2024 (12) TMI 436 - HC - GST

Section 74 CGST proceedings quashed after Section 61 proceedings dropped - officer cannot contradict earlier decision

J.S.B. Trading Co. Versus State of Punjab

The Punjab and Haryana HC quashed proceedings under Section 74 of CGST Act, 2017 initiated after dropping Section 61 proceedings. The court held that once ... Interpretation of Sections 61 and 74 of the CGST Act, 2017 - Validity of proceedings initiated under Section 74 after dropping proceedings under Section 61 - violation of principles of natural justice - HELD THAT:- The sine qua non for initiating proceedings under Section 74 are that the concerned officer should reach to a conclusion that the ITC has been wrongly availed or utilized by reason of fraud or any wilful mis-statement or suppression of facts to evade tax. It is found that once, the notice was issued to the petitioner under Section 61(1) of the Act, he filed his reply and explained how ITC had been claimed as against the business conducted with the concerned parties. The same was assessed by the concerned officer and the Proper Officer passed an order independently dropping the proceedings under Section 61(2) of the Act, 2017. However, from Section 61(3) of the Act, 2017, it is found that the said proceedings are only consequential i.e. when the Proper Officer reaches to a conclusion that the reply is not satisfactory. In the letter issued on 23.02.2023, while ascertaining the liability of the petitioner under Section 74 (5) of the Act, the concerned Proper Officer also mentions that reply to notice under Section 61 is not found satisfactory. Question regarding violation of principles of natural justice are not required to be gone into - the provisions of Section 75(4) of the Act are mandatory in all cases where there are proceedings for imposition of tax. Be that as it may, considering that the proceedings drawn under Section 74 (1) of the Act and passing of order thereto on 14.06.2023 have been held to be vitiated, it is not needed further to delve upon the said aspect and accordingly, this writ petition is allowed by quashing and setting aside the order dated 14.06.2023 and notice issued under Section 74 (1) dated 21.04.2023 - petition disposed off. Issues:1. Interpretation of Sections 61 and 74 of the CGST Act, 2017.2. Validity of proceedings initiated under Section 74 after dropping proceedings under Section 61.3. Allegations of violation of principles of natural justice.Detailed Analysis:1. The judgment involves an analysis of Sections 61 and 74 of the CGST Act, 2017. Section 61 deals with the scrutiny of returns by the proper officer and the consequences of discrepancies found. On the other hand, Section 74 pertains to the determination of tax not paid or short paid due to fraud or willful misstatement. The court examined the provisions of these sections to understand the legal framework governing the case.2. The main issue addressed was the validity of initiating proceedings under Section 74 after dropping proceedings under Section 61. The petitioner had received contradictory notices, one dropping proceedings under Section 61 and another initiating action under Section 74. The court noted that the authority cannot proceed under Section 74 once proceedings under Section 61 have been dropped. The judgment emphasized that the proceedings after dropping Section 61 were vitiated in law, leading to the quashing of the order under Section 74.3. The judgment also discussed the allegations of violation of principles of natural justice. The petitioner had raised concerns about the lack of a personal hearing as per Section 75(4) of the Act. While the court acknowledged the importance of adhering to natural justice principles, it concluded that due to the proceedings being vitiated on other grounds, the issue of natural justice violations did not need further examination.In conclusion, the court ruled in favor of the petitioner, quashing the order passed under Section 74 and setting aside the notice issued under the same section. The judgment highlighted the significance of procedural compliance and the proper interpretation of statutory provisions in GST matters.