The Kerala High Court held that provisions of section 74 of CGST Act can be invoked if assessee fails to report actual sales to evade tax. While dismissing the appeal, the bench opined that the department is also right in contending that the Officer did not invoke the extended period of limitation on the ground that the assessee was an unregistered person but on the ground of suppression of sales willfully for the purpose of evasion of tax.
The assessee/petitioner Ayyappan Pillai was served with show cause notice under Section 74 of the CGST Act calling upon the assessee to show cause as to why certain proposals should not be finalized against the assessee. After considering the reply submitted by the assessee and after affording to the assessee an opportunity of being heard, an order was issued by the Deputy Commissioner ( 2nd respondent ) confirming the proposals in the show cause notice and finalizing a demand against the assessee. The assessee filed an application for rectification under Section 161 of the CGST Act, which was rejected by an order.
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The assessee has challenged the order, passed by the Deputy Commissioner ( 2nd respondent ) confirming the demand in show cause notice and rejection order against rectification application, before the Kerala High Court.
It was submitted that the principal ground of challenge is that there was no just cause or reason to invoke the provisions of Section 74 of the CGST / SGST Acts in the case of the assessee. The wordings of Section 74 will suggest that it is not every suppression or misstatement that should lead to proceedings under Section 74 and unless such suppression or misstatement was willful and with the intention of evading tax, a proceeding under Section 74 cannot be justified in law.
On the other hand, the department submitted that certain documents which were stated to be ‘estimates’ were recovered which would show that the sales or part of it was not being accurately recorded by the assessee leading to loss of revenue. It was submitted that the use of the word ‘registered’ in the show cause notice refers only to the failure to register the actual sales and suppression and not to the fact that the assessee is an unregistered person.
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The single Bench of Justice Gopinath P. observed that the assessee has no case that the alternate remedy available to the assessee is not effective including for adjudicating the question as to whether there was just cause or reason for invoking the extended period of limitation ( under Section 74 ) in the facts and circumstances of this case.
Section 74 of the Central Goods and Services Tax Act, 2017, is the legal provision and guidelines provided to GST officers to deal with willful misstatement or fraudulent practices by GSTIN holders in filing GST data and related short payment, non-payment, erroneous refund or input tax credit availed.
The bench observed that there are several instances of suppression which have been pointed out in the show cause notice as a justification for invoking Section 74 of the CGST / SGST Acts. While the assessee may have raised several contentions to show that the allegations are not correct to reach a conclusion the adjudication of disputed questions of fact will be necessary.
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While dismissing the appeal, the bench opined that the department is also right in contending that the Officer did not invoke the extended period of limitation on the ground that the assessee was an unregistered person but on the ground of suppression of sales willfully for the purpose of evasion of tax.
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