Tvl. K.Ezhil Arasan Vs Joint Commissioner (ST) Intelligence (Madras High Court)
Section 74 GST Proceedings Valid on Inspection Findings; Assessment Remanded for Computation Errors: Madras HC
The Madras High Court considered two writ petitions challenging orders dated 20.06.2024 passed under Section 74 of the GST enactments for the tax periods 2020-2021 and 2021-2022. The impugned orders were preceded by Show Cause Notices in Form GST DRC-01 dated 07.05.2024, to which the petitioner submitted manual replies dated 14.06.2024. The notices alleged discrepancies relating to GSTR-3B vs. GSTR-2A, GSTR-7 vs. GSTR-3B, and GSTR-9 vs. Form 26AS. While one defect was dropped in the final orders, tax demands under the remaining defects, along with interest and penalty, were confirmed.
The petitioner contended that proceedings under Section 74 could not be invoked without first establishing material giving rise to fraud, wilful misstatement, or suppression of facts. Relying on principles under the Tamil Nadu Value Added Tax Act, 2006 and the Income-tax Act, 1961, including the concept of “reasons to believe” under Section 148, the petitioner argued that the show cause notices did not disclose the basis for invoking the extended limitation under Section 74.
The Revenue submitted that the notices were issued pursuant to an inspection conducted on 18.07.2023, followed by an intimation in Form GST DRC-01A dated 26.04.2024, and specifically invoked Section 74. The petitioner had been called upon to explain discrepancies relating to turnover differences and had also been afforded an opportunity of personal hearing. According to the Revenue, the petitioner had failed to satisfactorily explain the differences, particularly regarding exempted supplies.
