section 74

[VINODRAJ ERUVAT]

A single show cause notice under Section 74 was issued for the years 2017-18, 2018-19, 2019-20, 2020-21, and 2021-22, with separate DRC-01s and ARNs for each year. Due to a time-bar issue, the ARN for the year 2017-18 was verified, and an order was passed for 2017-18 with DRC-07 under Section 74.

1. How should the remaining cases for the years 2018-19, 2019-20, 2020-21, and 2021-22 be proceeded with?
2. Is it possible to change the notice issued under Section 74 to Section 73?
3. The Hon'ble High Court has directed consideration of the petitioner’s submission that there was no just cause or reason to invoke the provisions of Section 74 of the CGST/SGST Acts for the years 2018-19 to 2021-22 because the dealer remitted the complete tax amount after obtaining the show cause notice. The case was invoked due to a difference in the tax rate, i.e., 5% instead of 12%. In this scenario, can Section 74 be changed to Section 73?

[Shilpi Jain]

There is a provision in the law as per which any notice issued under section 74 once regarded as there is no fraud suppression, etc. should be regarded as having been issued u/s 73

[KASTURI SETHI]

In the interest of fair justice, even the Adjudicating Authority can confirm the demand under Section 73 (non-fraud)  instead of Section 74 (fraud, suppression etc. with in intent to evade tax.). There is no need of separate SCN for confirming demand under Section 73. 

[Sadanand Bulbule]

Also refer the following judgement:

2024 (6) TMI 667 - MADRAS HIGH COURT - M/S. GREENSTAR FERTILIZERS LIMITED, REP. BY ITS CHIEF OPERATING OFFICER, E. BALU VERSUS THE JOINT COMMISSIONER (APPEALS) THE ASSISTANT COMMISSIONER OF GST AND CENTRAL EXCISE, TUTICORIN

Legality of the imposition of penalty u/s 74(1) and 74(5) of the CGST Act, 2017 - Input Tax Credit (ITC) availed wrongly but not utilized - It is only after the issuance of the show cause notice, the petitioner has reversed the amount - HELD THAT:- The impugned order sustaining the penalty under Section 74(1) and 74(5) of the CGST Act is unsustainable.

Reliance placed in an identical issue in M/S. AATHI HOTEL, VERSUS THE ASSISTANT COMMISSIONER (ST) (FAC) , NAGAPATTINAM DISTRICT. [2022 (1) TMI 1213 - MADRAS HIGH COURT] where it has been that 'Though under Sections 73(1) and 74(1) of the Act, proceedings can be initiated for mere wrong availing of Input Tax Credit followed by imposition of interest penalty either under Section 73 or under Section 74 they stand attracted only where such credit was not only availed but also utilised for discharging the tax liability. The proper method would have been to levy penalty under Section 122 of TNGST Act, 2017.'

The imposition of penalty under the peculiar facts and circumstances of the case is unjustified - considering the fact that the petitioner has availed input tax credit, which was not eligible to be availed, but could have resulted in wrong utilization of input tax credit, a token penalty of Rs. 10,000/- is imposed on the petitioner - petition allowed.

[VINODRAJ ERUVAT]

SIr

SOMEONE SAYS, once NOTICE ISSUED UNDER SECTION 74 cannot changed to 73.. It can be either dropped or proceed that is only way to settle them

[Sadanand Bulbule]

Someone is someone only, not the law. 

[KASTURI SETHI]

Dear Querist,

Do not believe in hearsay. A query must have some basis.

AI Summary

Recharacterisation of GST fraud notices can allow confirmation under non fraud provisions when facts show no fraudulent intent. A single show cause notice under the fraud provision covered multiple assessment years but led to an order for one year due to time bar; the adjudicating authority may confirm demand under the non fraud provision where facts lack indicators of fraud, conversion of proceedings to non fraud without separate SCNs is permissible, and judicial dicta support treating post notice reversal of tax and mere rate difference shortfalls as unsuitable bases for sustaining penalties under fraud provisions.