recovery order invalid. The demand raised in Form DRC 07 was quashed accordingly.

2. Interpretation of "self-assessed tax" under Section 75(12)

The Explanation to Section 75(12) was pivotal. It states that "self-assessed tax" includes tax payable on details of outward supplies furnished under Section 37 but not included in the return under Section 39. The Court found this to mean that if the self-assessed tax is already included in the return under Section 39, Section 75(12) is not applicable.

In the instant case, the petitioner's returns under Section 39 included the relevant self-assessed tax. The respondents did not dispute this fact. Therefore, the Court concluded that Section 75(12) could not be invoked for recovery of such tax. This interpretation preserves the procedural safeguards under Sections 73 and 74 and prevents summary recovery without adjudication.

3. Treatment of petitioner's admissions and procedural fairness

The petitioner admitted delayed filing and the liability for interest and late fees. The respondents argued this admission justified immediate recovery. The Court recognized the admission but held that it does not dispense with the statutory requirement of adjudication under Sections 73 or 74 once discrepancies are identified and explanations are found unsatisfactory.

The Court observed that the order dated 20th December, 2024, though set aside, could be treated as a show-cause notice. The petitioner was granted liberty to respond within three weeks, and the respondents were directed to decide the matter in accordance with law. This approach balances the petitioner's admission with the need for due process.

4. Application of law to facts and procedural requirements

The facts disclose that the petitioner filed returns under Sections 37 and 39 for the financial year 2020-21. A notice in Form ASMT 10 was issued identifying discrepancies and short payment of Rs.8,09,248/-. The petitioner responded and admitted delayed filing and sought installment payment of interest.

The respondents proceeded to pass an order on 20th December, 2024, and raised a demand through Form DRC 07 dated 6th January, 2025, invoking Section 75(12) for recovery without issuing a show-cause notice or adjudicating under Sections 73 or 74.

The Court found this procedure flawed and contrary to the statutory scheme. The petitioner's returns included the self-assessed tax, making Section 75(12) inapplicable. The respondents should have initiated adjudication proceedings under Sections 73 or 74 after the petitioner's explanation was found unsatisfactory, rather than summary recovery. The demand and recovery order were set aside accordingly.

Significant Holdings

"Once the self-assessed tax as per Section 37 is included in the return furnished under Section 39 of the said Act, Section 75(12) of the said Act can no longer be invoked."

"In case the explanation furnished by the petitioner is found unacceptable, there is no option but to initiate appropriate action under the provisions of Section 65 or 66 or 67 or 73 or 74 of the said Act and not Section 75(12) of the said Act."

"The respondents could not have invoked the provisions of Section 75(12) of the said Act, nor could the respondents claim that the demands made by the respondents are based on admission made by the petitioner."

"The order dated 20th December, 2024 can be treated as a show cause and having regard thereto, the petitioner shall be at liberty to respond to the said show cause within a period of three weeks from date."

The Court established the core principle that summary recovery under Section 75(12) is confined to cases where self-assessed tax under Section 37 is not included in the return under Section 39. Where the tax is included, the statutory adjudication process under Sections 73 or 74 must be followed after issuance of ASMT 10 and consideration of the taxpayer's explanation. This preserves procedural fairness and statutory safeguards.

Consequently, the Court set aside the impugned order dated 20th December, 2024 and the consequential demand in Form DRC 07 dated 6th January, 2025. The petitioner was granted an opportunity to respond to the treated show-cause order, and the respondents were directed to decide the matter in accordance with law.

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