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CA Final · Indirect Tax Laws · Demands and Recovery

Kaveri Textiles Ltd. received an order under section 73 demanding tax, and the order became final. The order was served on 1 June. The proper officer has not recorded any reason for shortening the payment period. Under the provisions on initiation of recovery proceedings, within what period must Kaveri Textiles pay the amount before recovery proceedings are initiated?

Kaveri Textiles must pay within three months from the date of service of the order. Only if the proper officer records reasons in writing in the interest of revenue can a shorter period be fixed. Absent such reasons, recovery proceedings begin only after the three months lapse.

  1. AWithin three months from the date of service of the orderCorrect
  2. BWithin 30 days from the date of the order
  3. CWithin three months from the date of the notice
  4. DWithin 15 days from the date of service of the order

Explanation

Section 78 requires any amount payable under an order to be paid within three months from the date of service of the order, failing which recovery proceedings are initiated. A shorter period applies only if the proper officer records reasons in writing, and none were recorded here. The 30-day option is wrong because no such period applies in section 78, and the notice date is not the starting point.

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