Section 61(3) Notice Not Mandatory Before Initiating Proceedings Under Section 74 of CGST Act

The HC held that Section 61(3) notice is not a mandatory prerequisite for initiating proceedings under Section 74 of the CGST Act. The department's failure to point out discrepancies or deficiencies in the GSTR returns before commencing Section 74 proceedings does not invalidate the demand for short payment or misclassification of tax. Scrutiny under Section 61 and proceedings under Section 74 are distinct processes, and the absence of a Section 61 notice does not bar action under Section 74. The petitioner's challenge was dismissed, but the HC allowed the petitioner to file an appeal within two weeks, waiving any limitation objections.

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Issues:
The main issue in this case is whether the department is required to issue a notice under subsection 3 of Section 61 of the Central Goods and Service Tax Act, 2017 after the assessee has submitted returns before taking action under Section 74 of the Act.

Details of the Judgment:
The petitioner, an assessee under the GST regime, had submitted returns for the assessment year 2017-18. The department initiated proceedings under Section 74 against the petitioner regarding the classification and tax payable of certain goods. The department found a shortfall in the tax previously paid and demanded the deposit of the shortfall along with interest and penalty.

The petitioner argued that since returns were submitted, the department should have pointed out any deficiencies in the returns before proceeding under Section 74. Section 61 of the Act allows the proper officer to scrutinize returns and inform the assessee of any discrepancies noticed. If no satisfactory explanation is provided, the officer can initiate appropriate action under various sections, including Section 74.

The court clarified that the scrutiny of returns under Section 61 and proceedings under Section 74 are separate. The department can proceed under Section 74 even if no notice is issued under Section 61(3). The court rejected the argument that the department must first point out deficiencies before initiating action under Section 74.

Regarding a judgment cited by the petitioner, the court noted that it did not restrict the exercise of jurisdiction under Section 74 based on a notice under Section 61(3). The court emphasized that the absence of notices under Section 61 does not prevent issues like classification or tax payment from being addressed under Section 74.

The court allowed the petitioner to file an appeal within two weeks, without objections on limitation, considering the circumstances preventing the earlier filing of the appeal. The petition was dismissed, subject to the permission to file an appeal within the specified timeframe.

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