P. Baskaran Vs Deputy State Tax Officer (Madras High Court)
Section 74 of the CGST Act cannot be invoked without granting opportunity to establish genuine supply of goods: Madras High Court
The Madras High Court set aside an order imposing interest and penalty under Section 74 of the CGST Act and remanded the matter for fresh consideration, holding that the assessee must be given a reasonable opportunity to establish that the underlying supply of goods was genuine before the stringent provisions of Section 74 are invoked. The petitioner had reversed the Input Tax Credit (ITC) but contended that the supplies were genuine and that the essential ingredients of Section 74, namely fraud, wilful misstatement or suppression of facts, were absent. While the Revenue argued that the petitioner had already replied to the show cause notice, the Court observed that the reversal of ITC had protected the Revenue’s interest and that the possibility of proving genuine supply could not be ruled out without permitting the petitioner to produce supporting documents. Accordingly, the Court directed the assessing authority to reconsider the invocation of Section 74 and pass a fresh order within three months after granting a reasonable opportunity of hearing.
Facts:
M/s. P. Baskaran (“the Petitioner”), a proprietary concern based in Salem, Tamil Nadu, was issued an order dated August 30, 2024 in FORM GST DRC-07 (Order Reference No. ZD330824291608Z) by the Deputy State Tax Officer (“the Respondent”) for the Financial Year 2018-19, imposing interest and penalty under Section 74 of the applicable GST enactments.
