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The position with respect to scrutiny of returns under GST in terms of Section 61 of CGST Act seems far from being settled considering the ongoing dilemma. From taxpayer stand point, it is preferred that the procedure to scrutinize the returns in terms of Section 61 of CGST Act is followed. The same
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Section 61 of the CGST Act, along with Rule 99 of CGST Rules, outlines the procedure for the scrutiny of GST returns by a proper officer. A notice in Form GST ASMT-10 is issued to taxpayers to inform them of discrepancies and provide an opportunity to clarify or rectify them.
Taxpayers prefer the Section 61 scrutiny process because it offers a chance to clarify or correct inadvertent mistakes in their GST returns, especially since there is no facility for revision. This process can prevent the immediate initiation of more severe proceedings with penalties.
If a taxpayer fails to justify discrepancies or take corrective measures after receiving a notice under Section 61, the proper officer may initiate further action, including proceedings under sections 65, 66, 67, or determining tax and other dues under sections 73, 74, or 74A.
In the PepsiCo case, the Guwahati High Court affirmed that the notice under Section 61 (ASMT-10) is a crucial procedural safeguard. The court held that tax authorities must follow the assessment procedure prescribed in Section 61(3) before directly issuing notices under Section 73.
The Madras High Court, in the Mandarina Apartment case, viewed the ASMT-10 notice as non-mandatory, observing that Section 61 uses permissive language ('may scrutinize'). The court suggested that Section 73 proceedings could be initiated without necessarily going through the Section 61 scrutiny process.
While the general consensus leans towards issuing ASMT-10 for procedural fairness, authorities may issue show cause notices directly in specific circumstances, such as when information is gathered from sources other than GST returns or if there's evidence of tax fraud. This decision should be judiciously made with recorded reasons.
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