TaxTMI 
TaxTMI 
TaxTMI 
1. It would be a prudent practice to contest a show cause notice purely based on merits of the issues raised. Nevertheless, when a SCN is issued under section 74 as against 73, in my considered view, the first objection should be on wrongful invocation of section 74. I had an occasion to go though two orders passed by the Allahabad High Court where notices were initially issued under section 73 and subsequently, new notices were issued under section 74. The Madras High Court and Karnataka High Court have also passed orders quashing the invocation of section 74 as against 73 wherein the first notice itself was under section 74.
2. The basic difference between the two sections are the presence as well as absence of Bonafide intentions. To put it technically, where there is either a fraud or willful-misstatement or suppression of facts it is 74 and where none of such elements are present, it is 73.
3. While I am writing this article during first week of August 2025, the distinction between applicability or non-applicability of section 74 is of paramount importance, as Section 73 may be invoked only for the financial year 2021-22 onwards whereas 74 may be invoked for financial year 2019-20 onwards. It is worthwhile to mention here that the last date for issuing a SCN for 2020-21 under section 73 has already crossed as on 28/02/2025 itself whereas under section 74, the time limit for issuing SCN for financial year 2018-19 was over as on 30/06/2025 itself.
4. The tax officers without establishing the presence of any of the requirements under section 74 for the invocation, which are sine qua non, simply mention in the SCN that audit team has detected some issues which would have unnoticed in case there was no audit and hence 74 is applicable.
5. However, when we go in depth, it is observed that the information based on which whatever allegation is made during audit is already available in the GSTR itself. Hence, there was no suppression at all.
6. In the following four recent rulings of High Courts, either SCN itself was quashed or Order passed under section 74 was quashed giving HUGE RELIEF to the taxpayer.
7. Case 1: It was held on 08/07/2025 in M/s. JIT Auto Comp, Rep. by its Managing Partner K. Velmurugan Versus Assistant Commissioner, Hosur - 2025 (7) TMI 785 - MADRAS HIGH COURT that it is appropriate to set aside the impugned assessment order. Order dated 12/03/2024 is set aside. section 74 to be converted to Section 73. Interestingly, the period covered in the case was from 01/07/2017 till 31/03/2020 and when only section 73 is made applicable, substantial demand amount would come down based on the date of SCN.
8. Case 2: It was held on 23/05/2025 by the Division Bench of Allahabad High court in the matter of M/s Vadilal Enterprises Limited Versus State Of U.P. And 2 Others - 2025 (6) TMI 1149 - ALLAHABAD HIGH COURT that SCN dated 25/02/2025 issued under section 74 is quashed as notice is valid only under section 73. The original notice itself was under 73 and the second notice for same period under section 74 will not be enforceable, as it is proved that the requirements of section 74 were not present at the time of issuing original SCN under section 73.
9. Case 3: The Karnataka High Court has held on 01/07/2025 in the matter of SHRI. BASAVARAJ V. SAJJAN Versus THE DEPUTY DIRECTOR OFFICE OF THE ADDITIONAL DIRECTOR GENERAL, DIRECTORATE GENERAL OF GST, THE ADDITIONAL DIRECTOR OFFICE OF THE ADDITIONAL DIRECTOR GENERAL, DIRECTORATE GENERAL OF GST, THE ASSISTANT COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE, THE ADDITIONAL COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE - 2025 (7) TMI 545 - KARNATAKA HIGH COURT that even though there was short payment of tax, it was well within the knowledge of tax officials and there was no suppression. Accordingly order dated 28/11/2024 was to be treated as order under section 73 and not under 74 which gives huge relief.
10. Case 4: The Allahabad High Court in yet another identical case has held on 30/05/2025 reported in Bharat Mint & Allied Chemicals Versus State of U.P. and another - 2025 (6) TMI 1243 - ALLAHABAD HIGH COURT in the matter of Bharat mint and allied Chemicals that SCN dated 25/02/2025 issued under section 74 is quashed and set aside by allowing the writ petition.
11. Conclusion: The Tax Officials must immediately desist from issuing SCN under section 74, wherever the necessary ingredients which are sine quo non for 74 are missing, as ultimately they stand to loose as the High Courts are taking the view that mere allegation of suppression is not sufficient and it is the tax official who has to establish that section 74 is invoked due to presence of intention to evade tax or mala fide intentions of the tax payer. The professionals who deal cases of SCN issued under section 74 may take a clue from the above discussions to ensure that the taxpayers rights as provided in the law is protected and the Government is not collecting GST in a illegal manner.