CBIC Issued Guidelines for Recovery of Outstanding Dues where the First Appeal is Disposed of till the Appellate Tribunal Comes into Operation

CBIC has received a request from the GST authority to issue clarification in the following matters:

Whether recovery proceedings should be initiated in the matter where the first appellate authority has confirmed the demand created by the adjudicating authority, whether fully or partially, and where an appeal against such order could not be filed due to non-constitution of Appellate Tribunal.
Where the amount is paid through DRC-03 against the demand order. However, such DRC-03 is inadvertently filed under the “voluntary” or ‘others’ category. In such a case, can this amount be adjusted against the pre-deposit that is required to be paid for filing an appeal before the appellate authority and before the appellate tribunal?

The CBIC has issued the following clarification in the matter through Circular No. 224/18/2024 – GST dated 11th July 2024:

1. Recovery Proceedings where demand is confirmed by the Appellate Authority but an appeal could not be filed to the Appellate Tribunal

a. Statutory provisions related to filing of appeal before the Appellate Tribunal

As per Section 112 of the CGST Act, every person has statutory remedy of appeal against the order passed by the first appellate authority or by a revisional authority.
As per Section 78 of the CGST Act, recovery proceedings are to be initiated against the taxpayer if the amount confirmed by the order is not paid within 3 months from the date of service of the order.
However, if a person files an appeal under Section 112 on payment of the prescribed amount of pre-deposit then the recovery proceedings for the balance amount shall be deemed to be stayed till disposal of the appeal.

b. Appeal Can’t be filed before the Appellate Tribunal and consequent action by tax authority

Due to the non-constitution of the Appellate Tribunal, the taxpayers are not able to file an appeal against the orders of the appellate authority, and therefore, pre-deposit can’t be made under Section 112(8) of the CGST Act.
However, in these cases, the tax officers are taking a view that no stay is granted against the recovery as no pre-deposit is made.
In some cases, taxpayers have either paid or are willing to pay the requisite amount of pre-deposit either by crediting in their electronic liability register against the demand so created, or through DRC-03.
However, tax officers are still resorting to recovery proceedings after completion of a period of 3 months.

c. Clarification on manner of payment of pre-deposit amount

To grant the benefit of stay to the taxpayer, the CBIC has clarified that where the taxpayer decides to file an appeal against the order of the appellate authority and wants to make a pre-deposit, he can make the payment of an amount equal to the amount of pre-deposit by navigating to following path post-login:

Services >> Ledgers>> Payment towards demand

The taxpayer would be navigated to Electronic Liability Register (ELL) Part–II in which he can select the order against which pre-deposit is to be made.
The amount so paid would be mapped against the selected order and the demand amount would be reduced in the balance liability in the aforesaid register.
The amount deposited by the taxpayer will be adjusted against the amount of pre-deposit required to be deposited when filing an appeal before the Appellate Tribunal.

d. Undertaking of filing of an appeal with the appellate tribunal

Further, CBIC has clarified that the taxpayers must make an undertaking/ declaration with the jurisdictional proper officer that he will file an appeal before the Appellate Tribunal, as and when it comes into operation.
On the filing of such undertaking and payment of the pre-deposit amount, in the above-said manner, the recovery of the remaining amount as per the order of the appellate authority will be stayed.

e. Consequences of non-payment of pre-deposit amount and non-filing of declaration/undertaking

Where the taxpayer does not pay the pre-deposit amount or furnish the undertaking/declaration, it shall be presumed that the taxpayer is not willing to file an appeal against the order of the appellate authority.
Accordingly, in such a case, recovery proceedings can be initiated against such a person as per GST Law.
Similarly, post when the Tribunal comes into operation, if the taxpayer does not file an appeal within the timelines specified in Section 112 of the CGST Act then the remaining amount of the demand will be recovered as per the provisions of GST law.

2. Manner of adjustment of Amount paid through DRC-03 under “Voluntary” or “other” head against pre-deposit

a. Filing of Form GST DRC-03A

In some cases, taxpayers have already paid the amounts toward demand through GST DRC-03.
In such case, reference should be given to notification No. 12/2024– CT dated 10.07.2024 through which Rule 142(2B) and Form GST DRC-03A have been inserted.
Rule 142(2B) provides a mechanism to be followed where the person liable to pay tax, interest, and penalty under section 52, section 73, section 74, or other mentioned sections has made payment of such an amount inadvertently through FORM GST DRC-03.
In such a case, the person can file an application in FORM GST DRC-03A and the amount intimated through the FORM GST DRC-03 shall be adjusted as if the said payment was made towards the said demand on the date of such intimation through FORM GST DRC–03.
Therefore, where a concerned person has filed Form GST DRC-03A, the amount intimated through DRC-03A shall be liable to be adjusted towards the amount required for pre-deposit for filing an appeal.
However, if the taxpayer does not file the appeal within the timelines prescribed in Section 107 and Section 112 of the CGST Act, the remaining amount of the demand will be recovered as per the provisions of the law.
It is pertinent to mention that the application in FORM GST DRC–03A cannot be made in cases where against the payment made through the said FORM GST DRC–03, proceedings have already been concluded by the issuance of an order in FORM GST DRC–05 as per the Rule 142(3) of CGST Rules, 2017.

b. Till Form GST DRC-03A is not functional on the GST portal, an intimation can be filed to the proper officer

Till the time function to file Form GST DRC-03A is not available on the GST portal, where the pre-deposit amount is inadvertently paid through Form GST DRC-03, the concerned taxpayer may file an intimation with the proper officer.
On receipt of such intimation, the proper officer may not insist on recovery for the remaining amount payable till the time the said functionality of FORM GST DRC–03A is made available on the portal.
Once the functionality of FORM GST DRC-03A is available on the portal, the concerned taxpayer may file such an application at the earliest, and on doing so, the amount so intimated shall be adjusted against the pre-deposit required.
However, if the taxpayer fails to apply on a common portal, the proper officer may initiate the recovery proceedings.

Conclusion:

Clarification issued by the CBIC is indeed a savior for the taxpayer who intended to file an appeal with the Appellate Authority. However, to avail of the benefit of stay, taxpayers are required to make payment of pre-deposit in the specified manner and should file an intimation to the proper officer.