Is SCN required for Recovery on the basis of GSTR-1 admitted liability? Can recovery be made without issuing Show Cause Notice?

[Abhishek Raja]

Sec. 75(12) : Recovery of "self-assessed" tax as per GSTR-1 not properly discharged through Form GSTR-3B.

This section permits recovery action by Tax Authorities without Adjudication as this has been adjudicated by Tax Payer himself.

However, there have been several decisions of High Courts striking down recovery action without issuing notices.

 Selected few cases are as follows:

 M/S. LC INFRA PROJECTS PVT. LTD., (FORMERLY KNOWN AS LAXMI CONSTRUCTION) VERSUS THE UNION OF INDIA MINISTRY OF FINANCE, AND OTHERS - 2019 (8) TMI 84 - KARNATAKA HIGH COURT

 MAHADEO CONSTRUCTION CO. VERSUS THE UNION OF INDIA, ASSISTANT COMMISSIONER, CENTRAL GOODS & SERVICES TAX AND CENTRAL EXCISE, SUPERINTENDENT, CENTRAL GOODS & SERVICES TAX AND CENTRAL EXCISE - 2020 (4) TMI 666 - JHARKHAND HIGH COURT

 M/S. REFEX INDUSTRIES LIMITED, M/S. SHERISHA TECHNOLOGIES PVT. LTD. VERSUS THE ASSISTANT COMMISSIONER OF CGST & CENTRAL EXCISE, THE SUPERINTENDENT OF CENTRAL TAX, BANK MANAGAR, BANK MANAGAR, ICICI BANK - 2020 (2) TMI 794 - MADRAS HIGH COURT

We do understand that Recovery cannot be done without issuing SCN but this does not mean that we can do errors while filing GST Returns.

Taxpayers, must be cautious while filing not only GSTR-3B but also GSTR-1 because any liability because any Liability shown through GSTR-1 becomes admitted liability by virtue of Sec. 75(12) and Self-Assessment [Sec. 2(11)].

 Para 4 of Circular No. 26/2017  dated 29-Dec-2017

• GSTR-3B is a summary return
• No Separate Table for reflecting Tax Amendments for the past period
• Figures for the current month can be adjusted as long as they don't make current period figures negative

 Circular No. 170/02/2022-GST  dated 06-Jul-2022

Taxpayers should furnish correct and proper information of Inter-State Supplies and the amount of ineligible/blocked ITC and reversal thereof in GSTR-3B & GSTR-1 mandatorily.

UNION OF INDIA VERSUS BHARTI AIRTEL LTD. & ORS. - 2021 (11) TMI 109 - SUPREME COURT

There is no provision regarding REFUND of Surplus or Excess ITC in the electronic Credit Ledger, it does not follow that the assessee concerned who has discharged Output Tax Liability by paying cash without using ITC.

A Taxpayer is FREE to pay in Cash in spite of the Surplus or Excess amount lying in ITC Ledger. Taxpayer cannot ask later to swipe the entries and ask for refund of the cash paid.

Sec. 39(9) and Circular 26/017 are for rectification of errors or omissions etc. and cannot be invoked for refund of cash paid.

In the light of the above discussion, we hold that the Revenue is not bound to grant the refund of Surplus ITC or Excess ITC to the Taxpayer and the Taxpayer is also not entitled to insist for a refund in case they discharge their Tax Liability through Cash instead of ITC. GSTR-3B is a return and should not be filed without understanding the proper workings. GSTR-3B should never be filed in haste, as it might result in errors, which can be very costly for the business. Businesses should keep in mind that filing GSTR-3B is a very important compliance and should be done with utmost care.

We would like to reiterate that the proper working of GSTR-3B is very important for businesses and they should take all necessary precautions while filing their returns. We hope that this article will help businesses in understanding the process of GSTR-3B and filing their returns correctly.