2024 (10) TMI 1611 - HC - GST

Tax Authorities Validate Show Cause Notice for Input Tax Credit Irregularities Under Section 74 of CGST Act

Group M Media India Private Limited Versus Union Of India And Others

HC upheld a show cause notice under section 74 of CGST Act against a taxpayer for alleged tax evasion through excess input tax credit. The court dismissed ... Validity of SCN u/s 74 (1) of the CGST Act, 2017 read with section 20 of the IGST Act, 2017 - evasion and concealment of tax - parallel proceedings conducted by the DGGI and the Haryana State GST Intelligence Unit as well as Assistant Commissioner, CGST - HELD THAT:- It is found that the contentions raised by the petitioner are wholly misconceived. Issuance of notice under section 73 of the Act and dropping the same would not prevent the authorities from independently initiating proceedings under section 74 of the Act. The said proposition has also been accepted by the Allahabad High Court in HCL INFOTECH LTD VERSUS COMMISSIONER, COMMERCIAL TAX AND ANOTHER [2024 (9) TMI 1644 - ALLAHABAD HIGH COURT]. So far as the question raised by the petitioner with regard to parallel proceedings being conducted by the DGGI and the Haryana State GST Intelligence Unit as well as Assistant Commissioner, CGST is concerned, it is found that while the Assistant Commissioner, CGST issued a letter dated 10.03.2023 to the petitioner requesting him to deposit the tax liability, the office of the DGGI only issued notice seeking certain queries. However, none of the authorities, either of the CGST or the DGGI have proceeded or initiated proceedings under section 74 of the Act. it is apparent that the allegations against the petitioner are that while he is stated of having availed excess to the tune of Rs. 8,84,57,976/- under head IGST; Rs. 23,44,08,735/- in CGST and Rs. 23,43,95,663/- under SGST, however, same is not appearing in GSTR-2A which reflects that the taxpayer has not deposited the tax liability in the Government treasury and has availed the same wrongfully. Resultantly, the notice has been issued to the petitioner. The proceedings under section 74 of the Act are comprehensively and completely laid down under the provisions of the Act, and this Court would not in any manner cause hindrance in the disposal of the proceedings. The writ petition cannot be entertained for the said purposes, more so when prima facie the show cause notice specifically reflects the allegations which the tax authorities feel to reflect of a fraud having been committed by the petitioner. The case and facts of HCL Infotech Ltd. are found to be different from the present case and it cannot be said that the notice does not reflect the allegations. Petition dismissed. Issues:1. Validity of show cause notice issued under section 74 of the CGST Act, 2017.2. Allegations of tax evasion and concealment against the petitioner.3. Parallel proceedings by different tax authorities.Detailed Analysis:Issue 1: The petitioner challenged the show cause notice issued under section 74 of the CGST Act, 2017, arguing that it did not specify the manner of concealment of tax. The petitioner contended that the notice should point out incriminating allegations of fraud, willful misstatement, or suppression of facts to evade tax. The petitioner relied on the Supreme Court judgment in Raj Bahadur Narain Singh Sugar Mills Ltd. case and the Allahabad High Court decision in HCL Infotech Ltd. case. The High Court held that dropping proceedings under section 73 did not prevent initiating proceedings under section 74, as accepted in the HCL Infotech Ltd. case. The court dismissed the petitioner's contention as misconceived.Issue 2: The notice alleged that the petitioner had availed excess input tax credit (ITC) without the corresponding tax liability being deposited in the government treasury. The notice detailed the discrepancies in ITC availed under different heads of tax, which were not reflected in GSTR-2A. The notice invoked sections 16(2)(c), 50(3), and 74 of the CGST/SGST Act, 2017, seeking recovery of tax, interest, and penalty. The court found the allegations sufficient to reflect tax evasion and fraud by the petitioner.Issue 3: The petitioner raised concerns about parallel proceedings by the Directorate General of GST Intelligence (DGGI) and the Haryana State GST Intelligence Unit. The Assistant Commissioner, CGST issued a letter for tax liability deposit, while the DGGI sought queries without initiating section 74 proceedings. The court noted that only the Haryana State Tax (SGST) issued the notice under section 74, specifying the alleged tax evasion by the petitioner. The court clarified that the writ petition challenging the notice was premature and dismissed it as misconceived, emphasizing that the court would not interfere with the ongoing proceedings.In conclusion, the High Court upheld the validity of the show cause notice issued under section 74, finding the allegations of tax evasion and concealment against the petitioner sufficient. The court dismissed the petitioner's writ petition as premature and misconceived, allowing the tax authorities to proceed with the proceedings under the CGST/SGST Act, 2017.