Section 75(2) of the CGST Act deals with a situation where proceedings initiated under Section 74 (fraud, wilful misstatement, suppression of facts) fail at the appellate stage due to non-establishment of mens rea. Section 75(2) provides that:
“Where any Appellate Authority or Appellate Tribunal or Court concludes that the notice issued under Section 74(1) is not sustainable for the reason that the charges of fraud, wilful misstatement or suppression of facts to evade tax have not been established, the proper officer shall determine the tax payable, deeming as if the notice were issued under Section 73(1) of the CGST Act.”
Section 75(2) creates a statutory legal fiction. Once the allegation of fraud, wilful misstatement or suppression of facts is not established, the original notice issued under Section 74 does not lapse; rather, it survives and is deemed to have been issued under Section 73(1). Consequently, the demand itself does not fail merely because the higher threshold required under Section 74 is not proved. The proper officer is then required to re-determine the tax liability within the framework of Section 73, i.e., as a case of short payment without invoking the penal consequences prescribed under Section 74. This provision ensures that proceedings do not collapse solely on account of failure to establish fraudulent intent.
Proper office under Section 75(2)
It is pertinent to note that jurisdiction under Section 75(2) can be exercised only by the “proper officer”. The term “proper officer” has been specifically defined under Section 2(91) of the CGST Act to mean an officer who has been duly assigned such functions by the Commissioner.
It is further pertinent to note that the Board has issued specific circulars assigning jurisdiction to Proper Officers under the statute. Reference may be made to Circular No. 1/1/2017-GST dated 26.06.2017 assigning officers for matters relating to registration and composition levy. Further, Circular No. 3/3/2017-GST dated 05.07.2017; Circular No. 31/05/2018-GST dated 09.02.2018 (as amended from time to time, including Circular No. 169/01/2022-GST dated 12.03.2022 and Circular No. 239/33/2024-GST dated 04.12.2024); and Circular No. 254/11/2025-GST dated 27.10.2025, designate Proper Officers for discharge of functions under various provisions of the CGST Act and the Integrated Goods and Services Tax Act, 2017 (IGST Act).
These circulars clearly demonstrate that jurisdiction must be expressly conferred by way of assignment and cannot be assumed or inferred. In consonance with the statutory framework and the said circulars, the respective State authorities are also required to issue corresponding notifications or circulars assigning jurisdiction to Proper Officers under the State GST enactments.
Assignment of Proper Officer vide Circular No. 254/11/2025-GST dated 27.10.2025 Vide Circular No. 254/11/2025-GST dated 27.10.2025, the Board categorically observed that no proper officer had earlier been assigned in respect of proceedings under Section 74A, Section 75(2), Section 122 of the CGST Act and Rule 142(1A) of the CGST Rules. In order to remove this jurisdictional vacuum, the said Circular specifically designated and assigned proper officers for the exercise of powers and discharge of functions under the aforesaid provisions. Accordingly, prior to the issuance of the said Circular, there existed neither any statutory provision nor any administrative assignment conferring jurisdiction upon any officer to initiate any action under Section 75(2).
Para 6 of this Circular provides that Section 75(2) of CGST Act provides that where any Appellate Authority or Appellate Tribunal or Court concludes that the notice issued under section 74(1) of CGST Act, 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 section 73(1) of CGST Act. It is clarified that the proper officer for this purpose 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.
M/s Sterling & Wilson Pvt. Ltd. v. Commissioner, Odisha Commissionerate of CT & GST & Ors.,
In the matter of M/s Sterling & Wilson Pvt. Ltd. v. Commissioner, Odisha Commissionerate of CT & GST & Ors., Appeal No. APL/1/PB/2026 (Judgment dated 11/02/2026) before the Principal Bench, New Delhi, a concern was raised by the appellant that First Appellate Authority has converted the proceedings under section 74 to pass an order under section 73. The Appellant contended that that once the first appellate authority holds that section 74 is not applicable in this case, then it was improper on the part of first appellate authority to pass an order imposing penalty interest etc. under section 73.
In Countering this Argument, the Learned Additional Standing Counsel would submit by resorting to the Sub-Section (2) of 75 of the CGST Act. It provides that the Appellant Authority can modify the tax liability, penalty & interest by holding it to be a case of short payment of tax and not a case of fraudulent intend of evasion tax.
The Appellate Tribunal in the aforesaid matter held that it is clear that original Proper Officer who has issued Notice Under Section 74(1) of the CGST Act shall re-determine the tax payable by the Assessee and it cannot be done by the First Appellate Authority or the Tribunal. The natural corollary to such an observation would be that in case First Appellate Authority or the Tribunal comes to the conclusion that the proceeding initiated under Section 74 (1) of the CGST Act is not maintainable because of lack of requirements to attract the provision and comes to the conclusion that this is a matter to be considered under Section 73 of the CGST Act, then the matter has to be remitted back to the learned Proper Officer for re-determining the tax to be paid along with penalty, interest, etc.
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