Understanding Section 74 for Tax Evasion

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Good Morning and Happy New Year, Friends Let's understand the year learning drafting to challenge Notice under section 74. Please save this post. Research by: Abhishek Raja Ram, 9810638155

Ground-1: Extended Period without proving intention to evade tax. The extended period of limitation of five years under Section 74 is applicable only in cases where fraud, collusion, wilful misstatement, suppression of facts or contravention of provisions with the intent to evade payment of tax is established.

Each of these elements necessitates intent to evade duty, as laid down by the Hon’ble Supreme Court in Gopal Zarda Udhyog v. Commissioner of Central Excise reported in 2005 (188) ELT 251 (SC). Also, refer to Uniworth Textiles Ltd. v. CCE 2013 (288) ELT 161 (SC), where it was held that mere non-payment of duties is not equivalent to collusion, wilful misstatement, or suppression of facts. Positive action betraying the negative intention of wilful/deliberate default is a mandatory prerequisite.

Ground-2: Absence of Form GST DRC-01A Rule 142 (1A) of the CGST Rules mandates issuance of DRC-01A before initiating proceedings under Section 74. Where tax period covered both pre and post amended period of Rule 142(1A), GST officer ought to have issued tax intimation. The absence of pre-SCN intimation in Form GST DRC-01A renders the proceedings procedurally defective. Refer: New Morning Star Travels v. The Deputy Commissioner (S.T.) reported in 2023 (79) G.S.T.L. 430 (A.P.)

Ground-3: Bunching of Show Cause Notice GST Laws mandate year-wise determination of liability. Madras High Court in Titan Company Ltd. v. The Joint Commissioner of GST & Central Excise [(2024) 15 CENTAX 118 (Mad) :: (2024) 1 TMI 619] has held that where bunching of show cause notices for multiple assessment years under Section 73 of CGST Act had exceeded individual three-year limitation period for each year, High Court held such bunching invalid, directing separate adjudication for each year.

Ground-4: Issue is of Mixed Question of Law & Facts; thus extended period is not applicable. You can place reliance on these judgments: -> J.S Pigments Pvt. Ltd v. Commissioner of CGST and Central Tax, Howrah reported in (2022) 381 ELT 45 (Cal.) -> D.C.L. Polyester Ltd v. Collector of Central Excise and Customs, Nagpur reported in (2005) 181 ELT 190 (SC)

I hope you will find this useful. Warm Regards Abhishek Raja Ram 9810638155