Interplay of Sections 73, 74 & 75 of CGST Act – Limitation, Appellate Powers & Illusion of Revival

• Whether an appeal lies against a show cause notice under the GST law
• Whether the Appellate Authority has the power to remand a matter to the adjudicating authority
• Whether Sections 75(2) and 75(3) override or dilute the limitation prescribed under Section 73
• Whether Section 75(2) empowers the Appellate Authority to issue directions for re-determination of tax
  • • • • Whether statutory limitation can be extended or revived by executive circulars
• Consequences where proceedings under Section 74 fail on merits, with specific reference to limitation

Whether unpaid taxes arise out of fraud or bona fide error is a legacy debate in indirect tax jurisprudence. Under the CGST Act, 2017, this distinction is of critical importance, as it determines limitation, jurisdiction and the nature of statutory consequences. Sections 73 and 74 reflect this distinction by providing separate treatment for bona fide cases and cases involving fraud, wilful misstatement or suppression of facts.

Difficult questions arise when proceedings initiated under Section 74 fail on the merits because the foundational allegations of fraud or suppression are not established in the show cause notice. By the time such issues are adjudicated or examined in appeal, the statutory time limits for passing an order under Section 73 may have already expired. This raises a fundamental question: can such proceedings subsequently fall back upon Section 73 through deeming provisions, appellate intervention or executive clarification, or does the failure of Section 74 result in an insurmountable jurisdictional and temporal bar?

Against this backdrop, this article attempts to examine the legal consequences that ensue when proceedings under Section 74 fail on merits, with particular emphasis on statutory limitation, appellate powers and the illusion of revival.

1. An appeal under section 107(1), before the first appellate authority, can be made only against a “decision” or “order” passed by an adjudicating authority.

107. (1) Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person.

2(4) “adjudicating authority” means any authority, appointed or authorised to pass any order or decision under this Act, but does not include the Central Board of Indirect Taxes and Customs, the Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the National Appellate Authority for Advance Ruling, the Appellate Authority, the Appellate Tribunal and the Authority referred to in sub-section (2) of section 171;

2. An appeal, under section 112(1), before the Appellate Tribunal, can be made only against an order passed against him under section 107 or section 108.

112(1) Any person aggrieved by an order passed against him under section 107 or section 108 of this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act may appeal to the Appellate Tribunal against such order within three months from the date on which the order sought to be appealed against is communicated to the person preferring the appeal; or the date, as may be notified by the Government, on the recommendations of the Council, for filing appeal before the appellate Tribunal under this Act, whichever is later.

3. Whether an appeal can be made against a Show Cause Notice:

Sections 107 and 108 of the CGST Act, 2017 permit an appeal only against a decision or order passed by the Adjudicating Authority. A Show Cause Notice is merely an initiating step in adjudication and does not possess the character of an order. Orders under Sections 73 or 74 are passed only after adjudication and are post-SCN outcomes.

A Show Cause Notice lacks finality and enforceability and, therefore, cannot be treated as a “decision”. The term “decision” in Section 107 necessarily refers to the determination recorded in the adjudication order. This interpretation is consistent with the statutory scheme and cannot be discarded.

However, it is worth mentioning that for the purpose of section 108, the term “decision” includes an intimation given by any officer lower in rank than the Revisional Authority. However, this deeming inclusion is confined to the limited purpose of revision under Section 108 and does not render a show cause notice appealable under Sections 107 or 112.

4. Whether the Appellate Authority may remand the case to the adjudicating authority:

4.1 Section 107(11) states-

107(11) “The Appellate Authority shall, after making such further inquiry as may be necessary, pass such order, as it thinks just and proper, confirming, modifying or annulling the decision or order appealed against but shall not refer the case back to the adjudicating authority that passed the said decision or order:

Provided that an order enhancing any fee or penalty or fine in lieu of confiscation or confiscating goods of greater value or reducing the amount of refund or input tax credit shall not be passed unless the appellant has been given a reasonable opportunity of showing cause against the proposed order:

Provided further that where the Appellate Authority is of the opinion that any tax has not been paid or short-paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised, no order requiring the appellant to pay such tax or input tax credit shall be passed unless the appellant is given notice to show cause against the proposed order and the order is passed within the time limit specified under section 73 or section 74 or section 74A.”

Thus, section 107 itself mandates that the Appellate Authority shall not refer back the case to the adjudicating authority that passed the said decision or order.

