Penalty U/s 74

[Komal Agarwal]

Dear Sir,

GST department had issued an Intimation Notice U/s 74 in Form DRC-01A to my client for reversal of ITC of Rs. 2,10,000/- plus applicable interest and penalty @15% of tax on 12/07/2024. Client deposited tax amount of Rs. 2,10,000/- via DRC-03 on 16/07/2024. He did not deposited interest and applicable penalty.

As on 27/07/2024 the department issued Show Cause Notice U/s 74 for payment of interest and Penalty as per section 74 of CGST Act. Client did not respond the SCN.

Finally the demand order was issued on 01/02/2025 for payment of applicable interest and 100% Penalty.

The provision of Section 74 provide the penalty @15% if payment made before issue of SCN, 25% if payment made within 30 days of SCN, 50% if payment made thereafter, 100% in other case.

In this case client had already paid tax before issue of SCN. Please tell me the applicable penalty rate to the client.

Thanks

Dear Sir,

GST department had issued an Intimation Notice U/s 74 in Form DRC-01A to my client for reversal of ITC of Rs. 2,10,000/- plus applicable interest and penalty @15% of tax on 12/07/2024. Client deposited tax amount of Rs. 2,10,000/- via DRC-03 on 16/07/2024. He did not deposited interest and applicable penalty.

As on 27/07/2024 the department issued Show Cause Notice U/s 74 for payment of interest and Penalty as per section 74 of CGST Act. Client did not respond the SCN.

Finally the demand order was issued on 01/02/2025 for payment of applicable interest and 100% Penalty.

The provision of Section 74 provide the penalty @15% if payment made before issue of SCN, 25% if payment made within 30 days of SCN, 50% if payment made thereafter, 100% in other case.

In this case client had already paid tax before issue of SCN. Please tell me the applicable penalty rate to the client.

Thanks

[Sadanand Bulbule]

Dear 

Plz peruse Section 74(5) as under:

(5) The person chargeable with tax may, before service of notice under sub-section (1), pay the amount of tax along withinterest payable under section 50 and a penalty equivalent to fifteen per cent. of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.

Hope it would answer your query.

[KASTURI SETHI]

Now in order to be eligible for the benefit of reduced penalty and for deemed conclusion of proceedings the Noticee will have to pay interest and 50 % penalty also within stipulated period as per Section 74 (11) failing which 100 % penalty will have to be paid as per Adjudication Order.

I also concur with the views of Sh. Sadanand Bulbule, Sir.

[VENU K]

As on date of SCN , there is no tax liability. Unless there is a tax demand an SCN under Sec 73 or 74 are without jurisdiction. So you can file an appeal challenging the SCN as well as adjudication order.

However it is possible to recover interest under Sec 75(12) as an undisputed arrear in my opinion.

[KALLESHAMURTHY MURTHY K.N.]

Dear Sir,

The concession of the penalty provided u/s 74 at different stages is subject to payment of tax together with interest payable. Payment of tax alone without payment of interest attracts a penalty of @100% when the order is passed. So, the adjudication order is rightly passed.

The first stage of penalty is applicable @15% as per Sec. 74(5). The second stage of penalty applicable @ 25% is as per Sec. 74(8).  In both the stages, tax and interest must be paid. Where there is tax due for payment with interest as per order, and the tax and interest are paid within 30 days from the date of service of the order, a 50% penalty is applicable. 

 In this case, the100% penalty is payable as per order.

AI Summary

Client Faces 100% Penalty Under CGST Section 74 for Unpaid Interest Despite Pre-SCN Tax Payment A client received an Intimation Notice under Section 74 of the CGST Act for reversing an ITC of Rs. 2,10,000, plus interest and a 15% penalty. The client paid the tax but not the interest or penalty before a Show Cause Notice (SCN) was issued. Consequently, a demand order was issued for interest and a 100% penalty. Section 74 stipulates a 15% penalty if payment is made before the SCN, 25% within 30 days of the SCN, 50% thereafter, and 100% otherwise. The forum discusses the applicability of penalties, suggesting that the client's failure to pay interest led to the 100% penalty.