TIME LIMIT TO PASS ORDER UNDER SECTION 73

[Sadanand Bulbule]

General provisions relating to determination of tax.

75. (1) XXXX

(2) Where any Appellate Authority or Appellate Tribunal or court concludes that the notice issued under sub-section (1) of section 74 is not sustainable for the reason that the charges of fraud or any wilful-misstatement or suppression of facts to evade tax has not been established against the person to whom the notice was issued, the proper officer shall determine the tax payable by such person, deeming as if the notice were issued under sub-section (1) of section 73.

(2A) Where any Appellate Authority or Appellate Tribunal or court concludes that the penalty under clause (ii) of sub-section (5) of section 74A is not sustainable for the reason that the charges of fraud or any wilful-misstatement or suppression of facts to evade tax has not been established against the person to whom the notice was issued, the penalty shall be payable by such person, under clause (i) of sub-section (5) of section 74A.

(3) Where any order is required to be issued in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court, such order shall be issued within two years from the date of communication of the said direction.

My take:

So in terms of the provisions of Section 75[3], the time limit to issue an order starts within two years from date of direction of the FAA or GSTAT and such order is not hit by time barred from the relevant period.

I also understand that, since the amount of tax is not yet determined in terms of notice issued under 74/74A, and stands converted under Section 73 vide direction under Section 75[3], there is no need to pre-deposit 10% or 20% of tax amount as normally required under Section 107(6)/112(8) of the Act.

The CBIC Circular No.185/17/2022 dated 27/12/2022 is silent as regards to the pre-deposit issue.

Experts to validate.

[Sadanand Bulbule]

In simple words, section 75[2] changes the colour of the notice issued under Section 74/74A to section 73 to re-determine tax amount and also takes care of limitation issue.

[Sadanand Bulbule]

For the purpose of Section 75(2) (supra), section 74A  be ignored. 

[Sadanand Bulbule]

2025 (8) TMI 1132 - ALLAHABAD HIGH COURT - M/s Kesarwani Traders Versus State of Up And 3 Others

Initiation of proceedings against the petitioner under Section 74 of UPGST Act - suppliers registration was valid on the date of transaction but cancelled subsequently - reversal of ITC - HELD THAT:- It is not in dispute that proceedings have been initiated against the petitioner under Section 74 holding that tax invoice No.0014 dated 20th June, 2018 issued by M/s Purvanchal Trade Link India, Sonbahdra is not a registered dealer and, therefore, the claim made by the petitioner was a paper transaction. The record further shows that in the transaction, SM Shop, Raipur, Chhattisgarh have issued a tax invoice No.00961 dated 20th June, 2018 which was a "Bill To Ship To" transaction where the truck number was specifically mentioned as CG10-C-6933. Further, petitioner has been shown as consignee and the supplier has been shown as buyer. The said fact has not been disputed by the authorities. Further, the record shows that specific pleadings in the grounds of appeal before the first appellate authority was taken that the said vehicle was intercepted by a mobile squad of Chhattisgarh and a rubber stamp was put on e-Way bill and was duly signed (copy of the grounds of appeal has been appended as Annexure 6 to the writ petition). The grounds taken by the petitioner have been noticed in the impugned order at internal page 2 of the impugned order but no rebuttal or contradicting material against the petitioner has been brought on record to justify the action.

The record shows that the registration of the seller i.e. M/s Purvanchal Tradelink India, Sonbahdra was cancelled subsequent to the date of transaction, hence, no adverse inference can legally be drawn against the petitioner as on the date of transaction, the seller was having a valid registration.

Once on the date of transaction the seller was having a valid registration and the transaction was through a valid billing channel, which has neither been denied nor any adverse material has been brought on record, no adverse inference can be drawn against the petitioner.

The impugned orders cannot be sustained in the eyes of law and are hereby quashed - Petition allowed.

[rajat solanki]

As per Circular No. 185/17/2022-GST 

i beg to differ 

Scenario 1: Notice Within Section 73 Timeline

When the original Section 74 notice was issued within 2 years and 9 months of the annual return due date:

• Entire demand can be re-determined under Section 73 provisions
• Full recovery remains possible with reduced penalties
• All financial years covered in the original notice remain actionable

Scenario 2: Notice Beyond Section 73 Timeline

If the Section 74 notice was issued beyond the Section 73 limitation period:

• Entire proceeding must be dropped as it becomes time-barred
• No recovery is possible regardless of the tax liability
• The limitation period cannot be extended retrospectively

Scenario 3: Multiple Financial Years

For notices covering multiple financial years with mixed timelines:

• Selective re-determination applies only to years within Section 73 limits
• Years beyond the limitation period are automatically dropped
• Partial recovery possible only for compliant years

Scenario 4: Appellate Direction Compliance

Following appellate directions under Section 75(3):

• Strict two-year compliance window from communication date
• Failure to issue order within this period renders the proceeding ineffective
• No further extensions are permissible under current provisions

AI Summary

Limitation for reassessment under section 73 requires issuance of consequential orders within two years of appellate direction. Section 75(2) converts notices framed for fraud or wilful misstatement into proceedings under the general tax determination provision, requiring the proper officer to re determine tax as if the notice had been issued under that provision. Appellate directions that mandate consequential orders must be complied with within two years from communication; this conversion affects limitation exposure and may, according to commentators, alter the applicability of pre deposit requirements, although administrative guidance is silent.