GST / Indirect Tax : Discrepancies in Returns and Legality of Invocation of S.73 of CGST Act, 2017

GST / Indirect Tax : Discrepancies in Returns and Legality of Invocation of S.73 of CGST Act, 2017 

In case of Pepsico India Holdings Pvt Ltd v. Union of India [2025] GCtR 1635 (Gauhati), it was held that a reading of Section 61 of the CGST Act, 2017, along with Rule 99 of the CGST Rules, makes it clear that the mandate of the Act, when read with the Rules, is that where, upon filing of returns by the assessee and subsequent scrutiny by the proper officer, discrepancies are noticed, the proper officer is required to intimate such discrepancies to the assessee by issuing a notice in Form GST ASMT-10. Where the assessee accepts the discrepancies and submits an explanation within the prescribed period of 30 days, and such explanation is found to be acceptable by the proper officer, then no further action is required to be taken.

Section 73 deals with the determination of tax not paid or short paid, or erroneously refunded, or Input Tax Credit wrongly availed or utilized, for any reason other than fraud, willful misstatement, or suppression of facts. It is under these circumstances that demands and recovery can be ordered by the proper officer, in accordance with the procedure prescribed under Section 73. A bare perusal of Section 73 reveals that the proceedings under Section 73 can also be initiated in cases where Input Tax Credit has been wrongly availed or utilized under the provisions of the GST Act, 2017 the assessment procedure is prescribed under Chapter XII. Essentially GST is a self assessed tax payable under the Act. The registered person shall self assess the taxes payable and furnish a return for each period as specified under section 39. Where the person is unable to determine the value of goods or services or both or determine the rate of tax payable, then the provisions under section 60 will be applicable. In order to verify the correctness of returns submitted by the assessee under Chapter XII, the only provision prescribed is Section 61, which deals with the scrutiny of returns. Section 64 provides for summary assessment in special cases. Therefore, before issuing a demand-cum-show cause notice under Section 73 to a registered person, the proper officer must conclude that the registered person has wrongly availed or utilized Input Tax Credit.

From the scheme of the Act read with the Rules, such conclusion and finding by the proper officer can only be arrived at upon scrutiny of the returns. Such scrutiny of the return is specifically provided for under section 61. Under the said chapter there is no other provision which provides for any other procedure for scrutiny of returns. Therefore, for the proper officer to arrive at a conclusion that there was wrongful utilization or availment of Input Tax Credit, the procedure followed must be in accordance with the provisions prescribed under Section 61. Therefore, for the proper officer to arrive at a conclusion that a discrepancy was noticed in the returns filed, and to issue a demand-cum-show cause notice under Section 73 and initiate other proceedings contemplated thereunder, the proper officer must first arrive at a finding as specified under Section 61(3).

The provisions of Section 73 are very specific and are meant for the recovery or determination of tax not paid or short paid, or Input Tax Credit wrongly availed or utilized, for any reason other than fraud. Therefore, where the statute itself prescribes a procedure enabling the registered taxpayer to rectify any defects, subject to such defects being brought to their notice as per the prescribed procedure, and if the explanation or rectification offered is found acceptable by the proper officer, there arises no occasion to invoke proceedings under Section 73. 

By notification No.56/2019 dated 14.11.2019 the competent authority has notified that the submission of information in Table 14 in Form GSTR-9C was optional for the period 2017-18 and 2018-19. The same exemption was further extended till the period of financial year 2022-2023 by series of notifications being notification No. 79/2020-Central Tax dated 15.10.2020, Notification No. 30/2021-Central Tax dated 30.07.2021, Notification No.14/2022-Central Tax dated 05.07.2022 and Notification No.38/2023-Central Tax dated 04.08.2023.