SCN issued under section 74 for fraudulent intent or suppression of facts

[vinod jadhav]

One of my customer has mistakenly charged GST at 12% instead of 18% on irrigation works. As per Notification No. 11/2017-CT (Rate), Sl. No. 3(ix), works contract services provided by a subcontractor to a main contractor in relation to construction of canal, dam, irrigation works, etc., are taxable at 12%. The allegation in SCN is as below.

"It is clear from the above that if main contractor is awarded works contract for construction of canal, dam, irrigation works, pipeline etc (covers everything mentioned in clause (iii) or (vi)), only then first Sub contractor comes under the slab tate of l2% and for others works sub-contractors have to pay 18%." 

Can the department invoke Section 74 for short payment of tax? Shouldn’t this case fall under Section 73 instead?

AI Summary

Section 74 fraud invocation challenged where return disclosures and interpretational rate dispute suggest Section 73 applies instead.
Dispute whether invoking the extended limitation under Section 74 is sustainable where a subcontractor charged a lower GST rate for irrigation works; department contends only first-tier subcontractors qualify for the reduced rate under Notification 11/2017-CT (Rate) Sl. No. 3(ix), alleging sub to subcontractor short-paid tax. Contributors argue that disclosure in GSTR returns and absence of concealment or falsification make the issue interpretational, properly falling under Section 73, and stress the department bears the burden to prove wilful misstatement or suppression to justify Section 74.