In Writ Tax No. - 336 of 2023 – ALL HC - Notice under Sec 61(3) of Central Goods and Service Tax Act not a condition precedent for action under Sec 74, rules Allahabad High Court
Justice Ashwani Kumar Mishra & Justice Vinod Diwakar [15-05-2023]

Read Order: M/s Nagarjuna Agro Chemicals Pvt. Ltd v. State of U.P. and Another

Chahat Varma

New Delhi, June 1, 2023: The Allahabad High Court has ruled that issuance of notice under Section 61(3) of Central Goods and Service Tax Act, 2017 (CGST Act), is not a condition precedent for initiating action under Section 74 of the Act.

Briefly stated facts of the case were that the petitioner, an assessee under the GST regime, had submitted returns for the assessment year 2019-20. The department had initiated proceedings under Section 74 of the CGST Act against the petitioner with regard to classification and consequential tax payable of certain goods. The department passed an order demanding deposit of appropriate short fall in the deposit of tax as also interest and penalty. The petitioner's counsel argued that since the petitioner had already submitted returns, the department should have first pointed out any deficiencies in the returns, giving the petitioner an opportunity to rectify them before initiating action under Section 74 of the Act.

The division bench of Justice Ashwani Kumar Mishra and Justice Vinod Diwakar observed that in the present case the department did not identify any discrepancy or deficiency in the petitioner's returns, nor any such deficiency was pointed out to the petitioner for it to be rectified by it. It was only during the consideration of the returns, that the department found that proper tax had not been deposited, leading to the initiation and conclusion of proceedings under Section 74 of the CGST Act.

The bench held that in the statutory scheme, the course followed by the department was permissible in law. The argument that the department cannot proceed under Section 74 without pointing out deficiencies in the return and giving the petitioner an opportunity to rectify them, was rejected by the court.

“In our view, merely because no notices were issued under Section 61 of the Act would mean that issues of classification or short payment of tax cannot be dealt with under Section 74 as exercise of such power is not dependent upon issuance of notice under Section 61. The argument is misconceived is thus, repelled,” said the court.