4.2. Under the erstwhile regime of Central Excise and Service Tax, the legislature consciously curtailed the powers of the first appellate authority to remand matters to the adjudicating authority. The power of remand, which was earlier vested in the Commissioner (Appeals) under the Central Excise law, was expressly taken away by the amendment to section 35A with effect from 11.05.2001 through the Finance Bill, 2001. The Hon’ble Supreme Court, in MIL India Ltd. v. Commissioner of Central Excise [2007 (3) TMI 8], authoritatively affirmed this legislative intent and held that, post-amendment, the Commissioner (Appeals) no longer possesses the power to remand matters to the adjudicating authority.

4.3. This legislative policy of finality at the appellate stage, coupled with a conscious avoidance of remand proceedings, has been carried forward and reinforced under the GST regime. Section 107(11) of the Central Goods and Services Tax Act, 2017, in express terms, provides that the Appellate Authority shall confirm, modify or annul the decision or order appealed against, but shall not refer the case back to the adjudicating authority. Thus, the embargo on remand under GST is not novel, but a continuation of a settled legislative approach, now statutorily entrenched with greater clarity.

4.4 During the GST regime also Hon’ble High Courts have also held that section 107 of the CGST Act, 2017 does not confer any power to the Appellate Authority to remand the matter or refer the case back to the adjudicating authority that passed the said decision or order.

Hon’ble Allahabad High Court in “Anand and Anand vs. Principal Commissioner Central Goods and Services [2025] 178 taxmann.com 251 (Allahabad)/[2025] 102 GSTL 240 (Allahabad)[04-09-2025]” has followed its own judgment in “Kronos Solutions India (P.) Ltd. v. UOI 2024:AHC:16550-DB” wherein it was held-

“Undeniably, the appeal authority may either confirm or modify or annul the order under appeal. In face of statutory prescription allowing for only three above described options to the appeal authority, no inherent power may remain be exercised by the appeal authority to set aside the order under appeal and remand the proceedings to the original authority. Any doubt in that regard has been clarified by the legislature itself by stating that the appeal authority shall not refer the matter back to the adjudicating authority.

Accordingly, no other issue is required to be adjudicated at this stage. Once the appeal authority is seen to have failed to exercise its jurisdiction in accordance with law, such an order may never be sustained. It is accordingly set aside and the matter is remanded to the appeal authority to pass a fresh order after hearing the parties afresh.”

5. Provisions of Section 75(2) and 75(3):

Section 75(2)- “Where any Appellate Authority or Appellate Tribunal or court concludes that the notice issued under sub-section (1) of section 74 is not sustainable for the reason that the charges of fraud or any wilful-misstatement or suppression of facts to evade tax has not been established against the person to whom the notice was issued, the proper officer shall determine the tax payable by such person, deeming as if the notice were issued under sub-section (1) of section 73.”

Section 75(3)- “Where any order is required to be issued in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court, such order shall be issued within two years from the date of communication of the said direction.”

6.  Whether section 75(3) conflicts with section 107(11):

Section 75(3) does not directly conflict with section 107(11). While section 107(11) governs the scope of appellate powers and expressly prohibits the Appellate Authority from remanding a matter to the adjudicating authority, section 75(3) operates in a different field and deals with situations where, in the order passed under section 107, the Appellate Authority has issued lawful directions that require implementation by the proper officer. Section 75(3) does not confer any power to remand or reopen adjudication; it merely prescribes an outer time limit of two years for issuance of an order where such issuance is otherwise required to give effect to the appellate directions. Accordingly, section 75(3) cannot be invoked to justify a remand barred under section 107(11) and must be read as a limitation provision that comes into play only after and subject to the validity of the appellate directions issued under section 107. It is to be noted that any ‘direction’ contemplated under Section 75(3) must be intra vires Section 107(11) and cannot amount, directly or indirectly, to a remand or reopening of adjudication.

7. Whether section 75(2) conflicts with section 107(11):

Section 75(2) does not conflict with section 107(11). The later restricts the powers of the Appellate Authority by prohibiting it from remanding a matter to the adjudicating authority and mandates finality at the appellate stage. Section 75(2), on the other hand, does not arise from any appellate direction or remand; it operates by statutory mandate where an appellate authority, tribunal, or court concludes that proceedings initiated under section 74 are unsustainable for want of fraud, wilful misstatement, or suppression of facts. In such a situation, the Act itself deems the notice to have been issued under section 73 and obliges the proper officer to proceed accordingly. Since the initiation of proceedings under section 75(2) flows automatically from the statute and not from any reference or direction by the Appellate Authority, it does not offend the bar on remand contained in section 107(11). Both provisions operate in distinct fields and are capable of harmonious construction.

