Demands & Appeal under GST, Rules for Demands &

Appeals
Demand Under GST
In the GST regime Proper Officer is empowered to issue show cause notice to seek
recovery of any tax not paid or short paid or erroneously refunded or input tax erongly
availed or utilized The Provisions Prescribed under GST Act for demand and recovery of
tax are similar to existing Provisions under Customs, Excise and Service Tax.. The
provisions relating to conclusion of proceedings before preferring an appeal is detailed
out as below:

Situation 1 (Cases not Situation II( Cases not

involving Fraud or wilful involving Fraud or wilful
No. Implication
misstatement or suppression of misstatement or suppression
facts) of facts)

No Show cause notice

If tax and interest paid before If tax , interest and 15% to be issued and
1. issuanance of Show cause penalty paid before issuance proceedings will be
notice. of deemed to be
Show cause notice concluded.

If tax , interest and 25%

If tax and interest paid within The proceedings will
penalty paid within 30 days
2. 30 days of issuance of Show be deemed to be
of issuance of Show cause
cause notice concluded.
notice.

If tax, interest and 10% penalty

or
If tax , interest and 50%
Rs. 10,000, whichever is The proceedings will
penalty paid within 30 days
3. higher, be deemed to be
of communi- cation of order
paid within 30 days of concluded
adjudicating
communication of order
the Show cause notice
adjudicating the Show
cause notice

If order is not issued within 5

If order is not issued within 3
Years from the due date or The proceedings will
years from the due date or the
4. the actual date for filing of be deemed to be
actual date for filing of annual
annual return, whichever is concluded
return, whichever is earlier
earlier

However the GST act does not specifies any time limit for issuance of show cause notice
and it only specifies maximum time for limit for issuance of order and now the revenue
authorities can issue notice and conclude the proceedings at any time before 3/5
years .Further interest on Tax Short Paid Or not paid is payable whether interest is
specified in the order or not

Appeals under GST

The GST Act provides three set of provisions for appeals. viz CGST, SGST and common
provisions applicable to CGST as well as SGST .However the discussion in this article is
confined only to CGST

CGST
Any person aggrieved by an order or decision of adjudicating authority may prefer an
appeal before the First Appellate Authority

The Commissioner also may suo motu examine the record of a case and direct any
Designated officer to file an appeal before the First Appellate Authority for determination
of points arising out of any order or decision

The appeal needs to be filed before the First Appellate Authority within 3 months from
the date communication of order sought to be appealed against. The delay in filing
appeal by 1 month can only be condone by the First Appellate Authority.

Every appeal should be filed in prescribed form and duly verified in prescribed manner.
The appeal should be accompanied by a. mandatory pre-deposit of 10 per cent of the
amount in dispute. Amount in dispute shall include tax, interest, fine, fee and penalty.

The First Appellate Authority shall hear and decide appeal within one years of filing ,
wherever possible . The order need to be issued in writing and must state all points of
determination along with reasons for such decision. The First Appellate Authority can
grant adjournment of hearing a case up to 3 times to any party

Appellate Tribunal
The Central Government shall constitute a National Goods and Service Tax Appellate
Tribunal (National Appellate Tribunal) headed by a national president Any person
aggrieved by decision of first Appellate Authority may prefer an appeal before Appellate
Tribunal. Discretionary power has been given to Tribunal to admit an appeal wherein the
amount under dispute does not exceed Rs. 1 Lakh including amount of fine , fee or
penalty. An Appeal before the tribunal needs to be filed within 3 months from the date of
communication of the order sought to be appealed against. No time limit for tribunal to
accept condo nation of delay application if it is satisfied that there was sufficient reason
for not filing the appeal within time.

In case of appealed to be filed by the department Duly constituted Committee by CBEC

will be responsible for taking decisions with respect to filling of appeals against orders
passed by first Appellate Authority. The party against whom appeal is preferred may file
cross objection within 45 days of the receipt of notice .

The National Appellate tribunal will have one branch viz State GST Tribunal ( State
Appellate Tribunal for each state headed by state president.This is the area where cost
accountants can exercise their interpretational skill of GST law as the success of any
Tax professional to a large extend depends upon his /her ability to handle litigations, the
existence of which is inevitable for any Tax law.

Introduction

The government is propagating much about simplicity and uniformity of the proposed
GST regime but the Model GST Draft Act, 2016 does not compliment the avowed
promises made. The dual control of the Central and State Government with different
provisions regarding filing of appeals and mandatory pre-deposit to be made itself reflect
the complexity the assessees would face in the upcoming so called 'revolutionary taxation
reform'. This piece of write up is to address the provisions regarding mandatory pre-
deposit incorporated in the Draft GST Act, 2016.

