TaxTMI 
TaxTMI 
2026 (8) TMI 1363
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....nal audit report by the tax payer would amount to suppression of facts in terms of section 74 of the CGST Act, 2017. Brief Facts of the Case : 2.0 The appellant, M/s. Santhome Latex Enterprises, is engaged in the manufacture and supply of Centrifugal Rubber Latex, which is used in medical, pharmaceutical and other commercial applications. 3.0 The present proceedings arise from audit of the appellant's records for the period from July 2017 to March 2022. Consequent to the above, a Show Cause Notice was issued to the appellant under Section 74(1) of the CGST Act, 2017, read with the corresponding provisions of the KGST Act, 2017 and Section 20 of the IGST Act, 2017. The notice proposed recovery of alleged excess availment of input tax credit for the period from 2017-18 to 2021-22, together with interest under Section 50 and penalty under Section 74(9) read with Section 122(2)(b). 4.0 The show cause notice was adjudicated by Order-in-Original No. 137/GST/PATTOM/SUPDT/2024-25 dated 24.01.2025, passed by the Superintendent, Central GST and Central Excise, Pattom Range, Thiruvananthapuram. In the said order, the adjudicating authority found that the statutory ingredients for ....
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....r-in-Original without dislodging the above factual finding that the reconciliation had already been disclosed through GSTR-9C/annual return filings (v) The impugned Order-in-Appeal also travels beyond the show cause notice by sustaining Section 74 on the materially different basis of alleged nonresponse to audit observation / audit report. (vi) Non-response to an audit observation or Final Audit Report cannot amount to suppression when the underlying data was already available on the portal and Section 65 does not contemplate a statutory reply to the Final Audit Report. (vii) A difference between GSTR-2A/Table 8 figures and ITC availed in GSTR-3B cannot, by itself, establish violation of Section 16(2) (viii) Without prejudice, once Section 74 fails, the demand relatable to FY 2017-18 and FY 2018-19 would be barred by limitation if tested under Section 73, and the demand for FY 2019-20 is similarly arguable on limitation. (ix) Penalty under Section 74(9) read with Section 122(2)(a) cannot survive in the absence of fraud, willful misstatement or suppression. (x) Interest is unsustainable both as consequential to an invalid Section....
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....ence the order in appeal is sustainable. 11.0 Written submissions reiterating the above were also filed on 13/8/2026 by Shri Sreekumar B, Assistant Commissioner AR for the Revenue. Discussions and findings 12.0 We have carefully considered the submissions made by both sides and also perused the records of the case. 13.0 On a careful perusal of the show cause notice dated 20/1/2024 which is the foundational document of the current proceedings, we find that, in page 7 of the SCN an allegation is made to the effect that: The tax payer has taken the self-assessed ITC in their Electronic Credit Ledger without actually verifying the eligibility thereon. Therefore, it appears that the taxpayer has suppressed the facts to the department, in as much as he has taken ineligible self-assessed ITC in terms Section 42(1) of the Act. Therefore, it appears that the GST amounting to Rs. 8,56,877/- being the ineligible credit as detailed above is liable to be disallowed/recovered from them under Section 74(1) of CGST Act, 2017 along with interest in terms of Section 50(3) of the Act. Further, by their act of contravention of the provisions of Section 16 of CGST Act 2017, for sup....
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....o suppression of facts." and the other unproven assertion that "The taxpayer availed ineligible/excess ITC with a malafide intention to evade payment of tax". 17.0 We have also perused the order in original and reproduce the relevant portions thereof: "20. Demand of tax for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts is raised under section 74(1) of CGST Act, 2017. As per explanation 2 to Section 74, the expression "suppression" shall mean non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made there under, or failure to furnish any information on being asked for, in writing, by the proper officer. 21. I see that taxpayer has availed input tax credit in GSTR-3B based on inward supply invoices received from their suppliers and at the end of each financial year they have filed self-certified reconciliation statement in form GSTR-9C, through which they had reconciled the input tax credit, claimed i....
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....on the basis of a meticulous analysis of the facts and the law, arrived at the legally correct decision that the SCN has invoked the provisions of section 74 without any supporting evidence thereof and is therefore liable to be dropped. 20.0 We would have been heartened if the Revenue had appreciated the efforts of the officer passing the OIO in arriving at an unbiased, legally sound order, based in the true spirit of quasi-judicial adjudication, and accepted the said order in review. 21.0 Unfortunately, what we find is that the Revenue has filed an appeal against the said order on the following new/extraneous grounds which are not found in the Show Cause Notice: (i) The tax payer has not replied the audit enquiry as well as the final audit report. Hence it appeared that the tax payer availed and has not provided the correct information in the statutory returns which they were legally mandated to provide in terms of the provisions of the CGST Act and Rules made thereunder and has not furnished reply to the department when called fore and thus suppressed the facts from the department. (ii) We find that raising such additional grounds at the appellate stage is....
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....der what provision of the statute. We find that the OIA in this respect is delightfully vague. (iii) We also find that except for the above vague assertions on a charge which was not part of the original show cause notice, the OIA has not put forth even an iota of evidence as to how and why the charge of suppression is found to be sustained against the appellant. 23.0 At the cost of repetition, we observe that the OIA has not discussed / refuted the following findings of the Adjudicating Authority in the OIO: (i) The present proceedings arise only from statutory return data, GSTR-2A / Table 8 figures, GSTR-3B and GSTR-9C reconciliation records, and not from search, seizure, parallel records, fake invoices or concealed purchases. (ii) The invoice-wise reconciliation explaining the alleged ITC difference had already been uploaded as part of the appellant's GSTR-9C / annual return filings and was available on the common GST portal. (iii) The relevant reconciliation had been disclosed through statutory filings on the portal and, therefore, on that basis, held that "non-declaration of facts or information" under Explanation 2 to Section 74 was not ....
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....s context we reproduce the decisions of the honorable Supreme Court, cited by the assessee in their defense. (i) 1995 (75) E.L.T. 721 (S.C.) [06-09-1994]-COSMIC DYE CHEMICAL Versus COLLECTOR OF CENTRAL EXCISE, BOMBAY ........so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word "willful" preceding the words "mis-statement or suppression of facts" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or Rules" are again qualified by the immediately following words "with intent to evade payment of duty". It is, therefore, not correct to say that there can be a suppression or mis-statement of fact, which is not willful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Mis-statement or suppression of fact must be willful (ii) 2007 (215) E.L.T. 489 (S.C.) [30-08-2007]-COMMISSIONER OF C. EX., NAGPUR Versus BALLARPUR INDUSTRIES LTD. It was held that the word "suppressi....