SCN Issuance Under Both Section 73 and 74 of the CGST Act: Punjab & Haryana HC Ruling
The Punjab & Haryana High Court recently clarified the relationship between proceedings under Section 73 and Section 74 of the CGST Act. In the case of Group M Media India (P.) Ltd. v. Union of India [CWP No. 28974 of 2024, dated October 24, 2024], the court ruled that an earlier conclusion under Section 73 does not stop the department from initiating fresh proceedings under Section 74.
Key Highlights of the Case
1. Facts of the Case
- M/s Group M Media India (P) Ltd. (“Petitioner”) received an SCN under Section 73 of the CGST Act.
- The proceedings were dropped via an order on February 28, 2023.
- Later, the DGGI issued another SCN under Section 74(1), citing wrongful ITC claims:
- ₹8.84 crore under IGST
- ₹23.44 crore under CGST
- ₹23.43 crore under SGST
The Petitioner argued that the second SCN under Section 74 could not be issued for the same matter.
2. Petitioner’s Contention
- The SCN under Section 74 lacked evidence of fraud, suppression, or willful misstatement.
- Parallel proceedings by DGGI and Haryana GST Intelligence created unnecessary confusion.
- The Petitioner bypassed the legal process by approaching the High Court without replying to the SCN.
3. Issues Before the Court
The court addressed two major issues:
- Does dropping proceedings under Section 73 prevent the department from issuing a fresh SCN under Section 74?
- Did the SCN under Section 74 fail to establish material allegations, such as fraud or suppression?
Court’s Observations
The court made the following key observations:
- Section 74 proceedings specifically address fraud, willful misstatement, or suppression of facts to evade tax.
- The conclusion of Section 73 proceedings does not restrict the department from invoking Section 74 on distinct grounds.
- Wrongful Input Tax Credit (ITC) claims suggested that the tax liability remained unpaid.
- The Petitioner erred by directly approaching the court instead of responding to the SCN. The CGST Act already provides a robust mechanism for contesting such notices.
Court’s Ruling
The High Court dismissed the writ petition and ruled that:
- Sections 73 and 74 are distinct and can coexist when justified.
- Courts should not interfere in statutory proceedings unless there is a clear procedural violation.
Conclusion
This judgment underscores that the closure of proceedings under Section 73 does not prevent the department from invoking Section 74 if there is evidence of fraud, suppression, or willful misstatement. Taxpayers must address SCNs through the prescribed legal channels instead of bypassing them via writ petitions.
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