Section 74 CGST: No SCN for Multiple Years If No Wilful Suppression Found

Raghavendra Rao SVS 12 Aug 2025 25,479 Views 1 comment Print Goods and Services Tax | Articles

Is it correct to issue show cause notice for multiple years under Section 74 of CGST Act, where no willful intention to evade the tax – NO

There are many cases, issue of show cause notice under Section 74 of GST for multiple year starting from 2019-2020 to 2023-2024 without any proper reason to substantiate the wilful evasion as prescribed under Section 74 of GST Act. I am afraid of such notices issued to raise crores of wrong demands, with Interest and Penalty at their will and wish. So one should know the provisions under GST to protect yourself from such illegal notices.

There are Instruction from GST Policy Wing, New Delhi Dt 13/12/2023 that Show cause notice under Section 74, can only in the cases where the investigation indicates that there is material evidence of fraud or wilful mis- statement or suppression of fact to evade tax on the part of the taxpayer, provisions of section 74(1) of CGST Act may be invoked for issuance of show cause notice vide F No. CBIC-20002/3/2023 GST as under

F. No. CBIC-20004/3/2023-GST

Government of India Ministry of Finance Department of Revenue

Central Board of Indirect Taxes and Customs GST Policy Wing

INSTRUCTIONS 5/2023/GST DT 13th December 2023.

Judgment of the Hon’ble Supreme Court in the case of Northern Operating Systems Private Limited (NOS). It has also been represented by the industry that in many cases involving secondment, the field formations are mechanically invoking extended period of limitation under section 74(1) of the CGST Act.

In this regard, section 74 (1) of CGST Act reads as follows:

“(1) 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 utilized by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, “

From the perusal of wording of section 74(1) of CGST Act, it is evident that section 74(1) can be invoked only in cases where there is a fraud or wilful mis- statement or suppression of facts to evade tax on the part of the said taxpayer. Section 74(1) cannot be invoked merely on account of non-payment of GST, without specific element of fraud or wilful mis-statement or suppression of facts to evade tax.

Therefore, only in cases, where the investigation indicates that there is material evidence of fraud or wilful mis- statement or suppression of fact to evade tax on the part of the taxpayer, provisions of section 74(1) of CGST Act may be invoked for issuance of show cause notice, and such evidence should also be made a part of the show cause notice. The above aspects may be kept in consideration while investigating such cases and issuing show cause notices.

TIME LIMIT TO ISSUE SCN UNDER SEC 73.

And with regards to time limitation to issue show cause notice under Section 73 of CGST Act for the financial years 2018-2019, 2019-2020 and 2020-2021, there are notifications, Circulars and AP high Court judgment says that the time limitation prescribed under Sec 73 (9) and (10) of CGST and SGST for the years 2018-2019, 2019-2020 and 2020-2021 has been barred by limitation.

NOTIFICATION, No. 56/2023- Central Tax, Dt 28th December, 2023, Government, on the recommendations of the Council, hereby, extends the time limit specified under sub- section (10) of section 73 for issuance of order under sub-section (9) of section 73 of the said Act, for recovery of tax not paid or short paid or of input tax credit wrongly availed or utilized, relating to the period as specified below, namely:–

(i) for the financial year 2018-19, up to the 30th day of April, 2024; and

(ii) for the financial year 2019-20, up to the 31st day of August, 2024.

And with regards to show cause notice for the financial year 2020-2021 the Hon’ble High Court of Andhra Pradesh in the case of M/s. The Cotton Corporation of India Vs Assistant Commissioner (ST) (Audit) (FAC). Given judgment that POINT NO 10 – when a period, available for a certain action, is defined in terms of months, it would mean that the corresponding date of the corresponding month would be the cutoff date. In the present case, the cutoff date for issuing an order is 28.02.2025. The three months period which would elapse from this date would be 28.11.2024. Since the notice was issued on 30.11.2024, it would be beyond the time stipulated under Section 73(2) of the GST Act. So the time limit to issue show cause notice for the financial year under Section 73 of GST Act is up to the date 28/11/2024 ONLY, but not beyond that.

And with regards to Multiple show cause notices issued for several years under Section 74 with out considering the time limit to issued show cause notices the CBIC has issued Circular that show cause notice should not be issued under Section 74 I circumstances where the time limit is expired and barred or about to expire. The circular is as under :

1. Circular No. 185/17/2022-GST dt. 27.12.2022 Clarification with regard to applicability of provisions of section 75(2) of Central Goods and Services Tax Act, 2017 and its effect on limitation –

(3) In order to clarify the issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168(1) of the CGST Act, hereby clarifies the issues as under

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

Ans. Where the show cause notice under subsection (1) of section 74 was issued for multiple financial years, and where notice had been issued before the expiry of the time period as per sub-section (2) of section 73 for one financial year but after the expiry of the said due date for the other financial years, then the amount payable in terms of section 73 shall be re-determined only in respect of that financial year for which show cause notice was issued before the expiry of the time period as specified in sub-section (2) of section 73.

And the Andhra Pradesh High Court categorically defined the suppression of fact and willful intention under Sections 74 of GST in the case of Adigarla Bapinaidu, vs The State Of Andhra Pradesh, on 29 January, 2025, Judgment :: In the present case, there has been a failure, on the part of the petitioner, in filing the monthly returns and making payment of tax under the said monthly returns. This may not amount to fraud or misstatement. Explanation-2 to Section 74 states that suppression, for the purpose of the Act, would mean non-declaration of facts or information which is required to be declared in the returns, statement or report or any other document which needs to be furnished under the Act. To that extent, non-filing of the monthly return would amount to suppression of fact. However, the requirement under Section 74 is not fulfilled on mere suppression of fact. The said suppression of fact would have to be willful suppression of facts

And the Allahabad high court in the case of Hcl Infotech Ltd vs Commissioner, Commercial Tax And … on 27 September, 2024: Judgment :: We find that the impugned Show Cause Notice does not make even a whisper of the fact that petitioner has wrongly availed or utilized Input Tax Credit due to any fraud, or wilful mis-statement or suppression of facts to evade tax therefore, the proceedings initiated against the petitioner under Section 74 of the CGST Act are without jurisdiction for the lack of basic ingredients required under the said clause. So far as the argument advanced by the learned counsel appearing for the respondents that the writ petition against the Show Cause Notice is not maintainable, is concerned, we find that it is consistent view of the Hon’ble Supreme Court that if the Show Cause Notice is without jurisdiction then the same can be challenged by filing writ petition before the High Court under Artilce 226 of the Constitution of India.

In the present case, we do not find that the basic ingredients required for initiating proceedings under Section 74 of the CGST Act are present in the impugned Show Cause Notice dated 30.12.2023. Therefore the entire exercise including the Show Cause Notice is without jurisdiction and thus this writ petition under Article 226 of the Constitution of India is maintainable.

OPINION

Show Cause Notice under Section 74 of GST can be issued only under the circumstance where the proper office should establish the tax payer has committed willful evasion and suppression of facts to evade the tax. Mere establishing the difference in between GSTR 2A/2B Versus GSTR 3B and the difference in between GSTR 1 Versus 3B may not establish the willful evasion of suppression of facts. So issue of notice for multiple years under Sections 74 to gain the time limit is against the law, when no willful evasion has been established

****

Disclaimer: Views and Opinions expressed in the article are my personal and do not construe any suggestion or a professional or legal advice.

Authors:

S.V.S. Raghavendra Rao, Advocate & Tax Consultant, Nellore, Andhra Pradesh, Phone: 9440275175, Email: raghuvatconsultancy@yahoo.com