Section 74 CGST notice sustained; authority to provide relied-upon documents by 30 Sep 2025 and hear petitioner fairly

The HC declined to interfere with the invoking of Section 74 CGST, finding no basis to set aside the notice and refusing the writ on that ground. The court rejected a blanket claim of a pre-conceived notion against the adjudicating authority, but directed the authority to afford a fair hearing and decide impartially after receiving the petitioner's reply. The GST Department must supply all Relied Upon Documents to the petitioner by 30 Sep 2025, and the petitioner must file its response by 15 Oct 2025. The petition was disposed of.

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ISSUES PRESENTED AND CONSIDERED

1. Whether invocation of Section 74 of the Central Goods and Services Tax Act, 2017 is justified where the authority alleges wilful misstatement, suppression of facts and intentional non-reversal of ineligible Input Tax Credit (ITC).

2. Whether an allegation that the adjudicating authority is proceeding with a pre-conceived notion is tenable as a ground to interfere in writ jurisdiction prior to adjudication.

3. Whether the administrative requirement to supply Relied Upon Documents (RUDs) to the noticee before adjudication was complied with and, if not, what remedial directions are appropriate to ensure fair adjudication.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Invocation of Section 74 CGST - Legal framework

Legal framework: Section 74 CGST permits adjudication for tax not paid due to fraud, wilful misstatement or suppression of facts, attracting higher penalties. The self-assessment trust-based regime under GST places an onus on the registered person to correctly avail and reverse ITC (including reversal under section 17(2) and Rules 42/43) and creates liability where there is breach of that trust.

Precedent Treatment

The Court considered the authority's articulated reasons in the show cause notice rather than overruling or expressly following prior case law; no earlier decisions were applied, distinguished or overruled in the oral order excerpt.

Interpretation and reasoning

The Court examined paragraph 5 of the Show Cause Notice which sets out specific factual and inferential grounds: non-payment of GST for 2021-22, detection of ineligible/excess ITC by Anti-Evasion investigations, absence of reversal in GSTR-3B, admissions in a voluntary statement under Section 70 by a company director acknowledging liability to reverse ITC attributable to exempt supplies, and the department's conclusion that these facts were not ascertainable from returns and therefore indicate suppression and mens rea. On that factual matrix the Court found that prima facie the authority has articulated reasons sufficient to invoke Section 74 and was not inclined to entertain the writ petition seeking pre-adjudicatory relief against invocation of Section 74.

Ratio vs. Obiter

Ratio: It is a ratio that where a show cause notice contains specific factual findings indicating detection of undisclosed liabilities by departmental investigation, admissions by company representatives regarding ITC reversal obligations, and plausible inferences of deliberate non-disclosure, a writ court should not ordinarily intervene to quash invocation of Section 74 prior to adjudication.

Obiter: Observations about the conceptual basis of the trust-based regime and absolute liability on breach are expository but support the ratio; no broader pronouncement on standards of mens rea required for Section 74 beyond assessing sufficiency of the show cause notice was made.

Conclusions

The Court concluded that the invocation of Section 74 in the present notice is not amenable to challenge at the pre-adjudication writ stage because the SCN sets out specific reasons and materials from which wilful suppression and misstatement are inferred; accordingly, the petition cannot be sustained on that ground.

Issue 2: Allegation of pre-conceived bias by the Adjudicating Authority - Legal framework

Legal framework: Administrative law principles require adjudicating authorities to act fairly, impartially and unbiasedly. Allegations of pre-conceived notions can, if substantiated, justify judicial intervention, but mere speculative or blanket assertions are insufficient.

Precedent Treatment

No express reliance on or departure from specific precedents is recorded; the Court applied settled administrative law principles in an evaluative manner.

Interpretation and reasoning

The Court held that a general allegation that the authority has a pre-conceived notion is not tenable as a matter of course because such an allegation could be made in many matters and is too sweeping without particulars. The Court emphasised that the adjudicating authority is expected to hear the party fairly and impartially and indicated that the correct remedy is to permit the authority to give a personal hearing and decide the matter on merits.

Ratio vs. Obiter

Ratio: A generalized, unparticularized allegation of preconceived bias will not support pre-adjudicatory interference; the appropriate course is to require a fair hearing and reasoned decision by the adjudicating authority.

Obiter: The Court's comment that the allegation could not be correct as a blanket statement is illustrative and not a comprehensive treatment of bias jurisprudence.

Conclusions

The Court declined to quash proceedings on the ground of alleged predisposition but directed that after receipt of the petitioner's reply and a personal hearing the Adjudicating Authority must decide the matter fairly and unbiasedly; the possibility of raising bias with particulars at an appropriate stage remains open.

Issue 3: Supply of Relied Upon Documents (RUDs) and interim directions - Legal framework

Legal framework: Principles of natural justice and statutory fair procedure require that documents relied upon by the department which form the basis of adverse action be provided to the noticee to enable effective response; furnishing of RUDs prior to personal hearing is necessary for meaningful adjudication.

Precedent Treatment

The Court did not expressly cite precedent but applied established principles of fair procedure and disclosure.

Interpretation and reasoning

The petitioner contended that RUDs had not been supplied though a hearing date was fixed. The Court addressed this deficiency by issuing specific remedial directions: (a) supply of RUDs to the petitioner by a fixed date (30th September 2025); (b) filing of the petitioner's response by a fixed date (15th October 2025); and (c) issuance of a personal hearing notice to the petitioner and requirement that the Adjudicating Authority hear and pass a reasoned order in accordance with law. The Court left open the right to raise grounds regarding invocation of Section 74 during adjudication.

Ratio vs. Obiter

Ratio: Where RUDs have not been furnished, the tribunal should direct prompt disclosure of such documents and fix timelines for response and hearing; failure to furnish RUDs prior to adjudication undermines fair adjudicatory process and warrants interim directions.

Obiter: Specific timelines provided are procedural directions tailored to the facts of the matter and not binding as general rule beyond the case.

Conclusions

The Court directed immediate compliance with disclosure obligations by ordering production of RUDs by a specified date, fixation of timelines for the petitioner's response, and mandated a personal hearing followed by a reasoned decision. The petition was disposed of subject to these directions while preserving all substantive rights and contentions for adjudication.

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