Section 74 of CGST Act can be invoked if assessee fails to declare actual sales to evade tax: Kerala High Court

The bench of Justice Gopinath P. observed that “It is for the assessee to get his claim decided by the statutory authorities under the CGST/SGST laws. The procedure under Article 226 of the Constitution of India cannot be invoked for deciding disputed questions of fact, particularly in view of the procedure adopted by this Court in respect of writ petitions under Article 226 of the Indian Constitution.

Section 74 of the Central Goods and Services Tax Act, 2017, is the legal provision and guidelines provided to GST officers to deal with deliberate errors or fraudulent practices by GSTIN holders while filing GST data and short payments, non-payments, erroneous refunds or credits of associated input tax.

Section 161 of the Central Goods and Services Tax Act, 2017, authorizes a competent agent to rectify these errors. These errors generally include clerical errors, arithmetic errors, omissions, or other unintentional errors that do not require further interpretation or investigation.

The assessee/petitioner has been issued a show cause notice under section 74 of the CGST Act, calling upon him to show cause as to why certain proposals should not be finalized against the assessee. After considering the reply submitted by the assessee and after giving an opportunity to the assessee to be heard, an order was passed by the Deputy Commissioner (2^sd respondent) confirming the propositions contained in the show cause notice and finalizing a claim against the assessee. The assessee filed a rectification application under section 161 of the CGST Act, which was dismissed by order.

The assessee has challenged the order passed by the Deputy Commissioner (2^sd respondent) confirming the application in a show cause notice and a dismissal order against the rectification application, before the High Court of Kerala.

The assessee submitted that the main ground of challenge is that there was no valid cause or reason for invoking the provisions of section 74 of the CGST/SGST Acts in the case of the assessee. The wording of section 74 suggests that not all deletions or misrepresentations should give rise to proceedings under section 74 and, unless such deletion or misrepresentation is intentional and in the intention to evade tax, proceedings under section 74 cannot be justified in law. It was submitted that the reasoning contained in the show cause notice for invoking section 74 of the CGST/SGST Acts in the case of the assessee is clearly a copy and paste of another notice issued under Article 74 and has no bearing on the facts of the case. case to the extent that it concerns the person being assessed.

The department argued that certain documents which were considered to be ‘estimates’ were recovered which would show that the sales or part thereof were not accurately recorded by the assessee, resulting in a loss of income. It was submitted that the use of the word “registered” in the show cause notice only refers to the failure to record the actual sales and deletion and not to the fact that the assessee is an unregistered person.

The bench observed that there are several instances of deletion which have been pointed out in the show cause notice to justify invoking Section 74 of the CGST/SGST Acts. Although the assessee may have raised several arguments to show that the allegations are not true, to reach a conclusion it will be necessary to resolve the disputed questions of fact.

“It is for the assessee to get his claim decided by the statutory authorities under the CGST/SGST laws. The procedure under Article 226 of the Constitution of India cannot be invoked to decide disputed questions of fact, particularly in view of the procedure adopted by this Court for writ petitions under Article 226 of the Constitution of India . The assessee has no argument that the alternative remedy available to him is not effective, including in deciding the question whether there was just cause or reason for invoking the extended limitation period (in under section 74) in the facts and circumstances of this case. “, added the bench.

The bench held that the department is also right in holding that the agent did not invoke the extended limitation period on the ground that the assessee was an unregistered person, but on the ground of deliberate suppression of sales for the purpose of tax evasion. The wording of section 74 makes it clear that in such circumstances the provisions of section 74 could be invoked.

In view of the above, the bench rejected the request.

Counsel for the Petitioner/Assessee: Bobby John, S. Ajayghosh Kumar and Sangeetha S. Kamath

Attorney for Defendant/Department: Jasmine MM

Case Title: Ayyappan Pillai v. The State Revenue Officer, Mobile Team No. 5, Kollam, O/O. Deputy Commissioner (Intelligence), Sgst Department, Revenue Complex, Asramam, Kollam

File number: WP(C) NO. 29409 FROM 2024

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