2025 (11) TMI 1941 - HC - GST

Initiation of revisional proceedings under KGST Act after audit report invalid where assessment proceedings were not commenced, order quashed

Challenge concerned the validity of initiating revisional proceedings under the KGST Act after issuance of an Audit Report where no proceedings under ... Initiation of Revision Proceedings u/s 108 of the KGST Act after issuance of an Audit Report - proceedings u/s 73 or Section 74 of the KGST Act had not been initiated by the respondent - HELD THAT:- The facts and circumstances clearly indicate that as on the date of initiating revisional proceedings by issuance of the revision notice dated 19.10.2024, respondent had not initiated proceedings under Section 73 or Section 74 of the KGST Act. A plain reading of Section 65(7) of the KGST Act will clearly indicate that upon coming to know about issuance of the Audit Report, it is incumbent upon the respondent to initiate proceedings / action under Section 73 or Section 74 of the KGST Act and without doing so, it is impermissible in law for the respondent to initiate revisional proceedings, which is contrary not only to the aforesaid provision but also the other material on record especially having regard to the fact that no proceedings have been initiated under Section 73 or Section 74 of the KGST Act even till today. The impugned proceedings including the impugned order are illegal, arbitrary and without authority of law and the same deserves to be quashed - Petition allowed. Issues: (i) Whether the revisional authority was entitled to initiate and pass revision proceedings under Section 108(1) of the KGST Act after issuance of an Audit Report dated 15.12.2023 when proceedings under Section 73 or Section 74 of the KGST Act had not been initiated by the respondent.Analysis: The Court examined the sequence of events including the Revised Audit Observation dated 17.11.2023, the petitioner's reply dated 24.11.2023 and the Audit Report in Form GST ADT-02 dated 15.12.2023. The Court considered the statutory framework set out in Section 65(7) of the KGST Act which contemplates that detection of unpaid or short-paid tax, erroneously refunded tax or wrongfully availed input tax credit in an audit should lead to initiation of action under Section 73 or Section 74. The Court noted that as on the date of initiating revision by notice dated 19.10.2024 no proceedings under Section 73 or Section 74 had been initiated by the respondent and none had been initiated to date. On this basis the Court held that initiating revision proceedings in the absence of Section 73/74 proceedings was contrary to the statutory scheme and therefore rendered the revisional proceedings and the impugned order without authority.Conclusion: The revisional proceedings initiated and the impugned revision order dated 14.05.2025 are quashed; decision is in favour of the assessee.