Singh Electrical Store Vs Superintendent CGST And Central Excise
Date: March 16, 2025
Subject Matter
Invoking Section 74 necessitates a clear demonstration of fraud or willful misstatement
Summary
The Allahabad High Court reviewed a writ petition filed by Singh Electrical Store against an order issued by the Superintendent of CGST and Central Excise under Section 74 of the Central Goods and Services Tax Act, 2017. The court found that the order issued on February 21, 2025, displayed a significant lack of reasoning and application of mind by the respondent authority concerning allegations of fraud or misstatement, which are prerequisites for invoking Section 74. Singh Electrical Store contended that the excess claim was due to a clerical error and should fall under Section 73 instead. The authority, however, dismissed the argument citing the need for such claims to be addressed by appellate authority under Section 75. The High Court strongly disagreed with this reasoning and highlighted that invoking Section 74 necessitates a clear demonstration of fraud or willful misstatement, which was not appropriately addressed by the authority. Consequently, the court quashed the impugned order and directed the Commissioner of Central GST, Varanasi, to investigate officers passing orders under Section 74 without adequate reasoning. The court instructed that Singh Electrical Store be granted a hearing and that a reasoned order be provided within twelve weeks. Ultimately, the writ petition was allowed, emphasizing the necessity for due process and proper justification in tax assessments.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Sri Prakhar Saran Srivastava, learned counsel appearing on behalf of the petitioner and Sri Parv Agarwal, learned counsel appearing on behalf of the respondent.
2. This is a writ petition under Article 226 of the Constitution of India wherein the writ petitioner is aggrieved by the order dated February 21, 2025 (Ref. No.ZD0902252997022) passed by the respondent under Section 74 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the ‘Act’).
3. Upon a perusal of the impugned order, we are of the view that the respondent authority has not applied his mind and has come to the following finding :-
“5.2 However, they argued that the said excess claim was on account of clerical error and not intentional. They contended at length as to why their case not covered under section 74 but under section 73 of the CGST Act, 2017. Since the jurisdiction to consider such claim lies with the appellate authority and above in terms of section 75, I do not find it appropriate to deal on this aspect at the level of adjudication.”
4. It is trite law that to be covered under Section 74 of the Act, there is a mandatory requirement of there being fraud or any willful-misstatement and/or suppression of material This being an essential ingredient of the particular section, the authority concerned could not have made the statement in the impugned order that it was not appropriate for him to deal on this aspect at his level of adjudication.
5. We are indeed surprised at the reasoning or rather for non reasoning of the authority concerned. In fact, there appears to be complete non application of mind which leads us to intervene in this matter at this stage. Accordingly, we direct the Commissioner, Central Goods and Services Tax, Varanasi to look into this particular issue wherein officers are passing orders under Section 74 of the Act without providing the reasons for invoking Section 74 of the Act for fraud or any willful-misstatement or suppression of material facts. Commissioner, Central Goods and Services Tax, Varansi is directed to take appropriate action at his end.
6. In light of the observation made above, the impugned order dated February 21, 2025 is quashed and set aside with a direction upon the authority concerned to grant an opportunity of hearing to the petitioner, and thereafter, pass a reasoned order within a period of twelve weeks from date.
7. With the above directions, the writ petition is allowed.
8. A copy of this order be communicated by Registrar (Compliance) of this Court to Commissioner, Central Goods and Services Tax, Varansi.