TaxTMI 
TaxTMI 
How to interpret Section 74 of the CGST Act, 2017
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....ow to interpret Section 74 of the CGST Act, 2017<br>By: - K Balasubramanian<br>Goods and Services Tax - GST<br>Dated:- 24-11-2025<br><br>It is most common in many tax laws to have the concept of limitation period as well as the extended period of limitation for raising the tax demand. Sections 73 and 74 of the CGST Act are beautifully drafted to clearly make the distinction on when to use 73 and 74. Despite this clear and unambiguous legal position, Section 74 was mostly invoked in a wrong manner during 01/07/2017 till 12/12/2023, which forced the CBIC to issue an instruction to field formation across the country on 13/12/2023. Para 3.3 of the above instruction throws light on how and when to invoke section 74 which is reproduced below.....
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.... 3.3 From the perusal of wording of Section 74(1) of CGST Act, it is evident that Section 74(1) can be invoked only in cases where there is a fraud or wilful mis-statement or suppression of facts to evade tax on the part of the said tax payer. Section 74(1) cannot be invoked merely on account on non-payment of GST, without specific element of fraud or wilful misstatement or suppression of facts to evade tax. Therefore, only in the cases where the investigation indicates that there is material evidence of fraud or wilful mis-statement or suppression of facts to evade tax on the part of the tax payer, provisions of Section 74(1) of CGST Act may be invoked for issuance of show cause notice, and such evidence should also be made a....
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.... part of the show cause notice. It is really unfortunate that even after 23 months from the date of issuance of the above instructions, awareness is less on the above instructions amongst the taxpayers as well as the tax professionals which prompts the filed formation to deliberately apply 74 in a routine manner even in cases where the tax official is aware that the section 74 is not applicable in the respective cases as per CBIC instructions. An analysis of several decisions of the High Courts reveal that in almost all the cases, where the reference of the instructions dated 13/12/2023 are brought to the knowledge of the High Court by the legal professional representing the taxpayer, the order is set aside or quashed. It is bec....
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....ause, it has become a fashion amongst the tax officials to wrongly invoke section 74 of the CGST Act in all cases simply to maximise the penalty and to cover a larger period in the demand and the High Courts appreciate this position and mostly sets aside the orders passed under section 74. This fact is very clear from the recent order dated 11/11/2025 of the Madras High Court in the case of Neeyamo Enterprises Solutions Private Limited where the High Court has clearly and strongly held that section 74 can not be applied routinely as a matter of convenience by the tax officials as reported in Neeyamo Enterprise Solutions Private Limited Rep. by its Manager-Finance (Statutory & Compliance), Ms. Archana K Versus The Commercial T....
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....ax Officer, Office of the Joint Commissioner (State Tax) (Intelligence), Madurai - 2025 (11) TMI 847 - MADRAS HIGH COURT. The High Court has analysed the case in depth and makes it very clear that application of section 74 was upheld only in a very few cases where the dealing tax professional failed to bring the instructions dated 13/12/2023 to the knowledge of the High Court. It is High Time that CBIC must come very strongly on wrong invocation of section 74 up to the period ending on 31/03/2024. The approach of the tax officials in disregarding the instructions dated 13/12/2023 was understood even by the legislature, which prompted the introduction of a new Section 74A in place of 73 and 74 with effect from 01/04/2024. It....
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.... is appealed to all tax payers as well as tax professionals to invariably enclose a copy of CBIC Instructions dated 13/12/2023 while representing the cases wherever the demand is raised under Section 74. It is appealed to all tax officials to be conscious in applying section 74 in the most appropriate manner so as to avoid the orders passed under section 74 being quashed subsequently by a higher court/ Tribunal. It is appealed to the CBIC to come out with strong instructions on applicability of Section 74 as the field formations have not taken the instructions dated 13/12/2023 in to consideration at all. It is concluded by stating that mere non payment of GST or lesser payment of GST or merely availing the ineligible ITC is NOT suf....
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....ficient to invoke section 74, where it happened due to interpretation issues. Unless and until it is factually established that there was an intention to evade the payment of GST by the taxpayer, Section 74 is not applicable. Reply By Sadanand Bulbule as = Dear Sir Very effective article to open the eyes of the adjudicating authorities. It is experienced that the authorties working under the CGST domain seldom invoke Section 73. Rather Section 74 has become a routine and the only operational jurisidiction for them on two counts: One is to use extedend period despite no evidence to subastantiate it. Second is to levy 100% penalty. Most of the time their ears are closed even during personal hearing which runs not more than coupl....