For example, where the Appellate Authority annuls an order passed under section 74 on the ground that the show cause notice, though otherwise valid, does not sustain the invocation of section 74 as the charges of fraud, wilful misstatement, or suppression of facts with intent to evade tax are not established, section 75(2) comes into operation. In such a case, the proper officer is empowered to determine the tax payable by such a person by deeming the notice to have been issued under sub-section (1) of section 73.

8. Whether section 75(2) issues any direction to the Appellate Authority:

• A careful examination of the text, context, and placement of Section 75(2) within the CGST Act demonstrates that it does not issue any direction to, nor does it confer any power upon, the Appellate Authority. The provision is located in Chapter XV, which governs general procedural provisions relating to determination of tax, and is addressed exclusively to the proper officer.
• Section 75(2) operates as a statutory consequence provision. It comes into play automatically once it is found, in appellate or judicial proceedings, that the invocation of Section 74 fails on merits due to absence of fraud, wilful misstatement or suppression of facts. The provision merely mandates that, in such event, the notice shall be deemed to have been issued under Section 73. It neither envisages nor requires any positive direction by the Appellate Authority for re-determination of tax.
• From a jurisdictional standpoint, the powers of the Appellate Authority are exhaustively codified under Section 107(11), which restricts the authority to confirming, modifying or annulling the order appealed against and expressly prohibits remand. Section 75(2) does not override, qualify, or carve out any exception to this statutory limitation. There is nothing in the language of Section 75(2) to suggest that it enlarges appellate jurisdiction or authorises issuance of directions to the adjudicating authority.
• Read harmoniously, Section 75(2) is consequence-driven and officer-centric, not appellate-centric. It does not regulate appellate procedure, does not confer discretion on the Appellate Authority, and does not contemplate the issuance of directions. Any interpretation treating Section 75(2) as a source of appellate power would be contrary to the scheme of Section 107 and would amount to judicial legislation.
• It is also a settled principle of administrative law that executive clarifications or circulars cannot expand statutory powers or alter jurisdictional boundaries created by the legislature. Therefore, any clarification suggesting that Section 75(2) operates through appellate directions would travel beyond the statute and lack legal foundation.
• Whatever may be the abstract possibility of a “mere reference” to Section 75(2), once the executive circular itself predicates the operation of Section 75(2) on a “direction” issued by the Appellate Authority, any such reference by the Appellate Authority inevitably assumes, in substance and effect, the character of a remand or re-determination. In such circumstances, the distinction between a ‘reference’ and a ‘direction’ becomes illusory, and any appellate invocation of Section 75(2) necessarily infringes the express bar on remand contained in Section 107(11) of the Act.
• Section 75(2) does not extend, suspend or override the limitation prescribed under Section 73(10). The deeming fiction created under Section 75(2) is confined strictly to the nature of the notice and does not revive or validate jurisdiction to pass an order once the statutory time limit under Section 73(10) has expired. Any determination of tax pursuant to Section 75(2) must independently satisfy the mandatory limitation prescribed under Section 73, failing which the proceedings are liable to be dropped as being without jurisdiction.

9. Who is the Proper Officer under section 75(2):

Circular No. 254/11/2025, dated 27/10/2025 clarifies that for the purpose of section 75(2), the Proper Officer shall be the same officer who is the adjudicating authority for such show cause notice in respect of which the Appellate Authority or Appellate Tribunal or Court has concluded that the notice issued under section 74(1) of CGST Act is not sustainable.

10. Time limits for the purpose of section 75(2):

In 48^th meeting of the GST Council, the Principal Commissioner, GST Policy Wing informed the meeting that in cases where the Appellate Authority/Appellate Tribunal/Court held that the notice under Section 74(1) of the CGST Act, 2017 was not sustainable for the reason that the charges of fraud or wilful misstatement or suppression of facts to evade tax had not been established against the person to whom the notice was issued and directed the proper officer to determine the tax payable by such person deeming the notice to be issued under Section 73(1) of the CGST Act, 2017, field formations were seeking clarification regarding the time limit within which the proper officer was required to re-determine the amount of tax payable considering notice to be issued under sub-section (1) of Section 73, specially in cases where the time limit for issuance of order as per sub-section (10) of Section 73 was already over. Doubts had also been expressed regarding the methodology for computation of such amount payable by the noticee, deeming the notice to be issued under sub-section (1) of Section 73.

