Section 74 GST invocation fails without allegations of fraud, wilful misstatement, or suppression to evade tax.

Proceedings under Section 74 of the State GST Act are sustainable only where tax non-payment, short payment, erroneous refund, or wrongful input tax credit is linked to fraud, wilful misstatement, or suppression of facts to evade tax. The show cause notice relied only on a mismatch between declared liability and the return filed, together with non-response to a Section 61 notice, and did not allege the required fraudulent or evasive conduct. The impugned order also recorded no such foundational finding. In the absence of these jurisdictional averments, invocation of Section 74 was unsustainable and the demand of interest and penalty could not be maintained.

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Issues: Whether proceedings under Section 74 of the State Goods and Services Tax Act, 2017 could be sustained when the notice and order did not allege fraud, wilful misstatement or suppression of facts to evade tax.

Analysis: Section 74 can be invoked only where the proper officer forms the view that tax has not been paid, short paid, erroneously refunded, or input tax credit has been wrongly availed or utilised by reason of fraud, wilful misstatement or suppression of facts to evade tax. The show cause notice referred only to the difference between the declared liability and the return filed, along with non-response to a notice under Section 61, but it did not allege the essential ingredients required for invocation of Section 74. The impugned order also did not record any such allegation or finding. In the absence of those foundational averments, the jurisdictional condition for proceeding under Section 74 was not satisfied.

Conclusion: The invocation of Section 74 was unsustainable and the demand of interest and penalty could not be maintained.

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