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

Section 74 penalty invoked where mens rea plus short payment or wrongful ITC claimed, affecting scope of SCN and remedies.
Whether invoking Section 74 in a show cause notice is appropriate where allegations include wrongful passing of input tax credit without actual supply and alleged short payment/non declaration of outward supplies; the SCN's conflation of penalty proposals and recovery under Section 74 raises issues about the statutory fit of Section 74, availability of reduced penalty mechanisms, mens rea requirements, and whether drafting defects affect entitlement to concessional treatment.