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....e of minutes. Thus the CBIC Circulars followed by umpteen number of judgements quashing such adjudications without authority of law have taken back seats. This is something serious and unfair administration on records. High time to correct themselves. Dated: 24-11-2025 Reply By Sadanand Bulbule as = 2025 (11) TMI 1792 - SC Order - M/s. Sriba Nirman Company Versus The Commissioner (Appeals), Guntur, Central Tax and Customs & Ors. Applicability of penalties under Section 74 of the CGST Act, 2017 - petitioners failure to pay GST and file returns within the stipulated time - suppression of facts or not - contravention of the provisions of Section 37 of the CGST Act - it was held by Supreme Court that There are no good reason t....
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....o interfere with the impugned order passed by the High Court of Andhra Pradesh at Amaravati. HELD THAT:- There are no merit in the review petition and the same is, accordingly, dismissed. Dated: 27-11-2025 Reply By K Balasubramanian as = Thanks a lot for the latest and relevant update 1) Even CBIC could not control the actions at lower level and hence decided to make a full stop for Section 74 with effect from 01/04/2024 2) In almost all cases, SLP preferred by CBIC are rejected. Section 74 is not an exception. 3) Awareness on Section 74 amongst tax payers and tax professionals is a must to stop the wrong invocation of 74 as a routine manner. 4) Imposition of cost as well as passing strictures may bring down such occu....
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....rrences Regards. Dated: 28-11-2025 Reply By Sadanand Bulbule as = Dear Sir You are absolutely at the right page. Most of the authorities have taken Section 74 for granted assuming that the aggrieved taxpayers may not go to Apex/ High Courts. In some instances whenever such cases are remanded back for de novo, again they are repeating the unlawful adjudication without caring for specific directions. Habits die hard. I once again congratulate you Sir for your relentless efforts to activate the taxpayers on this count. Dated: 28-11-2025 Reply By K Balasubramanian as = Yes. Whenever I observe that the taxpayer has erred in compliance, there is no compromise and taxes with interest are suggested to be paid eve....
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....n before issuance of SCN to avoid penalty. Unfortunately, when an officer exceeds his power, knowingly or even unknowingly, the only solution is High court or some times Supreme Court. This is only for the relief from taxes which is not the complete remedy My only purpose of writing articles in TMI is to improve the awareness amongst taxpayers, tax professionals as well as tax officials to improve compliance Compliance of law is meant for even the tax officials, which they never understand. The simplest solution on earth is only imposition of cost, wherever the high court observes that the officials exceed the limit Time up to 30/06/2026 is GOLDEN for taxpayers, as they may now review all orders passed under 74 now and in all high ....
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....value cases, they may go on appeal to GSTAT, where the orders are by first appellate authority. All orders passed by adjudicating officials during 2025 under section 74 merits appeal with first appellate authority. They may reject the appeal on limitation, but that is blessing in disguise to appeal in GSTAT. I one again thank you for the creative interactions. Regards Dated: 28-11-2025 Reply By Sadanand Bulbule as = The dispute before the GSTAT concerned Sterling & Wilson Pvt. Ltd. vs Commissioner of CT GST Odisha - 2026 (2) TMI 726 - GSTAT NEW DELHI, arising from a mismatch between GSTR-1 and GSTR-3B returns for FY 2018-19, where the department alleged short payment of about Rs. 27 lak....
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....h with interest and penalty. The taxpayer argued the difference resulted from credit/debit notes, advance adjustments, and technical return-filing limitations, not tax evasion. Earlier authorities had reduced the allegation from fraud to non-fraud but still confirmed tax and interest. The GSTAT held that no intent to evade tax was established, emphasised that reconciliation issues alone do not justify fraud proceedings, and clarified that if fraud provisions fail, fresh tax determination must be done by the proper officer. Consequently, the matter was remanded for reconsideration with an opportunity for the taxpayer to amend returns and present supporting evidence, reinforcing procedural fairness and proper factual examination in GST disput....
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....es, Refer: Order No. APL/1/PB/2026 dated 11/02/2026 of the GSTAT Principal bench, New Delhi on Section 75[2]. Dated: 15-2-2026 Reply By K Balasubramanian as = Good Observation. The above order dated 12/02/2026 gives us tremendous scope from GSTAT to receive more such qualitative orders in the years to come. The field formation must immediately stop invoking 74 up to 31/03/2024 on matters relating to bona fide cases as above. In my considered view, as and when Section 74 is wrongly invoked, strictures must be passed against the officers so as to make them understand the pain of the poor taxpayer Dated: 15-2-2026 Reply By Sadanand Bulbule as = Dear Sir ji Let us hope for justice from GSTAT. Dated: 15-2-2026 Re....
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....ply By Sadanand Bulbule as = 2026 (2) TMI 726 - GSTAT NEW DELHI - M/s Sterling & Wilson Pvt. Ltd. Through Zarine Yazdi Daruvala Versus Commissioner, Odisha, Commissionerate of CT GST & Ors. Sanjukta Gantayat. Dated: 16-2-2026 =============<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....