TaxTMI 
TaxTMI 
TaxTMI 
Since 01/07/2017 onwards, it is not so easy for the GST officials to prove that Section 74 of the CGST Act which is in force during 01/07/2017 till 31/03/2024 is invokable due to suppression as all ingredients to determine taxability, rate, classification etc. are available in the respective GST Returns 1, 3 as well as 9. Moreover, at least 95% of the taxpayers do not have any intention to evade payment of GST as they are aware of the consequences of longer period that can be invoked under 74 and huge penalty etc. It is only because the GST officials issued Show Cause Notices under 74 uniformly in almost all cases to improve GST collection, CBIC came forward on 13/12/2023 to issue instructions on applicability of section 74.
Para 3.3 of the above instructions is crucial for application of section 74 which is furnished below:
' 3.3 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'.
The above CBIC instructions were not followed in letter and spirit by the field formations which forced the CBIC and the GST Council to stop operating Section 74 in total from 01/04/2024 onwards and accordingly made Section 74A is now operational to all situations irrespective of fraudulent intention cases or not by making suitable amendments to the penalty clauses. Under the above circumstances as on today, it is possible to invoke Section 74 only for the financial years 2020-21 to 2023-24 and apply for four years for issuing SCN up to 31/08/2026 whereas in case the taxpayer / tax professional is able to establish based on CBIC instructions dated 13/12/2023 as well as the list of decided cases laws as tabled in part 2 of this article, the SCN is possible only for 2022-23 and 2023-24 and there is a straight savings on demand pertaining to 2020-21 as well as 2021-22 which is a great help to all the taxpayers.
This is a crucial period for all taxpayers as the field formation shall continue to issue SCN invoking Section 74 for the financial year 2020-21 till 31/08/2026 and by relying upon all the issues covered in this article, demand pertaining to two financial years could be saved. The intention of this article is to stop 100 per cent of the non- genuine invocation of Section 74 by creating awareness amongst all stakeholders and even if 5% of the taxpayers on whom SCN is being served from today till 31/08/2026 for the financial year 2020-21 are able to stop operation of Section 74 at least at GSTAT, the purpose of writing this article is fully achieved.
It may not be out of place to record that the arguments on non-applicability of Section 74 is required at the reply to show cause notice itself, as officials are not going to listen to our arguments during investigation or audit. It is not a simple task to make an allegation that the taxpayer suppressed certain fact as all the materials/ evidences based on which the SCN is likely to be issued are available in the GST portal. In almost 90% of the cases, where SCN is being issued are based on data/ information collected by the GST officials from the respective GST returns of the taxpayer and as such the question of suppression does not arise. Only when a material or information is found at the premises of the taxpayer during the course of audit or investigation, the grounds of suppression is possible. It is for the GST officials to establish that there was a fraudulent intent on the part of the taxpayer to invoke Section 74 as per the CBIC instructions dated 13/12/2023.
As the jurisdictional high courts are now not encouraging writs and suggest alternative remedies such as first appeal as well as appeal to GSTAT consequent to the operationalisation of the benches of GSTAT all over India and keeping a time frame up to 30/06/2026 for filing appeal before GSTAT on orders under section 107 passed till 31/03/2026, there is no better time which is more appropriate than today for the taxpayer to be fully aware on the non-applicability of the Section 74 of the CGST Act in the situations covered in this article.
The taxpayer is at a dual advantage to win the case when SCN is issued under section 74 and that too, by clubbing more than one financial year. The division bench of the Bombay High Court on 13/03/2026 in WP 8184 of 2025 has categorically held that clubbing of more than one financial year in one SCN is impermissible and accordingly the SCN dated 28/09/2025 covering five different financial years was quashed and set aside. Reference: M/s. Supreme Bituchem India Pvt. Ltd. Nagpur Versus The Commissioner, Central Goods and Services Tax & Central Excise, Nagpur and Ors. - 2026 (3) TMI 1199 - BOMBAY HIGH COURT. This one case law is so good on non- applicability of clubbing of several financial years and it is worth to attach a copy of this high court order in all cases where single SCN is issued for more than one financial year.
It is suggested that the CBIC instructions dated 13/12/2023 is a powerful tool for the taxpayers on improper invocation of section 74. A reference of this instruction may be invariably recorded in all SCN replies under section 74.