Proceedings Can be Initiated Under Section 74 Even After Dropping of Proceedings Under Section 73

The Show cause notice was issued to the petitioner under section 73 of the CGST Act and the proceedings were dropped post-furnishing response. Further, the notice was again issued to the petitioner under section 74 of the CGST Act alleging excess availment of ITC. With the same regard, the office of the DGGI had also issued notices to the petitioner to which the petitioner had submitted its reply. Accordingly, the petitioner filed a writ petition contending that the show cause notice can’t be issued under section 74 when the proceedings are already dropped under section 73 of the CGST Act. Further, notice issued under section 74 does not reflect and point out as to what manner of concealment of tax has been done by the petitioner.

The Hon’ble High Court held that Issuance of notice under section 73 of the Act and dropping the same would not prevent the authorities from independently initiating proceedings under section 74 of the Act. Further, the SCN clears the allegation against the taxpayer. The writ petition cannot be entertained when the SCN specifically reflects the allegations which the tax authorities feel to reflect fraud.

The detailed judgment is discussed below:

1. Brief facts of the case:

The show cause notice was issued on The Petitioner under section 74 of the CGST Act, 2017.
The petitioner submitted that earlier the show cause notice was issued to the petitioner under section 73 of CGST Act, 2017. The petitioner furnished a response against such show cause notice and the proceedings were dropped.
With the same regard, the office of the DGGI had also issued notices to the petitioner to which the petitioner had submitted its reply.
The petitioner filed the writ petitioner against the validity of the Show cause notice issued under section 74 of the CGST Act when the proceedings were already dropped under section 73.

2. Contention of the petitioner:

The petitioner contended that:

Notice under section 74 of the CGST Act can’t be issued when the matter is pending with the DGGI.
Further, notice issued under section 74 does not reflect and point out as to what manner of concealment of tax has been done by the petitioner.
As per Section 74, the show cause notice should point out as to what are the incriminating allegations against the petitioner and how the petitioner has attempted fraud to evade tax.

3. Finding and Analysis by Hon’ble High Court

The Hon’ble High Court has made the following analysis:

The contention raised by the petitioner is wholly misconceived.
Issuance of notice under section 73 of the Act and dropping the same would not prevent the authorities from independently initiating proceedings under section 74 of the Act. The said proposition has also been accepted by the Allahabad High Court in HCL Infotech Ltd Ltd. (supra).
Further, concerning parallel proceedings being conducted by the DGGI and Assistant Commissioner, CGST, the Assistant Commissioner, CGST issued a letter requesting the petitioner to deposit the tax liability. The office of the DGGI only issued a notice seeking certain queries. However, none of the authorities, either of the CGST or the DGGI have proceeded or initiated proceedings under section 74 of the Act.
Notice under section 74 of CGST is only issued by the Haryana State Tax (SGST) along with a summary of show cause notice.
From the show cause notice issued, it is clear that the allegations against the petitioner are that the petitioner has availed excess ITC of what is appearing in GSTR- 2A which reflects that the taxpayer has not deposited the tax liability in the Government treasury and has availed the same wrongfully.
Accordingly, the notice was issued to the petitioner.
However, instead of filing a reply to the show cause notice, the petitioner directly approached this Court assailing the said show cause notice.
The proceedings under section 74 of the Act are comprehensively and completely laid down under the provisions of the Act, and this Court would not in any manner cause hindrance in the disposal of the proceedings.