SCRUTINY OF GST RETURNS: SELECT JUDICIAL PRONOUNCEMENTS -2025

Section 61 of the CGST Act, 2017 contains provisions on scrutiny of returns. Rule 99 of CGST Rules, 2017 provides for rules relating to scrutiny of returns and manner of conducting the scrutiny along with forms ASMT-10, ASMT-11 and ASMT-12.

Section 61 of CGST Act, 2017 contains the provisions of scrutiny of GST returns which empowers proper officer to scrutinize the return and related particulars furnished by the taxable person to verify the correctness of the return and inform him of the discrepancies noticed, if any, in a manner as may be prescribed.

Select judicial pronouncements in 2025 on scrutiny of GST returns

• In Jaguar Land Rover India Limited Versus The Union of India and anr. - 2025 (1) TMI 404 - BOMBAY HIGH COURT, where original writ petition was filed to challenge certain circulars and notifications, but by interim application, petitioner sought leave to amend petition and challenge show cause notice, instead of allowing petitioner to challenge show cause notice at such a belated stage, it was held that interest of justice would be better served if petitioner responded to show cause notice by raising all permissible defences.

• In M/s. Qualicum Solutions Pvt. Ltd. Versus The Chief Commissioner of CT and GST, Odisha, Cuttack and others - 2025 (1) TMI 209 - ORISSA HIGH COURT, it was held that section 61(2) requires consideration of explanation furnished by assessee and in case no satisfactory explanation  is furnished, proper officer may initiate appropriate action under section 73. In impugned notice and order made under section 73 reply of assessee was not considered and initiation of proceeding under section 73 was clearly without jurisdiction. Therefore, the order was set aside as the reply to GST ASMT-10 was not considered.

• In J.S.B. Trading Co. Versus State of Punjab - 2024 (12) TMI 436 - PUNJAB AND HARYANA HIGH COURT, the notice was issued to the petitioner under Section 61(1) of the Act, he filed his reply and explained how ITC had been claimed as against the business conducted with the concerned parties. The same was assessed by the concerned officer and the Proper Officer passed an order independently dropping the proceedings under Section 61(2) of the Act, 2017. However, as per Section 61(3) the said proceedings are only consequential i.e. when the Proper Officer reaches to a conclusion that the reply is not satisfactory. In the letter issued on 23.02.2023, while ascertaining the liability of the petitioner under Section 74(5) of the Act, the concerned Proper Officer also mentioned that reply to notice under Section 61 was not found satisfactory.

Thus, there were two different views expressed by the same Proper Officer, one while intimating the liability under Section 74(5) of the Act and the other by subsequently dropping the proceedings under Section 61(2) on 28.02.2023.

Therefore, it can be presumed that after the notice was given under Section 74(5) of the Act, the Authority has reached to the conclusion that no additional demand is payable/chargeable and therefore, the proceedings stand dropped. Thus, on that day when the order was passed on 28.02.2023, proceedings initiated on 23.02.2023 would also stand closed and the Authority could not have thereafter again issued notice under Section 74(1) of the Act. The entire proceedings after passing of order on 28.02.2023 were, thus, found to be vitiated in law, and were accordingly quashed and set aside.

• In Goverdhandham Estate Private Limited Versus State Of Rajasthan, Through Chief Commissioner, Joint Commissioner, Union Of India, Jaipur - 2024 (1) TMI 1434 - RAJASTHAN HIGH COURT, the proper officer accepted the assessee’s explanation under section 61 and issued from GST ASMT-12 but later on show cause notice under section 73 was issued based solely on the discrepancies identified under section 61 without recording the reasons of dissatisfaction. It was held that power under section 73 was invoked only when explanation was not satisfactory and once the explanation was accepted, no further proceedings can be sustained.
• In M/s. Sri Ram Stone Works, M/s. G.D. Stone Company, M/s. Karambi Stone Works, M/s. Maa Raksi Stone Works, M/s. Durga Stone Works, M/s. Shakti Stone Works, M/s. Jai Mata Di Stone Works, M/s. Vaishanv Stone Works, M/s. Awadh Kishor & Sons, M/s. A Creation, M/s. Saraswati Stone Works, Versus State of Jharkhand, Joint Commissioner of State Tax, Sahibganj Circle, Assistant Commissioner of State Tax, Sahibganj Circle, State Tax Officer, Sahibganj Circle, Joint Commissioner of State Tax, Sahibganj. - 2025 (5) TMI 772 - JHARKHAND HIGH COURT,  the court observed that in present cases, notices under Section 61 have been issued to writ petitioners and instead of pointing out discrepancies in the returns filed by writ petitioners, the competent officer has embarked upon an exercise of comparing the price at which Petitioners have sold their stone-boulders/stone-chips with that of prevalent market price and, thereafter, accordingly, issued notices to writ petitioners asking them to show cause as to why appropriate proceedings for recovery of tax and dues be not initiated against them. The court observed that notices issued comparing the particulars at which Petitioners have sold their goods with that of prevalent market price, is wholly without jurisdiction and beyond the scope of Section 61 of the Act. In fact, it is settled law that unless transactions of sale are shown to be sham transactions or the mere fact that the goods were sold at a concessional rate/rate less than market price would not entitle the Revenue to assess the difference between the market price and the price paid by the purchaser as transaction value. It was therefore, held that notice issued under section 61 were without jurisdiction and accordingly quashed.