Paul Rajan Punithan vs. The Assistant Commissioner (St)
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Before: and Dr.Thangaraj Salai, Dr.Thangaraj Salai,
Heard both sides.
The case on hand pertains to the assessment year 2020-2021. The first respondent issued the show cause notice dated 28.03.2025 proposing to re-assess the petitioner for the said assessment year. The petitioner failed to respond to the show cause notice. Thereafter, the impugned order came to be passed on 03.06.2025 calling upon the petitioner to pay a sum of Rs.4,00,377/- with penalty and interest. Challenging the same, this writ petition has been filed.
The learned Additional Government Pleader would call upon this Court to relegate the writ petitioner to go before the appellate authority. In response thereto, the learned counsel for the petitioner would point out that 2/8 https://www.mhc.tn.gov.in/judis admittedly, the impugned order was passed only within the extended period of limitation under Section 74 of the TNGST Act, 2017. The said provision provides for passing a re-assessment order within five years provided the assessee can be attributed with fraud, or any wilful-misstatement or suppression reads as follows:- “6. Before proceeding further, it may be relevant to extract to Section 74 of the GST Act, which has been invoked by the respondent vide impugned proceedings:
“74. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts. (1)Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable 3/8 https://www.mhc.tn.gov.in/judis thereon under section 50 and a penalty equivalent to the tax specified in the notice.” A reading of the above provision would show that the extended period would be invoked only where tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful misstatement or suppression of facts to evade tax. The existence of the above ingredients is a juri ictional fact/condition precedent for invoking extending period of limitation under Section 74 of the Act. It is clear that existence of "juri ictional fact" is sine qua non for the exercise of power. If the juri ictional fact exists, the authority can proceed with the case and take an appropriate decision in accordance with law. It leaves no room for any doubt that to invoke the extended period, the Assessing Officer ought to show/demonstrate the existence of any of the circumstances set out in Section 74 of the Act. In terms of Section 74 of the Act, fraud, wilful misstatement or suppression of facts to evade tax would constitute the "juri ictional fact" for invoking extended period of limitation and failure to record the existence of the above juri ictional fact while invoking the extended period under section 74 of the Act, would vitiate the entire proceedings. In this regard, it may be relevant to refer to the following judgments rendered under Section 11A of the Central Excise Act, which contained similar/identical expressions: a)CCE v. H.M.M. Ltd., 1995 Supp (3) SCC 322 “2. If the department proposes to invoke the proviso to Section 11- A(1), the show-cause notice must put the assessee to notice which of the various commissions or omissions stated in the proviso is committed to extend the period from six months to 5 years. Unless the assessee is put to notice, the assessee would have no opportunity to meet the case of the department. The defaults enumerated in the proviso to the said sub-section are more than one and if the Excise Department places reliance on the proviso it must be specifically stated in the show-cause notice which is the allegation against the assessee falling within the four corners of the said 4/8 https://www.mhc.tn.gov.in/judis proviso. In the instant case that having not been specifically stated the Additional Collector was not justified in inferring (merely because the assessee had failed to make a declaration in regard to waste or by-product) an intention to evade the payment of duty.” b) CCE v. Pepsi Foods Ltd., (2011) 1 SCC 601: ''
The aforesaid dictum of Lord Reid has been followed by this Court also. A reference in this connection may be made to Union of India v. Rajasthan Spg. & Wvg. Mills [(2009) 13 SCC 448 : (2009) 238 ELT 3] . This Court considering Section 11-AC of the Act held in ELT para 19 at p. 12 of the Report as follows: (SCC p. 459, para 29) “29. From the aforesaid discussion it is clear that penalty under Section 11-AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section.”
Following the aforesaid well-settled principles, this Court quashes that part of the order-in-original which imposes penalty without any finding of fraud or misstatement against the respondent. This part of the order-in- original is quashed. Save as aforesaid, the order-in-original is upheld. These appeals filed by the Revenue are allowed to the extent indicated above. No costs.''
It may also be relevant to refer to the judgment of this Court rendered under the Income Tax Act in the case of CIT v. Elgi Ultra Industries Ltd. [2008] 296 ITR 573 (Mad), which reads as follows: ".. . the reopening of the assessment under section 148 beyond the period of four years at the end of the relevant assessment year can be sustained only if it is established that there is a failure on the part of the assessee to disclose fully and truly all material facts. In this case there is no finding that there is failure on the part of the assessee to disclose fully and truly all material facts." (emphasis applied)
This Court has perused the entire order of assessment and there is 5/8 https://www.mhc.tn.gov.in/judis not even a whisper about fraud, wilful misstatement or suppression of facts. To a pointed question as to whether the adjudicating authority has anywhere during the course of proceeding indicated that there is fraud, wilful misstatement or suppression of fact, the learned Additional Government Pleader was unable to point out.”
The learned counsel for the writ petitioner draws my attention to the circular dated 13.12.2023 issued by the Principal Commissioner (GST). Paragraph Nos.3.1 to 3.3 of the said circular read as follows:- “3.1 It has also been represented by the industry that in many cases involving secondment, the field formations are mechanically invoking extended period of limitation under Section 74(1) of the CGST Act.
2 In this regard, Section 74(1) of CGST Act reads as follows:- “(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilized by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax.”
3 From the perusal of wording of Section 74(1) of CGST Act, it is evident that Section 74(1) can be invoked only in cases where there is a fraud or wilful mis-statement or suppression of facts to evade tax on the part of the said tax payer. Section 74(1) cannot be invoked merely on account on non-payment of GST, without specific element of fraud or wilful mis- statement or suppression of facts to evade tax. Therefore, only in the cases where the investigation indicates that there is material evidence of fraud or wilful mis-statement or suppression of facts to evade tax on the part of the tax payer, provisions of Section 74(1) of CGST Act may be invoked for issuance of show cause notice, and such evidence should also be made a part of the show cause notice.” 6/8 https://www.mhc.tn.gov.in/judis
I carefully went through the impugned show cause notice as well as the final order. No where, the elements envisaged under Section 74(1) of the Act have been shown to be present. Thus, in view of the absence of the juri ictional facts, the impugned proceedings will have to be quashed. The impugned order is quashed. The Writ Petition is allowed. No costs. Consequently, connected miscellaneous petitions are closed.
2025 Index : Yes / No Internet : Yes/ No rmi To 1.The Assistant Commissioner (ST), Tamil Nadu Commercial Tax Department, Nethaji Road Assessment Circle, Dr.Thangaraj Salai, Madurai-625 020. 2.The Deputy Commissioner (ST), GST Appeal, Commercial Taxes Building, Dr.Thangaraj Salai, Madurai-625 020. 7/8 https://www.mhc.tn.gov.in/judis G.R.SWAMINATHAN, J. rmi
2025 8/8 https://www.mhc.tn.gov.in/judis
Reproduced from the public record of the Madras High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.