Indian courts clarify Section 74 CGST Act requirements

Indian judicial authorities have issued rulings clarifying the limitations on invoking Section 74 of the Central Goods and Services Tax (CGST) Act, which pertains to tax evasion through fraud or suppression of facts.

The Supreme Court ruled that tax departments cannot invoke the extended period of limitation under Section 74 merely by using terms such as “fraud”, “wilful misstatement”, or “suppression of facts”. In cases involving M/s G. R. Infra Projects Limited and M/s Tata Steel Limited, the Court held that a show-cause notice must disclose the specific material facts and circumstances that justify such allegations. A “bland statement” lacking underlying factual evidence is insufficient to overcome standard limitation periods.

Separately, the GSTAT Kolkata Bench ruled in the case of M/s Power Tech Global Private Limited that the amendment to Rule 43, which excludes Duty Credit Scrips from the value of exempt supplies, applies prospectively and cannot be applied retrospectively to fiscal years 2017-18 through 2019-20. The Tribunal also found that the Revenue failed to establish the intent to evade tax, rendering the Section 74 notice unsustainable and directing the officer to re-determine liability under Section 73.