Section 74 proceedings require express allegations of fraud or suppression in the notice and order; inspection differences alone are insufficient.

Section 74 of the Tamil Nadu GST Act cannot be invoked unless fraud, wilful misstatement, suppression of facts, or intention to evade tax is expressly alleged in the show cause notice and reflected in the assessment order; such ingredients cannot be presumed from inspection-based turnover differences or voluntary pre-notice payment alone. The Madras HC found the notices and orders deficient because they did not clearly set out those statutory elements, so the invocation of Section 74 was unsustainable on the material as framed. The impugned orders were set aside and the matter was remanded, with liberty to issue a fresh notice under Section 73 or Section 74, as appropriate, and proceed in accordance with law.

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Issues: Whether proceedings could validly be initiated under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017 in the absence of an express allegation in the show cause notice and assessment order of fraud, wilful misstatement, suppression of facts, or intention to evade tax.

Analysis: The notice and the impugned orders proceeded on turnover differences noticed on inspection and on voluntary payment of tax before the notice. The Court held that mere reference to inspection or non-reporting of transactions does not, by itself, establish the element of wilfulness or intention to evade tax. For action under Section 74, the offending conduct must be expressly put to notice and must be discernible from the notice and the order; such elements cannot be presumed. In the present case, the notice and order did not expressly record fraud, wilful misstatement, or suppression of facts, though the facts could have supported further enquiry. The Court therefore found the invocation of Section 74 unsustainable on the material as framed.

Conclusion: The impugned orders were set aside and the matter was remanded, with liberty to the authority to issue a fresh notice under Section 73 or Section 74, as the case may be, after making the necessary averments and to proceed in accordance with law.

Final Conclusion: The assessee obtained relief against the impugned assessment orders, but the revenue was left free to recommence proceedings with proper allegations and notice.

Ratio Decidendi: Section 74 can be invoked only when fraud, wilful misstatement, suppression of facts, or intention to evade tax is expressly alleged and made discernible from the show cause notice and the order; such ingredients cannot be presumed from inspection-based turnover differences alone.

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