Chandigarh GST Tribunal Upholds ₹1.3 Lakh GST And Equal Section 74 Penalty On Rent Omitted From GST Returns

Bharat Packaging Industries, a manufacturer registered in Chandigarh, appealed the rejection of four appeals concerning financial years 2017–18, 2018–19, 2020–21 and 2021–22.

The underlying proceedings followed an audit for July 2017 to March 2023 and a consolidated show-cause notice and order.

The disputed demands concerned GST on rental income, reverse-charge GST on freight, late fee and interest, alleged excess input tax credit (ITC), and alleged blocked credit.

The Tribunal heard the appeals together.

It corrected the cause title to name the Commissioner, CGST, Chandigarh, as respondent, as required by Rule 33(1) of the GSTAT (Procedure) Rules, 2025.

Section 74 of the CGST Act permits the extended-period demand and penalty where non-payment or short payment of tax, erroneous refund, or wrong ITC arises by reason of fraud, wilful misstatement, or suppression of facts to evade tax; the statutory explanation treats non-declaration of information required in a return or other prescribed document as suppression.

The Tribunal applied *Tata Steel Ltd. v. Union of India*, which requires the foundational facts supporting fraud, wilful misstatement, or suppression to appear in the notice; merely reciting those expressions is insufficient.

Section 75(2) requires the proper officer, where a Section 74 determination is set aside, to determine tax as if notice had been issued under Section 73(1).

Section 50 governs interest, while Section 16 governs ITC entitlement; the Tribunal held that ITC should not be denied solely because it is absent from GSTR-2A if Section 16’s conditions are met.

For supplier location, the relevant definitions are in Section 2(71) of the CGST Act and Section 2(15) of the IGST Act; Section 12(3) of the IGST Act identifies the place of supply for services relating to immovable property.

The Tribunal also followed its decision in *RLCR 7 Super Market v. Sunil N. Ranote* on the permissibility of consolidated notices and orders.

The property’s location in Punjab determined the place of supply, but did not remove the Chandigarh authorities’ jurisdiction over the Appellant, whose registered place of business was in Chandigarh; the supply was therefore treated as inter-State.

The rental income was not shown to have been declared in GST returns, and was detected through income-tax Form 26-AS. The Tribunal consequently found suppression and sustained the Section 74 demand and equal penalty on the rental income.

By contrast, the SCN did not explain how fraud, wilful misstatement, or intentional suppression supported the freight and credit demands; the relevant return information was available to the Department, and the adjudicating authority had described the ITC adjustment as revenue-neutral. Section 74 was therefore unavailable for those amounts.

The Tribunal remitted the ITC issues for fresh examination on their merits, including whether the statutory ITC conditions were met and whether the claimed invoice was available.

It rejected the challenge to consolidated proceedings by following its earlier decision and held that Section 74 was irrelevant to the late fee and interest.

It held that Section 74 could not support the freight demand or the disputed ITC and blocked-credit demands.

It remanded the excess and blocked ITC issues to the Adjudicating Authority for fresh consideration and directed the proper officer to determine any tax payable under Section 75(2), treating the notice as one under Section 73(1).

The appeals were disposed of accordingly.