In the said meeting, the council has approved the draft of the proposed circular, and accordingly, Circular No. 185/17/2022-GST, dated 27/12/2022, was issued. The said circular inter alia contained:

A. Issue raised-

In some of the cases where the SCN has been issued by the proper officer as a notice under section 74(1) of the CGST Act, the appellate authority or appellate tribunal or the court concludes that the said notice is not sustainable under section 74(1) of the CGST Act for the reason that the charges of fraud or any willful-misstatement or suppression of facts to evade tax have not been established against the noticee and directs the proper officer to re-determine the amount of tax payable by the noticee, deeming the notice to have been issued under section 73(1) of the CGST Act, in accordance with the provisions of section 75(2) of the CGST Act. What would be the time period for re-determination of the tax, interest and penalty payable by the noticee in such cases?

Clarification provided.:

Section 75(3) of the CGST Act provides that an order, required to be issued in pursuance of the directions of the appellate authority or appellate tribunal or the court, has to be issued within two years from the date of communication of the said direction.
Accordingly, in cases where any direction is issued by the appellate authority or appellate tribunal or the court to re-determine the amount of tax payable by the noticee by deeming the notice to have been issued under section 73(1) of the CGST Act in accordance with the provisions of section 75(2) of the said Act, the proper officer is required to issue order of re-determination of tax, interest and penalty payable within the time limit as specified under section 75(3) of the said Act, i.e. within a period of two years from the date of communication of the said direction by appellate authority or appellate tribunal or the court, as the case may be.

Author’s comments on the above clarification:

The above clarification seems to proceed on an incorrect premise. Section 75(2) does not contemplate or require any “direction” from the Appellate Authority for the determination of tax under section 73. The provision operates by statutory mandate once it is concluded that the invocation of section 74 fails for want of fraud or suppression. Neither section 75(2) nor section 107 confers any power upon the Appellate Authority to direct re-determination of tax under section 73. On the contrary, section 107(11) expressly restricts the Appellate Authority to confirming, modifying or annulling the order appealed against and prohibits referring the matter back to the adjudicating authority. Section 75(2) does not override this embargo, nor does it enlarge appellate powers. To the extent the circular predicates the applicability of section 75(3) on a “direction” issued by the Appellate Authority, it appears to travel beyond the statutory framework and may therefore warrant judicial scrutiny.

B. Issue raised-

How the amount payable by the noticee, deeming the notice to have been issued under section 73(1), shall be re-computed/ re-determined by the proper officer as per the provisions of sub-section (2) of section 75?

Clarification provided:

Section 75(3)

• In cases where the amount of tax, interest and penalty payable by the noticee is required to be re-determined by the proper officer in terms of section 75(2), the demand would have to be re-determined keeping in consideration the provisions of section 73(2) read with section 73(10).
• Section 73(1) provides for issuance of an SCN by the proper officer for tax not paid or short paid or erroneously refunded, or where ITC has been wrongly availed or utilised, in cases which do not involve fraud or willful misstatement or suppression of facts to evade tax. Section 73(2) provides that such a show cause notice shall be issued at least 3 months prior to the time limit specified in section 73(10) for issuance of the order. As per section 73(9), the proper officer is required to determine the tax, interest and penalty due from the noticee and issue an order. As per section 73 (10), an order under section 73(9) has to be issued by the proper officer within three years from the due date for furnishing of annual return for the financial year in respect of which tax has not been paid or short paid or input tax credit has been wrongly availed or utilized or from the date of erroneous refund.
• It transpires from a combined reading of these provisions that in cases which do not involve fraud or willful-misstatement or suppression of facts to evade payment of tax, the show cause notice in terms of section 73(1) has to be issued within 2 years and 9 months from the due date of furnishing of annual return for the financial year to which such tax not paid or short paid or input tax credit wrongly availed or utilized relates, or within 2 years and 9 months from the date of erroneous refund.
• Therefore, in cases where the proper officer has to re-determine the amount of tax, interest and penalty payable deeming the notice to have been issued under section 73(1)in terms of section 75(2) of the said Act, the same can be re-determined for so much amount of tax short paid or not paid, or ITC wrongly availed or utilized or that of erroneous refund, in respect of which SCN was issued within the time limit as specified under section 73(2) read with section 73(10). Thus, only the amount of tax short paid or not paid, or input tax credit wrongly availed or utilized, along with interest and penalty payable, in terms of section 73 relating to such financial years can be re-determined, where show cause notice was issued within 2 years and 9 months from the due date of furnishing of annual return for the respective financial year. Similarly, the amount of tax payable on account of erroneous refund, along with interest and penalty payable, can be re-determined only where a show cause notice was issued within 2 years and 9 months from the date of the erroneous refund.
• In case, where the SCN under section 74(1) was issued for tax short paid or tax not paid or wrongly availed or utilized input tax credit beyond a period of 2 years and 9 months from the due date of furnishing of the annual return for the financial year to which such demand relates to, and the appellate authority concludes that the notice is not sustainable under section 74(1) of CGST Act thereby deeming the notice to have been issued under sub-section (1) of section 73, the entire proceeding shall have to be dropped, being hit by the limitation of time as specified in section 73. Similarly, where SCN under section 74(1) was issued for erroneous refund beyond a period of 2 years and 9 months from the date of erroneous refund, the entire proceeding shall have to be dropped.
• In cases, where the SCN in terms of section 74(1) was issued for tax short paid or not paid tax or wrongly availed or utilized input tax credit or on account of erroneous refund within 2 years and 9 months from the due date of furnishing of the annual return for the said financial year, to which such demand relates to, or from the date of erroneous refund, as the case may be, the entire amount of the said demand in the show cause notice would be covered under re-determined amount.

