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CA Final · Indirect Tax Laws · Demands and Recovery

Mehta Traders received an order under section 73 demanding tax, which was served on 10 June. The order does not state any shorter payment period, and the proper officer has recorded no reasons for requiring earlier payment. Within what period must Mehta Traders pay the amount before recovery proceedings are initiated under section 78?

Mehta Traders must pay within three months from the date of service of the order. Section 78 sets this period, and recovery begins only on failure to pay. A shorter period applies only if the officer records reasons in writing that it is expedient in the interest of revenue.

  1. AWithin one month from the date of service of the order
  2. BWithin three months from the date of service of the orderCorrect
  3. CWithin three months from the date of the tax period to which the order relates
  4. DWithin six months from the date of service of the order

Explanation

Section 78 requires payment within three months from the date of service of the order, failing which recovery proceedings are initiated. A shorter period is possible only if the proper officer, in the interest of revenue, records reasons in writing. Here no such reasons exist, so the one-month option is wrong.

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