Backdrop of prevalent provisions regarding mandatory pre-deposit:- At

present, the provisions regarding mandatory pre-deposit in Central Laws like Excise,
Customs and Service Tax are similar and summarized as follows:-

Appellate
Quantum of Mandatory Pre-Deposit
Authority
Commissioner 7.5% of the duty determined in the order if duty and penalty are
(Appeals) involved.
7.5% of the penalty determined in the order if only penalty is involved.

Ceiling of Rs. 10 Crores.

No pre-deposit for interest component

Tribunal (If 7.5% of the duty determined in the order if duty and penalty are
order is passed involved.
by 7.5% of the penalty determined in the order if only penalty is involved.
Commissioner
or officer above Ceiling of Rs. 10 Crores.
rank of
Commissioner) No pre-deposit for interest component

Tribunal (If 10% of the duty determined in the order if duty and penalty are
order is passed involved.
by 10% of the penalty determined in the order if only penalty is involved.
Commissioner
Appeals) Ceiling of Rs. 10 Crores.

No pre-deposit for interest component

Under VAT Laws, the provisions vary from State to State. In case of Rajasthan VAT Act,
assessee is required to pay 10% of the disputed tax amount and 5% of the disputed tax
amount in case of ex-parte assessment order.

Provisions proposed in Model GST Act, 2016:- There are different provisions
regarding filing of appeals in GST regime. It appears that the government will develop a
dual mechanism of assessment and appellate remedies available to assessees. The
provisions proposed with respect to mandatory pre-deposit are summarised as follows:-

Appellate
CGST Law SGST Law
Authority
First Appellate 10% of the amount in dispute Amount of tax, interest, fine,
Authority and arising from the said order. penalty admitted by assessee in
Second Appellate Amount in dispute means full is to be deposited.
Authority being amount determined including Apart from admitted liability, a
Tribunal amount of fee or penalty sum equal to 10% of remaining
levied. If interest is amount in dispute.
determined by order, interest
Amount in dispute means amount
is also included.
determined including amount of
fee or penalty levied. If interest is
determined by order, interest is
also included.

Departmental authorities also

have right to apply for ordering
higher pre-deposit, upto maximum
50% of the amount in dispute if
the case is considered as 'serious
case'.

Serious case means case involving

disputed tax liability of Rs. 25
Crores or more and department
believes it is good case for them.

Comparative Analysis of the Provisions:-

There is no difference in the percentage of mandatory pre-deposit at different

appellate stages in contrast to 7.5% for first appellate stage while 10% for
second appellate stage thereby leading to increase in the quantum of mandatory
pre-deposit in GST regime.
Presently, mandatory pre-deposit is computed only on duty component or
penalty component if only penalty is in dispute. However, the computation of
mandatory pre-deposit in GST regime includes fine, penalties and even interest,
if ascertained by the order. This also leads to increasing the mandatory pre-
deposit in absolute terms in the proposed GST regime.
There is wide variation in the provisions of CGST and SGST Laws. The
mandatory pre-deposit provision in SGST is harsher. Firstly, if assessee admits
certain tax as its liability, then such tax, interest, fine and penalties are required
to be paid in full and further 10% is required to be paid of amount in dispute.
Not only this, the departmental authorities have also been empowered to
request for ordering more pre-deposit in serious cases which can extend upto
50% of the amount in dispute. This appears to be unfair as assessees have not
been given any option to dispense with the condition of mandatory pre-deposit
 in deserving cases and apply for stay. It is practical phenomenon that futile
demands are raised against assessees and in meritorious cases, it is burdensome
to even comply with mandatory pre-deposit of 10%. When no option of
complete stay is provided to assessee, power to departmental officers for
enhancing mandatory pre-deposit in serious cases is very biased.
There is no ceiling on the amount of mandatory pre-deposit as is presently
prevalent thereby leading to diminishing the right of appeal in cases involving
Crores of demand wherein it may not be possible to comply with even 10% of
the mandatory pre-deposit.
Before Parting:- It has been concluded in various judicial pronouncements that
appellate remedy is granted under the provisions of Statue and the option of filing appeal
can be granted on satisfaction of certain conditions but the conditions cannot be too
harsh and stringent so as to disable assessees from filing appeals. The provisions of
mandatory pre-deposit incorporated in the Model GST Act, 2016 deserves prompt
attention by trade and industry so that the pros and cons can be communicated to the
authorities drafting the GST legislation.