Page 27 - GSTL_14th May 2020_Vol 36_Part 2

2020 ] RULE 86A & BLOCKING OF INPUT TAX CREDIT — AN ANALYSIS J27
or utilized by reason of fraud, or any wilful misstatement or suppression of facts
to evade tax, he shall serve notice on the person chargeable with tax which has
not been so paid or which has been so short paid or to whom the refund has er-
roneously been made, or who has wrongly availed or utilized input tax credit.
The notice should require him to show cause why he should not pay the
amount specified in the notice along with interest payable thereon under Section
50 and a penalty equivalent to the tax specified in the notice - Section 74(1) of
CGST Act.
Judicial view
The Hon’ble Gujarat High Court in a recent case namely Valerius Indus-
tries v. Union of India decided on 28-8-2019. Vide R/Special Civil Application No.
13132 of 2019.
We have recently seen the practice of GST Department of blocking the
credit of a person merely by way of computer entry on the common portal of
GST on one pretext or the other, without there being any legal provision allow-
ing expressly providing for such cource of action. held that such blocking of
credit by way of mere computer entry is absolutely illegal.
Show cause notice if amount short paid. Where the proper officer is of
the opinion that the amount paid under Section 74(5) falls short of the amount
actually payable, he shall proceed to issue the notice as provided in Section 74(1)
in respect of such amount which falls short of the amount actually payable - Sec-
tion 74(7) of CGST Act.
There can be no suppression of facts if facts which are not required to be dis-
closed are not disclosed - Smt. Shirisht Dhawan v. Shaw Brothers - 1992 (1) SCC 534
= 1992 AIR SCW 1649 = AIR 1992 SC 1555, CCE v. Ranka Wires - 2015 (322) E.L.T.
410 (S.C.).
Suppression should be wilful
Supreme Court in Rainbow Industries v. CCE - 1994 (74) E.L.T. 3 (S.C.) has
held two ingredients must be present - wilful suppression, misdeclaration etc.
and the intention to evade.
New Section 271AAD proposed in the Finance Bill, 2020 which is in
Chapter XXI - Penalties imposable. This section will be effective from 1st April,
2020 and the scope of this section is very large which give very wide power to
the Ld. Assessing Officer. It starts with “without prejudice to any other provi-
sions of this Act”, it means the penalty u/s. 270A and 271AAD can be invoked
simultaneously for the false entry or penalty u/s. 271AAC and 271AAD can be
invoked for bogus purchases. Further, it is said that if false entry found in the
books of accounts maintained by any person or an omission of any entry to
evade the tax liability.
(1) What if the purchase is found to be bogus, whether the addition
would be done u/s. 69C? If the addition is u/s. 69C, the tax would
be computed u/s. 115BBE and penalty would be levied u/s.
271AAC.
[Continued on page J37]

GST LAW TIMES  14th May 2020  27