Section 74 GST scrutiny and job work record compliance: revenue neutrality required factual verification before final demand confirmation.

GST proceedings under Section 74 may be initiated where scrutiny of the taxpayer's own records discloses a mistake or shortfall, and the threshold for invoking the extended period is lower than under the earlier indirect tax regime; a challenge on the ground that the lapse is merely technical or jurisdictional is not excluded on that basis alone. In relation to goods sent for job work under Section 143 read with Rule 45, proper accounts and prescribed reporting remain mandatory, but a plea of revenue neutrality is a factual issue requiring verification. The demand was not finally sustained and the matter was remitted for reconsideration on that limited question after hearing the assessee.

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Issues: (i) Whether the challenge to invocation of the extended period of limitation and proceedings under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017 was maintainable. (ii) Whether the impugned demand arising from dispatch of goods for job work without proper records under Section 143 of the Tamil Nadu Goods and Services Tax Act, 2017 read with Rule 45 of the Tamil Nadu Goods and Services Tax Rules, 2017 could be sustained, and whether the matter required verification on the plea of revenue neutrality.

Issue (i): Whether the challenge to invocation of the extended period of limitation and proceedings under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017 was maintainable.

Analysis: The Court held that under the GST scheme the Department proceeds on the basis of the records maintained by the taxpayer, and where scrutiny reveals a mistake or shortfall, proceedings under Section 74 can be initiated. It further held that the threshold for invoking Section 74 is lower than under the earlier indirect tax regime and that such proceedings are not excluded merely because the assessee characterises the lapse as technical or jurisdictional.

Conclusion: The challenge to invocation of Section 74 was rejected.

Issue (ii): Whether the impugned demand arising from dispatch of goods for job work without proper records under Section 143 of the Tamil Nadu Goods and Services Tax Act, 2017 read with Rule 45 of the Tamil Nadu Goods and Services Tax Rules, 2017 could be sustained, and whether the matter required verification on the plea of revenue neutrality.

Analysis: The Court noted that the assessee was required to maintain proper accounts for goods sent to job workers and to comply with the statutory conditions governing return of goods and reporting in the prescribed form. At the same time, it found that the plea that the issue may be revenue neutral required factual verification and could not be conclusively decided in the writ proceedings.

Conclusion: The matter was remitted to the respondent for verification of the revenue-neutrality plea and for passing fresh orders on merits after hearing the assessee.

Final Conclusion: The writ petitions did not succeed on the jurisdictional objection, but the demand was not finally affirmed and the matter was sent back for reconsideration on the limited question of revenue neutrality.

Ratio Decidendi: In GST proceedings, a notice under Section 74 may be invoked where scrutiny of the taxpayer's own records reveals a shortfall or mistake, and a factual plea such as revenue neutrality can justify remand for fresh consideration.

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