Author’s comments on the above clarification:

a. While the clarification proceeds on the premise that compliance with the time limit for issuance of an SCN under Section 73(2) is sufficient, it conspicuously ignores the independent and mandatory time limit prescribed under Section 73(10) for passing the adjudication order. Section 73 embodies a composite limitation scheme, comprising both the time limit for issuance of notice under Section 73(2) and the outer, non-extendable time limit for issuance of the adjudication order under Section 73(10). Compliance with one cannot dispense with compliance with the other.

Section 75(2), by no means, overrides, supplants, or rewrites the limitation framework under Section 73. It merely creates a limited deeming fiction as to the nature of the notice once invocation of Section 74 fails on merits. It does not extend, suspend, or revive the statutory time limit for passing an order under Section 73(10). Consequently, where the period prescribed under Section 73(10) has expired, no valid order can be passed under Section 73, whether directly or by invoking Section 75(2). It is to be kept in mind that section 75(3) applies only where issuance of an order is otherwise permissible under law, and cannot revive a limitation already extinguished.

This position stands reinforced by Section 107(11), which expressly prohibits the Appellate Authority from remanding the matter to the adjudicating authority, thereby foreclosing any indirect mechanism for revival of jurisdiction through appellate proceedings.

Further, where an order under Section 74 itself has been passed after the expiry of the time limit prescribed under Section 73(10), such an order cannot survive once the invocation of Section 74 fails on merits. Section 75(2) is not a curative or validating provision intended to salvage proceedings that are otherwise time-barred under Section 73. When fraud, wilful misstatement, or suppression of facts is not established, the proceedings necessarily fall back to Section 73; however, such fallback is permissible only if jurisdiction under Section 73 was subsisting on the relevant date. Where a limitation under Section 73(10) had already expired, there is no surviving jurisdiction to sustain the demand, and the entire proceedings must fail.

It is well settled that a circular or clarification cannot alter the provisions of the statute, nor can it override or dilute statutory time limits expressly prescribed by the legislature. Any interpretation to the contrary would defeat the legislative intent underlying the distinct and carefully calibrated limitation framework governing Sections 73 and 74 of the CGST Act.

11. Case Study:

Let us take an example. SCN for FY 2020-2021 was issued u/s. 74, adjudication order passed, and appeal filed u/s. 107. The Appellate Authority find that the charges of fraud or any wilful-misstatement or suppression of facts to evade tax have not been established, and therefore invocation of section 74 is unlawful. It was also found that 25% of the demanded tax liability is not sustainable on merit.

[The time limit for issuance of the show cause notice expired on 28.11.2024 (alternatively, as may be contended, on 30.11.2024), and the statutory time limit for issuance of the adjudication order expired on 28.02.2025.]

Case-1: SCN issued on 04/11/2024, Adjudicating Order issued on 25/02/2025. Appeal Order date 11/01/2026.

