Challenging Section 74 GST Notices — Key Grounds & Legal Precedents

Section 74 of the CGST/IGST Acts permits the tax authority to proceed beyond the usual limitation period where it appears that tax has been short-paid, not paid or wrongly refunded by reason of fraud or any wilful mis-statement or suppression of facts with intent to evade tax. Because of the extended limitation, enhanced penalties and reputational risk, Section 74 notices carry far greater legal exposure than routine Section 73 adjudications. The statutory predicate (fraud / wilful mis-statement / suppression with intent) is therefore jurisdictional — absent pleaded and supported material, the extended procedure cannot lawfully be invoked. :contentReference[oaicite:3]{index=3}

The department must demonstrate prima facie material showing (a) concealment, mis-statement or mis-representation and (b) a mens rea (intent to evade tax) or conduct amounting to fraud. Courts repeatedly hold that automated mismatches or routine data flags without corroborative evidence do not satisfy the gateway. The onus to justify Section 74 must be apparent from the show-cause notice and the material underpinning it. :contentReference[oaicite:4]{index=4}

An SCN that fails to specify period, invoices, suppliers or quantum breaches fairness. Denial of adequate time to respond, mechanical rejection of adjournments, or improper service are strong grounds to set aside orders. Courts insist the State scrupulously follow process before invoking grave provisions. :contentReference[oaicite:9]{index=9}

Compile SCN and annexures, audit replies, supplier documents, bank traces, ITC invoices, reconciliation reports (GSTR-2B/3B/1), delivery receipts and third-party confirmations. Seek disclosure of the department’s intelligence/data analysis. Plead to quash where particulars and mens rea are absent; prepare substantive documentary defence in parallel. :contentReference[oaicite:10]{index=10}

Recent decisions show recurring themes: (a) quashing of Section 74 SCNs that lack articulated fraud, (b) requirement to disclose material supporting allegations, and (c) refusal to permit mechanical invocation based solely on data mismatches. Cite relevant precedents to show that Section 74 is exceptional and must be supported by visible prima facie material. :contentReference[oaicite:11]{index=11}

1. Preserve contemporaneous records, timestamps and replies to audits.
2. File application/writ seeking disclosure of material relied upon (including DGGSTI notes).
3. File jurisdictional challenge (quash) if Section 74 ingredients are absent.
4. Seek interim stay of coercive action and protection from attachment/recovery.
5. Simultaneously prepare substantive defence (invoices, reconciliations, delivery proofs).

Practical drafting: insist on particularisation — dates, invoices, supplier details — and ask the officer to specify how each alleged fact constitutes fraud or suppression. :contentReference[oaicite:12]{index=12}

• Quash the Section 74 SCN for want of jurisdiction.
• Direct disclosure/production of all material relied upon (including intelligence notes).
• Interim stay of coercive action (attachments, recovery).
• Direction to proceed, if at all, under Section 73 (not Section 74) unless proper material is available.
• Costs in appropriate cases.

Tailor the reliefs: where prior Section 73 disposal exists, emphasize non-duplication and inter-departmental protocols. :contentReference[oaicite:13]{index=13}

Section 74 survives where the department can produce clear contemporaneous material — admissions, forged invoices disproved by suppliers, bank traces showing circularity, suppressed books revealed in search, or other corroboration indicating deliberate evasion. On facts showing willful conduct, courts defer to revenue and Section 74 proceeds. :contentReference[oaicite:14]{index=14}

• Examine whether fraud is specifically pleaded with particulars; if not, pursue jurisdictional challenge.
• Demand and litigate for disclosure of the department’s material.
• Prepare a two-pronged defence — quash route + documentary merits defence.
• Press for interim protection against coercive action where commercial survival is threatened.

The jurisprudence favours careful, material-based invocation of Section 74; mechanical, data-only invocations are frequently quashed. :contentReference[oaicite:15]{index=15}

• Copy of SCN and annexures; record of service.
• Audit replies, previous correspondence and notes of assessments under Section 73.
• Supplier POs, invoices, GRNs, delivery receipts and confirmations.
• Bank statement traces, payment advices and reconciliations.
• GSTR reconciliation reports (2B/3B/1) and ERP export showing transaction flow.

Use focused pleadings that: (a) isolate the jurisdictional defect (absence of pleaded mens rea), (b) request immediate disclosure of material, (c) narrate prior compliance and reconciliations, and (d) seek interim stay of coercive action. Avoid vague, scattergun averments — courts reward precise, material-based petitions. :contentReference[oaicite:16]{index=16}

Courts are cautious because Section 74 carries stigma and severe financial consequences. Judicial pronouncements emphasise a high standard of initial satisfaction; automatic invocation on data-mining alone is disfavoured. The judiciary protects due process and prevents arbitrary use of taxing powers. Well-argued jurisdictional petitions often produce interim relief and guard against mechanical adjudication culture. :contentReference[oaicite:17]{index=17}

When the department can show forged records, supplier denials substantiated by third-party evidence, or circular banking evidence, courts generally uphold Section 74. The success of a challenge is fact-sensitive: weak documentary defences and missing corroboration reduce the odds of quashment. :contentReference[oaicite:18]{index=18}

On receipt of a Section 74 SCN: (1) assume the SCN is a jurisdictional attack target — check whether fraud is pleaded with particulars; (2) demand disclosure of the department’s material; (3) pursue a two-pronged strategy — jurisdictional quash + substantive documentary defence; and (4) press for interim protection where commercial survival is at stake. The jurisprudence now requires material-backed invocation; mechanical, data-only invocations are a frequent basis for judicial relief. :contentReference[oaicite:19]{index=19}

Styled to match your Permanent Account Number (PAN) Zerolev thesis layout. Template source: PAN thesis file. :contentReference[oaicite:20]{index=20}