No, the Honorable Madras High Court in the case of Mandarina Apartment Owners Welfare Association (MAOWA) v. Commercial Tax Officer/State Tax Officer [W.P. NOS. 15307 & 15330 OF 2024 dated 16 July 2024] set aside the assessment order stating that a close examination of sections 61 and 73 shows that scrutiny of returns and issuance of notice in form ASMT-10 do not constitute essential steps for adjudication.
The Honorable Court observed that upon selection of returns for scrutiny and discovery of discrepancies, there is a mandatory obligation to issue an ASMT-10 notice. The ASMT-10 notice allows the registered person to provide an explanation; if satisfactory, no further action is taken, otherwise, action is initiated under sections 65, 66, or 67, or tax is determined under sections 73 or 74. Failing to issue an ASMT-10 notice despite noticing discrepancies vitiates the scrutiny process and any resulting quantification. However, scrutiny of returns and issuance of ASMT-10 notice is not a mandatory prerequisite for adjudication under section 73, even if returns were scrutinized. The Honorable Court accepted the contention of the Respondents by relying on the judgment of this Court in case of Vadivel
Pyrotech (W.P.(MD)No.22642 of 2022 and W.M.P.(MD)Nos.16803 and 16804 of 2022 dated 27.09.2022) and concluded that the said judgment does not lay down the proposition that jurisdiction under Section 74 cannot be exercised without issuing notice under Section 61(3).
Author’s Comments
Proceedings under section 73 of the CGST Act are completely different and independent of section 61 proceedings. Proceeding under section 61 of the CGST Act is a pre-adjudication exercise (where no demand can be confirmed and recovered) and certainly not a pre-condition to initiate proceedings under chapter XV of the CGST Act. The opening words of section 73 read as “Where it appears to the Proper officer…” clearly indicates that scrutiny, audit, special audit or Inspection, on the one hand, and adjudication, on the other, operates in silos and the former does not constitute a pre-requisite for the latter.
SCN is the conclusion of the investigation and does not limit the proper officer to investigate and draw conclusions on the basis of scrutiny of returns under section 61 only, rather information can be gathered by the proper office from any source. A Similar decision was given by the Division Bench of the Honorable Allahabad High Court in the case of M/s. Nagarjuna Agro Chemicals Pvt. Ltd. v. State of U.P. and another (2023: AHC: 148454-DB, Writ Tax No.335 of 2023) wherein the Division Bench held that scrutiny of return proceedings and proceedings under Section 74 are two separate and distinct exigencies and issuance of notice under Section 61(3) cannot be construed as a condition precedent for initiation of action under
Section 74 of the Act.
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