Case Law Details
Chandrashekhar Yadav Vs State of U.P. (Allahabad High Court)
For invoking Section 74 of the Act, the allegations pertaining to suppression etc. are sine qua non in absence thereof, the jurisdiction under Section 74 of the Act itself cannot be invoked by the authorities: Allahabad High Court
The Allahabad High Court, in Chandrashekhar Yadav vs. State of U.P., ruled that the invocation of Section 74 of the State Goods and Services Tax Act, 2017 (SGST Act) was unwarranted. The petitioner had been served with a notice for non-payment of tax, followed by a demand order seeking interest and penalty. However, the court observed that the essential conditions for invoking Section 74, such as fraud, wilful misstatement, or suppression of facts, were absent.
The case pertained to a demand order dated March 16, 2024, which sought Rs. 25,08,494 from the petitioner for the financial year 2017-18. The petitioner had initially received a show cause notice on October 12, 2022, stating that a tax liability of Rs. 13,55,943 had been declared but remained unpaid. Subsequently, the petitioner deposited the tax amount but was still issued the impugned order demanding interest and penalty. The petitioner challenged this on the grounds that the notice lacked allegations of fraud or suppression, making the demand legally untenable.
The court analyzed Section 74 of the SGST Act, which applies only in cases where tax evasion results from fraud, misrepresentation, or suppression of facts. Since neither the show cause notice nor the final order contained such allegations, the court held that the authorities had wrongly exercised their jurisdiction under this section. Moreover, the petitioner argued that the order was time-barred, as it was passed beyond the prescribed limitation period, further weakening the case against him.
Relying on established legal principles, the court quashed the order dated March 16, 2024, ruling that Section 74 could not be applied without meeting its statutory requirements. The decision reinforces the principle that mere non-payment of tax does not justify penalties under this provision unless fraudulent intent or suppression is proven.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. This writ petition has been filed by the petitioner aggrieved of the order dated 16.03.2024, Annexure-1 passed by respondent no. 2 under Section 74 of State Goods and Services Tax Act, 2017 (in short, ‘the Act’), for the financial year 2017-18 (July 2017 to March 2018) raising a demand of Rs. 25,08,494/- towards interest and penalty.
2. The petitioner was issued a show cause notice dated 12.10.2022 under Section 74 of the Act inter auia indicating that though in GST DRC-01 a tax liability of Rs. 13,55,943.00/- was declared, however, no tax was deposited and that notice under Section 61 of the Act was issued, however, no explanation was submitted.
3. Pursuant to the said notice dated 12.10.2022, the petitioner deposited Rs. 13,55,943.60/- through DRC-03 on 14.11.2022. Thereafter, the impugned order dated 16.03.2024 has been issued demanding the amount of interest and penalty.
4. Learned counsel for the petitioner made submissions that a bare look at the notice would reveal that none of the ingredients of Section 74 of the Act have been alleged as there has been no fraud or wilful misstatement or suppression of facts on the part of the petitioner inasmuch as liability was clearly reflected and has been accepted by the Department and, therefore, notice under Section 74 of the Act could not have been issued and once the notice itself is without jurisdiction, passing of the order demanding interest and penalty cannot be sustained.
5. Submissions have also been made that the order even otherwise is barred by limitation having been passed much beyond the prescribed limitation.
6. Learned counsel appearing for the respondents attempted to support the order impugned with the submissions that though through GST DRC-01 tax liability was apparent, deliberately, the same was not deposited by the petitioner and, therefore, issuance of the notice under Section 74 of the Act and raising the demand of interest and penalty is justified.
7. We have considered the submissions made by learned counsel for the parties and have perused the material available on record.
8. A bare look at the show cause notice dated 12.10.2022 reveals that only indication made is that for the period in question, the difference between GST DRC-01 and GST-3B was Rs. 13,55,943.00/- and that no response to notice under Section 61 of the Act was given and, therefore, the petitioner must deposit a sum of Rs. 13,55,943.00/- as tax along with interest and penalty. The petitioner deposited the tax, whereafter the order impugned under Section 74 of the Act has been passed demanding interest and penalty.
9. Section 74 of the Act can be invoked where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised ‘by reason of fraud, or any wilful-misstatement or suppression of facts to evade taxi. However, neither the show cause notice alleges the ingredients of Section 74 of the Act pertaining to suppression etc. nor the order passed under Section 74 of the Act dated 16.03.2024 makes any reference to the said ingredient of Section 74.
10. For invoking Section 74 of the Act, the allegations pertaining to suppression etc. are sine qua non in absence thereof, the jurisdiction under Section 74 of the Act itself cannot be invoked by the authorities.
11. In view of above fact situation, we have no doubt that the order impugned dated 16.03.2024 passed by respondent no. 2 demanding interest and penalty from the petitioner invoking provisions of Section 74 of the Act cannot be invoked.
12. Consequently, the petition is The order impugned dated 16.03.2024 is quashed and set aside.
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