Case-2: SCN issued on 04/12/2024, Adjudicating Order issued on 25/02/2025. Appeal Order date 11/01/2026.

Case-3: SCN issued on 04/11/2024, Adjudicating Order issued on 25/03/2025. Appeal Order date 11/01/2026.

Let us now discuss the possible outcome in all the above three cases:

Case-1:

In the present case, both the show cause notice and the adjudication order were issued under Section 74 within the time limits prescribed under Section 73.

a. In the opinion of the author, there is no bar if the Appellate Authority pass a final order u/s. 107(11), reducing the penalty to 10%, without issuing any direction for re-determination.

b. The Appellate Authority may annul the order on the ground that the order passed under section lacks jurisdiction.

c. The Appellate Authority may annul the order on the ground that the order passed under section lacks jurisdiction. Directing the Proper Officer to determine the tax liability assuming that SCN was issued under section 73.

Author’s Comment:

If the Appellate Authority adopts the first course of modifying the order, such action would remain well within the statutory confines of Section 107(11) and would also serve the interest of revenue. Although annulment of the order may be legally permissible, it may not be the most appropriate course in the given factual matrix.

Once an order is annulled, Section 75(2) does not, by itself, revive jurisdiction in favour of the proper officer. Any determination of tax under Section 73 pursuant to Section 75(2) must independently satisfy the mandatory limitation prescribed under Section 73(10). Since the said limitation had already expired, no valid order can thereafter be passed under Section 73.

Further, annulling the order coupled with a direction to invoke Section 75(2) would, in substance, amount to remanding the matter to the adjudicating authority, an exercise expressly prohibited under Section 107(11) of the Act.

Case-2:

In the second case, the show cause notice was issued after expiry of the time limit prescribed for issuance of SCN under Section 73, though the adjudication order was issued within the time limit prescribed under Section 73(10).

Possible courses open to the Appellate Authority:

a. In the opinion of the author, the Appellate Authority may annul the adjudication order without issuing any further direction, as the very initiation of proceedings stands vitiated on account of limitation.

b. The Appellate Authority may annul the order on the ground that the order passed under Section 74 lacks jurisdiction and direct the Proper Officer to determine the tax liability by deeming the SCN to have been issued under Section 73.

Author’s Comment:

In the present case, since the show cause notice itself was issued beyond the limitation prescribed under Section 73, the proceedings are fundamentally time-barred once the invocation of Section 74 fails on the merits. Consequently, the only legally sustainable course open to the Appellate Authority is to annul the order simpliciter, without issuing any direction.

Issuing a direction to the Proper Officer to determine tax liability by assuming that the SCN was issued under Section 73 would be contrary to Section 107(11), which expressly prohibits remand. Such a direction would also be wholly futile, as even a deemed proceeding under Section 75(2) cannot survive when the original SCN itself was issued beyond the limitation prescribed under Section 73(2) read with Section 73(10). In such circumstances, the entire proceedings are liable to be dropped as being barred by limitation.

Case-3:

In the third case, the show cause notice was issued within the time limit prescribed under Section 73, whereas the adjudication order was issued after expiry of the time limit prescribed under Section 73(10).

Possible courses open to the Appellate Authority:

a. In the opinion of the author, the Appellate Authority may annul the adjudication order without issuing any further direction, as the order is barred by limitation and is therefore without jurisdiction.

b. The Appellate Authority may annul the order on the ground that the adjudication order passed under Section 74 lacks jurisdiction and direct the Proper Officer to determine the tax liability by deeming the show cause notice to have been issued under Section 73.

Author’s Comment:

In the present case, although the show cause notice was issued within the limitation prescribed under Section 73, the adjudication order was passed beyond the mandatory outer time limit prescribed under Section 73(10). Once the invocation of Section 74 fails on merits, the proceedings necessarily fall back to Section 73; however, such a fallback is permissible only if jurisdiction under Section 73 was subsisting at the time of passing the order.

Since the limitation prescribed under Section 73(10) had already expired, no valid order could have been passed under Section 73 on the date of adjudication. The order is therefore without jurisdiction and void, and the only legally sustainable course open to the Appellate Authority is to annul the order simpliciter.

Issuing any direction to the Proper Officer to determine tax liability by invoking Section 75(2) would be contrary to Section 107(11), as it would amount to a remand in substance. Further, Section 75(2) does not operate as a curative or validating provision and cannot be invoked to revive jurisdiction once the limitation under Section 73(10) has expired. Any such exercise would be futile, as the proceedings would inevitably be dropped on account of limitation.

