Non-issuance of Notice u/s 61 would not Affect Validity of Proceedings Initiated u/s 74: HC

Case Details: Nagarjuna Agro Chemicals (P.) Ltd. v. State of U.P. - [2023] 150 taxmann.com 419 (Allahabad)

Judiciary and Counsel Details

• • Ashwani Kumar Mishra & Vinod Diwakar, Jj.
  • Shubham Agrawal for the Petitioner.
  • C.S.C. for the Respondent.

Facts of the Case

The petitioner had submitted returns for period 2019-20. The GST department had not issued any notice under Section 61 of CGST Act, 2017 (the Act) but it initiated proceedings under Section 74 against petitioner on certain grounds with regard to classification and consequential tax payable of certain goods.

The department had examined issue and ultimately passed order whereby tax previously paid was found short and a demand had been raised for deposit of appropriate short fall in deposit of tax as also interest and penalty. It field writ petition against the assessment order and contended that the department must have pointed out deficiency in the returns submitted by the petitioner so as to give it an opportunity to rectify the return before proceeding under Section 74 of the Act.

High Court Held

The Honorable High Court noted that the scrutiny proceedings of return as well as proceeding under Section 74 are two separate and distinct exigencies. Therefore, the issuance of notice under Section 61(3) cannot be construed as a condition precedent for initiation of action under Section 74 of the Act.

Thus, the Court held that merely because no notices were issued under Section 61 of the Act, it would not mean that issues of classification or short payment of tax could not be dealt with under Section 74 as exercise of such power was not dependent upon issuance of notice under Section 61. The Court dismissed the writ petition and the petitioner was permitted to prefer appeal against the impugned order.