Seven Late GST Returns Alone Don’t Prove Suppression Under Section 74, GST Tribunal Says, Remanding Case for Fresh Section 73 Decision

The respondent failed to file seven monthly GST returns for August 2017 to February 2018. Anti-Evasion officials inspected the business premises on 19 April 2018; the respondent filed six pending returns the next day and the remaining return on 6 June 2018.

The respondent had reportedly deposited an estimated cash liability before the inspection and discharged the return liabilities; the adjudication order also recorded payment of interest. The adjudicating authority nevertheless invoked Section 74 and imposed a penalty, while appropriating the tax already paid. On the respondent’s appeal, the First Appellate Authority did not uphold Section 74 but determined a penalty under Section 73. The Commissioner appealed to the Tribunal seeking restoration of the Section 74 demand.

Section 74(1) of the CGST Act applies where tax has not been paid, has been short-paid, or input tax credit has been wrongly availed or utilised by reason of fraud, wilful misstatement, or suppression of facts with intent to evade tax; those statutory ingredients must be established, and mere non-compliance does not by itself establish them.

Explanation 2 to Section 74 defines “suppression” as non-declaration of information required to be declared in a return, statement, report, or other document furnished under the Act or rules, or failure to furnish information when required in writing by the proper officer.

Under Section 75(2), where an appellate authority or court concludes that a Section 74 allegation is unsustainable, the proper officer is to determine the tax payable as if the notice had been issued under Section 73.

The Tribunal found no allegation of fraud and no identified false statement or material information omitted from the returns. The turnover, tax rate, and liability declared in the returns were accepted in the adjudication order; the alleged default was the late filing of the returns, not an inaccuracy in their contents.

The Tribunal therefore held that the required elements of Section 74, including suppression within Explanation 2 and intent to evade tax, were not established merely by filing the returns after inspection.

It also noted the reported pre-inspection deposit of the estimated cash liability and payment of interest, while making its observations about those payments subject to verification.

However, because Section 75(2) assigns fresh determination under Section 73 to the proper officer, the First Appellate Authority’s determination of a Section 73 penalty could not stand.

It set aside the portion of the First Appellate Authority’s order that determined a penalty under Section 73 and remanded the matter to the original adjudicating authority to determine afresh any liability under Section 73, subject to the statutory time limit.