2025 (7) TMI 545 - HC - GST

GST short payment on works contract treated under Section 73 not Section 74 without willful suppression

SHRI. BASAVARAJ V. SAJJAN Versus THE DEPUTY DIRECTOR OFFICE OF THE ADDITIONAL DIRECTOR GENERAL, DIRECTORATE GENERAL OF GST, THE ADDITIONAL DIRECTOR OFFICE OF THE ADDITIONAL DIRECTOR GENERAL, DIRECTORATE GENERAL OF GST, THE ASSISTANT COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE, THE ADDITIONAL COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE

The Karnataka HC disposed of a petition involving short payment of GST on works contract services. The petitioner challenged proceedings initiated under ... Short payment of GST - works contract services - returns filed by the petitioner was not accepted and proceedings were initiated under Section 74 of CGST / KGST Act - wilful suppression of facts - HELD THAT:- Section 73 of the CGST / KGST Act is in respect of determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful-misstatement or suppression of facts. Section 74 proceedings are initiated for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful-misstatement or suppression of facts. The authorities concerned has come to the conclusion that if there is any due from PWD to the petitioner, it is for the petitioner to recover and it cannot be a ground for non payment of GST and for that reasons the impugned order has been passed. It is submitted under the circumstances, petitioner cannot be treated as being guilty of suppression of facts and it is prayed that the amount determined by the authorities concerned have already been paid by the petitioner and if any amount is still due he would pay the same. But his only prayer is that the impugned order should be treated as an order under Section 73 of the Act and not 74. It has to be held that there was short payment by the petitioner in respect of payments towards GST, but there was no suppression of facts. Under the said circumstances, it is opined that it is appropriate to treat the impugned order at Annexure-C1 to the writ petition as an order passed under Section 73 of the CGST / KGST and not under Section 74 of the CGST / KGST Act. Petition disposed off. The Karnataka High Court, per Justice M. I. Arun, addressed a writ petition concerning GST liability under the CGST/KGST Act, 2017. The petitioner, engaged in works contract services, filed returns for 2018-19 which were rejected, leading to proceedings under Section 74 (fraud or willful misstatement). The petitioner conceded to pay the determined amount but requested the order be treated under Section 73 (tax short paid without fraud or suppression) instead of Section 74.The Court distinguished Section 73 from Section 74, noting Section 74 applies only where fraud or willful misstatement is established. The petitioner disclosed transactions and consideration received from the Public Works Department (PWD) to both Income Tax and GST authorities, negating suppression of facts. The delay in GST payment arose from non-receipt of differential amounts from PWD, which the authorities held was the petitioner's recovery issue, not a basis for non-payment of GST.The Court found that while there was short payment of GST, there was no suppression or fraud. Consequently, the impugned order dated 28.11.2024 was directed to be treated as an order under Section 73, not Section 74, thereby limiting the petitioner's liability accordingly. The writ petition was allowed on these terms.