Dropping Section 73 Notice does Not Bar initiation of Section 74 Proceedings

Group M Media India Private Limited Vs Union Of India And Others (Punjab and Haryana High Court)

In the case of Group M Media India Private Limited Vs Union of India and Others, the petitioner challenged a show-cause notice issued under Section 74(1) of the CGST Act, 2017, in relation to an alleged tax evasion. Earlier, the respondents had issued a notice under Section 73 of the Act, but after the petitioner’s reply, the proceedings were dropped. The petitioner contended that the issuance of the Section 74 notice was improper, arguing that since the DGGI was already handling the matter, the notice should not have been issued. Additionally, the petitioner argued that the notice failed to specify any fraudulent intent or willful misstatements, which are necessary to substantiate a tax evasion case.

The Punjab and Haryana High Court, however, disagreed with the petitioner’s contentions. The Court upheld the issuance of the notice under Section 74, emphasizing that a notice under Section 73 does not preclude the authorities from initiating proceedings under Section 74. The Court also dismissed the petitioner’s argument about parallel proceedings, noting that the proceedings under Section 74 had been initiated independently by the Haryana State GST authorities. The notice accused the petitioner of availing excess Input Tax Credit (ITC), which was allegedly not supported by corresponding tax liabilities reflected in the vendor’s GSTR-1, suggesting that the tax was not deposited in the government treasury. The Court found the show-cause notice to be properly issued, with clear allegations of fraud, and dismissed the writ petition as misconceived, asserting that the petitioner should respond to the notice rather than bypassing the statutory process through a writ.