SCN u/s 74 for penalty only..whether valid?

[SUSHIL BANSAL]

Dear friends,

I am giving text of one SHOW CAUSE NOTICE. At the top of this no section etc mentioned.

2. It appears that the taxable person has passed on GST credit amounting to Rs. 900000 as the taxable person has only issued GST invoices and passed on ITC to the recipients without actual supply of the underlying goods in contravention of section 7 of the CGST Act 2017,& hence liable to be penalized under section 122(1)(ii).

3. Further, the taxable person appears to have short paid tax amounting to Rs. 1,50,000/- as E-way bills were generated for invoices as detailed , these invoices were not declared as the outward supply in GSTR 1 returns, nor the tax was deposited in the returns of GSTR 3B against such supplies in contravention of section 7, section 9(1), section 37 of the CGST Act 2017. The tax amounting to Rs. 1,50,000- appears to be recoverable under section 74,Int u/s 50,penalty u/s 122(1)(i)

4. In the view of the above, it is clear that the taxpayer has willfully suppressed the facts with intend to claim refund of fraudulent ITC so obtained. Therefore, provisions of section 74 are invokable in this case.

I need your advice on following:

1.at point No 4 the SCN is talking about invoking of 74, whether this is with regard to both the point i.e. 2nd & 3^rd.If yes, then whether the SCN u/s 74 can be issued for recovery of penalty only as in point No.2^nd it is asking for penalty u/s 122(1)(ii) only.

2. Further in point No.3^rd it is stated that we have “short paid tax” whereas in point No. 4 is is stated that “the taxpayer has willfuly suppressed the facts with intend to claim refund of fraudulent ITC so obtained.” In my view both are contradictory.

Plz guide

AI Summary

Debate on Using Section 74 of CGST Act 2017 for Penalties Without Tax Recovery in Show Cause Notices A discussion on the validity of a Show Cause Notice (SCN) issued under section 74 of the CGST Act 2017 for penalties only. The notice alleges that a taxable person passed on GST credit without actual supply, contravening section 7, and short-paid tax, invoking sections 9(1) and 37. The main query is whether section 74 can be invoked for penalties alone, as the SCN seems contradictory. Responses suggest that section 74 should not be used for penalties without tax recovery and highlight the complexity of interpreting GST laws. The discussion emphasizes careful drafting of replies to such notices.