Audit Findings From Taxpayer’s Own Records Cannot Sustain Section 74: GSTAT Kolkata

The Kolkata Bench of the GST Appellate Tribunal quashed extended-period proceedings for three years, sending two back for fresh determination under Section 73 and leaving the taxpayer free to seek Section 128A relief.

GSTAT Kolkata has held that Section 74 of the CGST Act cannot be invoked where the discrepancies rest solely on documents prepared and produced by the taxpayer and no incriminating material shows wilful suppression. It quashed proceedings under Section 74 for 2017-18 to 2019-20 and directed that tax for the last two years be redetermined as if the notice had been issued under Section 73(1). [Bengal Spare Parts Supply v. M Rahaman, Commissioner of CGST & CX Howrah Commissionerate, 2026-juristway.com-3315-GSTAT(Kolkata)-GST]

The Bench of Satya Gopal Chattopadhyay, Member (Judicial), and Malay Ghosh, Member (Technical), allowed the appeal, with Malay Ghosh writing the order. An audit show cause notice (SCN) dated 14 Dec 2023 alleged short payment of tax on supplies found in the profit and loss account but not declared in returns, along with credit issues. The taxpayer had paid ₹19,14,473 before the notice, and the demand was confirmed with interest and a penalty equal to the tax on 19 Aug 2024.

The appellate authority held that Section 74 could not apply to 2017-18, as the profit and loss account and GSTR‑9C for that year had been uploaded, but sustained it for 2018-19 and 2019-20 because those records were not with the Department before the audit. The taxpayer said it was exempt from filing GSTR‑9C on account of its turnover, and the Department raised no objection to that statement.

Relying on Tata Steel Limited v. Union of India (2026), the Bench held that the foundational facts for fraud or suppression must appear in the notice itself. Not discharging tax suo motu before the audit, during years marked by early statutory and infrastructure problems and the pandemic, does not necessarily mean wilful suppression, and Instruction No. 5/2023-GST requires definite evidence in the SCN for action under Section 74.

The Section 74 action was quashed, and 2017-18 was held time-barred. For 2018-19 and 2019-20, the proper officer is to redetermine the tax under Section 75(2), treating the notice as one under Section 73(1), preferably within three months and after hearing the taxpayer. The taxpayer may apply for the benefit of Section 128A, which the Revenue is to consider expeditiously.

2026-juristway.com-3315-GSTAT(Kolkata)-GST