Unless and until the legislature inserts an express substantive provision to the contrary, any attempt to sustain such an order or to permit re-determination thereof after expiry of the statutory limitation would be without authority of law. The time limits prescribed under Section 73 of the CGST Act are mandatory and jurisdictional in nature and cannot be diluted, taken away, or bypassed either by the Appellate Authority in exercise of appellate powers or by executive instructions, clarifications, or circulars.

One additional issue merits consideration. In cases where the Appellate Authority modifies the order by reducing the penalty, there will always remain the possibility of an argument that an order founded on Section 74, once that very foundation fails, cannot be partially salvaged by substitution of penalty. The author would candidly acknowledge that, given the architecture of Sections 73, 74, 75 and 107 of the CGST Act, there appears to be practically no legally secure method to preserve an order passed under Section 74 once it is judicially found that the essential ingredients of fraud, wilful misstatement or suppression of facts are not established. Even the seemingly pragmatic approach of modifying such an order by merely reducing the penalty is not immune from challenge, as a serious and tenable argument would always remain that an order founded on Section 74, once that foundation fails, cannot be partially salvaged by substitution of a penalty applicable to Section 73. Each alternative course—whether remand, re-determination, deeming fiction or reliance on Section 75—encounters either an express statutory prohibition or a fundamental jurisdictional infirmity.

That said, the author does not suggest that modification of an order passed under Section 74 is entirely without statutory basis. A possible justification for such modification lies in the distinction between absence of jurisdiction and incorrect invocation of aggravated statutory consequences. While failure to establish fraud, wilful misstatement or suppression of facts renders the invocation of Section 74 unsustainable, it does not necessarily negate the jurisdiction of the proper officer to adjudicate the underlying tax liability itself. In such circumstances, the Appellate Authority, acting within the express contours of Section 107(11), may arguably modify the order by excising only those consequences that are traceable exclusively to Section 74, including the enhanced penalty, while preserving the determination of tax and interest which would otherwise be sustainable even under Section 73. However, the author acknowledges that such an approach, though statutorily arguable and pragmatically appealing, remains exposed to the objection that a proceeding initiated and concluded under Section 74 cannot be partially cured once the statutory foundation for invoking Section 74 is held to be absent.

12. Other Issues:

The issues examined in this article are not exhaustive. Several allied and equally significant questions remain open for discussion. For instance, situations may arise where a show cause notice under Section 74 covers multiple issues, and the Appellate Authority finds that some of those issues do not warrant invocation of Section 74, while others may. The legal consequences in such mixed situations merit independent and careful examination.

There also appears to be a prevailing misconception that once a show cause notice is issued under Section 74, the adjudicating authority is precluded from passing an order under Section 73, even after recording a clear finding that fraud, wilful misstatement, or suppression of facts is not established. The correctness of such an understanding requires closer scrutiny in light of the statutory scheme.

The author proposes to place these and other related issues for the kind consideration of esteemed readers in subsequent articles, with the objective of fostering a deeper and more nuanced discussion on the subject.

13. Conclusion:

While presenting this article, the author candidly acknowledges that the purpose of this article is not to project individual knowledge or assert finality, but to initiate a constructive and healthy discussion on issues that have significant practical implications under the GST law.

The author would consider the effort meaningful if it invites informed engagement, differing viewpoints, and even rigorous or unsparing criticism from experts, with the objective of achieving a clearer understanding of the law.

Before parting, the author would like to flag one limited but intriguing aspect of Section 75(2). The provision speaks only of “determination of tax payable” and is conspicuously silent on interest and penalty. Whether this legislative choice is inconsequential—on the footing that interest and penalty under Section 73 automatically follow the determination of tax—or whether the silence assumes significance in the context of a deeming fiction operating in a jurisdictionally sensitive area, is a question that remains open.

Disclaimer: The above views are compiled by the author based on the study of various legal provisions, judicial pronouncements, etc. There may be some other views also on this subject matter. So, the readers are requested to refer to relevant provisions of the statute, latest judicial pronouncements, circulars, clarifications, etc., of the respective law and obtain legal opinion before acting on the above write-up.

The author is a C.A. in practice at Guwahati, specialising in GST litigation. Can be reached at fca.opg@gmail.com 94350-24252