Importance of maintenance of accurate records under GST need not be overemphasized.

Section 143 of the CGST/SGST Act 2017 is a beneficial provision for all taxpayers who engage a job worker. By strict adherence to Section 143 as well as Rule 45 of the CGST rules, it is possible to send goods for job work and receive back the goods after completion of job within one year for goods and three years for capital goods, without payment of GST. The time limits as one year as well as three years are very fair for majority of the taxpayer and in genuine cases, there is also provision for extension by applying to the GST authorities. All major industries which heavily depend on job work for completion of the job take full advantage of the framework under GST on job work and the procedures set out for compliance are also not complicated. In case of system glitches, the issue must be immediately taken up with jurisdictional authorities for rectification or keep the jurisdictional officers informed of the movement of goods without adherence of Rule 45 so as to ensure that Section 74 is not attracted at a later date.

Section 74 is dangerous one as it has twenty one more months for issuance of SCN as compared with section 73 and penalty is also heavy once invocation of section 74 is upheld at GSTAT or any other higher forum. The Madras High Court has on 08/06/2026 in W P 29580 of 2025 in the matter of Tvl. Technocast Foundry, Represented by its Partner T. Kamalakannan Versus The State Tax Officer, Coimbatore. - 2026 (6) TMI 752 - MADRAS HIGH COURT upheld the invocation of Section 74 as the taxpayer could not prove that the materials sent for job work were brought back within one year from the job worker premises. The trouble started when the tax authorities carried surprise inspections on 23/09/2024 and 24/09/2024 and issued SCN under Section 74 covering three different tax periods consisting of financial years 2018-19, 2019-20 and 2020-21. GST was demanded on goods involved in job work along with applicable interest as well as equal penalty.

The taxpayer argued that section 74 was wrongly invoked which the high court did not agree. It was argued by the department that the taxpayer could not prove that the goods sent for job work were brought back within permitted period of one year on completion of job work as accurate records were not maintained. It may incidentally be noted that section 143 is only an option and in case this option is exercised, benefits of non payment of GST applies only when the conditions stipulated in Rule 45 are adhered. In case of difficulties in adherence, goods may be sent on payment of applicable GST for which job worker is entitled for ITC and may be sent back to principal on payment of GST for which the principal is entitled for ITC.

Since it was not proved by the taxpayer that goods were returned within time permitted under section 143, the high court has rightly held that invocation of section 74 is upheld. The case was remanded to the original adjudicating authority so as to enable the taxpayer to get some relief by providing reply within 30 days to establish that the issue is revenue neutral. The adjudication authority to pass final order within three months on merits after hearing the taxpayer.

The taxpayer has not lost the case completely as one more opportunity to prove revenue neutrality is granted which is live till 07/07/2026. By collating all records which prove that the date of receipt of goods from the job worker is within one year from the date of sending to job worker, relief is possible to the extent of submission of documentary evidences. As interest as well as penalty are directly proportional to the determined GST payable, each and every effort may be made to get the relief to the maximum extent possible by submitting records.

This case is an eye opener for all engaged in sending goods to job worker without payment of GST. By maintaining accurate documents on outward as well as inward movement of goods and by ensuring that the goods are received back well within permitted time, the advantages of the provisions may be enjoyed in full. Normally, the onus is on the revenue to prove that 74 is invoked appropriately in line with para 3.3 of CBIC Instructions dated 13/12/2023 whereas in the above case, the taxpayer could not avoid invocation of 74 due to non- adherence of Rule 43 of the CGST Rules.

Most interestingly, the show cause notice for 2028-19, 2029-20 and 2020-21 were issued on 28/12/2024 whereas the time limit for issuance of SCN under section 73 lapsed on 30/11/2024 itself for 2020-21. Had the taxpayer kept all the records in- tact and followed the required procedures, the demand could be nil as invocation of 74 would not have been possible to the GST authorities.