The most fundamental thing for the Adjudication Authority under GST.

Show Cause Notice is to be issued under Section 73 or 74 or 74A by invoking the applicable section in the most appropriate manner. All the adjudication orders passed by the proper officers based on SCN which was issued incorrectly by invoking a wrong section is at risk of being set aside or quashed by the competent court at a later date.

The following table is simple and clear one which could be easily understood by even a Graduate who is a beginner in GST law.

The common errors which are committed at the time of issuance of SCN are listed below for creating awareness amongst all concerned.

1. Invocation of 74 with an intention to cover larger period as well as to levy maximum penalty where there was no intention to evade payment of tax. It is to be noted that mere non- payment of GST is not a ground to invoke 74, when the information was available with tax officials based on GST returns. When all inputs are disclosed, the contention that taxpayer had fraudulent intention to evade tax is ridiculous especially when the same is issued in gross violation of para 3.3 of CBIC instruction dated 13/12/2023 which reads as below.
2. '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 the cases where the investigation indicates that there is material evidence of fraud or wilful misstatement 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'.
3. Invoking section 73 or 74 for the period commencing from 01/04/2024 onwards is impermissible as both the sections have no validity beyond 31/03/2024.
4. Issuing SCN under section 73 or 74 is impermissible when all the applicable taxes have been fully paid but either under a wrong head or by FCM as against RCM etc.
5. The trigger for this article is order dated 19/08/2025 by one STO in Tamil Nadu for the period subsequent to 01/04/2024 by invoking section 74. Let us go in depth to the background.

The Madurai Bench of the Madras High Court in their order dated 11/02/2026 in WP (MD) 3819 of 2026 in the matter of RB Communication Vs STO - 2026 (2) TMI 656 - MADRAS HIGH COURT passed a simple order by setting aside the adjudication order dated 19/08/2025.

The vital observations are on non- application of mind as well as lack of clarity on application of 74 or 74A as both the sections are referred in the order.

The final order has remanded the matter to STO to consider the order dated 19/08/2025 as SCN under Section 74 by allowing petitioner four weeks time to reply. The STO was instructed to allow personal hearing after 14 clear days after receipt of reply and to pass orders on MERITS as well as IN ACCORDANCE WITH LAW.

Though it is a simple order with no cost, the hidden message is loud and clear that the STO is now not free to invoke any section as per his choice and also the requirements of Section 75 are to be fulfilled in entirety.

It is appealed to all tax officials across India who have already invoked a wrong section while issuing a show cause notice to be more cautious to correct themselves from today onwards as it is a futile exercise to invoke a inappropriate section which is impermissible under law.

Let us hope that the efforts put in writing a series of articles during last two months numbering to around 35 reiterating on the need to bring down avoidable litigation bring some desired results in the days to come.