GSTAT’s First Ruling – Section 74 Not Invocable for GSTR-1 vs GSTR-3B Mismatch Without Fraud.
Sterling and Wilson Pvt. Ltd vs COMMISSIONER, ODISHA, COMMISSIONERATE OF CT GST & ORS.- GSTAT Principal Bench .
The Goods and Services Tax Appellate Tribunal (GSTAT) has delivered its first reported judgment, laying down crucial principles on the incorrect invocation of Section 74 of the CGST Act, 2017 in cases involving mismatch between GSTR-1 and GSTR-3B.
The ruling brings long-awaited clarity on three recurring issues under GST litigation:
1. Whether mere return mismatch can justify proceedings under Section 74
2. Whether appellate authorities can re-determine tax liability under Section 73
3. The scope of powers of GSTAT in second appeals.
Key Issues Before the Tribunal
1. Whether proceedings under Section 74 are sustainable when fraud, suppression, or intent to evade tax is absent
2. Whether the First Appellate Authority or Tribunal can themselves re-determine tax liability under Section 73
3. Whether GSTAT has jurisdiction to examine questions of fact in second appeal.
Findings and Legal Analysis by GSTAT
1. Section 74 Cannot Be Invoked Without Mens Rea.
The Tribunal categorically held that mere mismatch between GSTR-1 and GSTR-3B does not automatically attract Section 74. It was noted that: Transactions were recorded in books of accounts Debit and credit notes were disclosed There was no finding of fraud, wilful misstatement, or suppression In absence of any positive act indicating intent to evade tax, proceedings under Section 74 were held to be legally unsustainable. The Tribunal observed that Section 74 is a penal provision and must be strictly construed.
2. GSTAT Is the Final Fact-Finding Authority.
Rejecting the Revenue’s argument, the Tribunal held that GSTAT has full jurisdiction to examine questions of fact and law under Section 112 of the CGST Act read with Rule 112. The Tribunal distinguished: Second appeals under GST law from Second appeals under Section 100 of the Code of Civil Procedure, 1908 It held that limitations applicable to High Courts under CPC do not apply to GSTAT, making it the last adjudicating authority on facts.
3. Appellate Authorities Cannot Re-Determine Tax Under Section 73
A crucial aspect of the judgment relates to Section 75(2) of the CGST Act. The Tribunal held that: Once proceedings under Section 74 fail, Only the Proper Officer is empowered to re-determine tax liability under Section 73 Neither the First Appellate Authority nor the Tribunal can themselves compute or confirm demand under Section 73. This conclusion was reinforced by CBIC Circular No. 254/11/2025-GST, which clarifies that re-determination must be done only by the Proper Officer.
4. Protection of Honest Taxpayers and Natural Justice
In strong taxpayer-friendly observations, the Tribunal held that every honest taxpayer deserves protection.
Final Decision of GSTAT
-Proceedings under Section 74 were held unsustainable.
-Orders of the Proper Officer and First Appellate Authority, insofar as they treated the case under Section 73, were set aside .
-Matter was remanded to the Proper Officer for fresh adjudication under Section 73.
-Taxpayer was granted liberty to amend returns, submit reconciliation, and be heard on merits .
Delhi High Court held that both the one-year mandatory separation period and the six-month "cooling-off" period for mutual divorce can be waived in cases of exceptional hardship.
Case title - Shiksha Kumari vs Santosh Kumar 2025
The court deemed these provisions "directory," not mandatory, emphasizing personal autonomy and dignity
Key Details of the Judgement:
-Waiver of Waiting Periods: The court ruled that if the parties have made a case for waiver, the 6-month cooling-off period (for the second motion) and the 1-year separation period (for the first motion) can be waived, allowing for faster dissolution of marriage.
-Discretionary Power: The waiver is not automatic but dependent on court satisfaction that the marriage is irretrievably broken, with no possibility of reconciliation.
-Exceptions: This relaxation is designed for situations of extreme hardship or when waiting would cause unnecessary, prolonged suffering, rather than routine cases.
-Rationale: The court stated that legal procedures should not force couples to remain in dead marriages, and the law should facilitate, not prevent, the separation of consenting parties.
-Applicability: The ruling applies to petitions filed under Section 13B of the Hindu Marriage Act, 1955.
This judgment strengthens the legal precedent, ensuring that the legal process does not unduly burden individuals with unwanted, long-term legal, emotional, and financial constraints.
ROC Strike-Off Does Not Invalidate Reassessment where S.148 Notice Predates It: ITAT Surat Bench.
Title- Amizara Construction Private Limited vs ITO Surat.
Important - post–Finance Act 2024, the CIT(A) is statutorily empowered to set aside best judgment assessments and remand matters for fresh consideration.
Finance Act, 2024 had inserted a proviso to Section 251(1) of the Income Tax Act, 1961 with effect from 1.10.2024, expressly enlarging the powers of the appellate authority to set aside assessments framed under Section 144 and remand the matter for fresh adjudication.
The Income Tax Appellate Tribunal, Surat (ITAT) held that reassessment proceedings are not rendered invalid merely because the assessee company’s name was subsequently struck off by the Registrar of Companies (ROC), where the notice under Section 148 had been issued prior to such strike-off.
Amizara Construction Private Limited, the appellant from Surat, challenged separate appellate orders passed for the Assessment Years 2010-11 and 2012-13. The case arose after the AO reopened the assessments based on information relating to substantial cash deposits made in the company’s bank account and issued notice under Section 148 of the Income Tax Act, 1961 on 31.03.2017.
Since no return of income was filed and no satisfactory explanation regarding the source of cash deposits was furnished, the AO completed the assessment under Section 144 read with Section 147 of the Income Tax Act, 1961, treating the deposits as unexplained income .
Before the first appellate authority, the appellant contended that as the company was non-existent as its name had been struck off from the records of the Registrar of Companies (ROC) on 21.06.2017, and therefore, the assessment itself was invalid. The CIT(A) set aside the assessment order and directed the AO to conduct a fresh assessment after granting due opportunity to the assessee.
The Bench of Suchitra Raghunath Kamble, Judicial Member, and Bijayananda Pruseth, Accountant Member, upheld the order of the CIT(A). The Tribunal observed that the Finance Act, 2024 had inserted a proviso to Section 251(1) of the Income Tax Act, 1961 with effect from 1.10.2024, expressly enlarging the powers of the appellate authority to set aside assessments framed under Section 144 and remand the matter for fresh adjudication.
The Tribunal further noted that the assessee had failed to file any return of income or produce evidence explaining the nature and source of the cash deposits, and that the reopening notice had been issued prior to the striking off of the company’s name.
The Tribunal rejected the assessee’s contention, holding that the plea of non-existence was factually incorrect, as the company was very much in existence on the date of issuance of notice under Section 148. The Bench noted that the ROC strike-off took effect only on 21.06.2017, whereas the reassessment proceedings had already been validly initiated earlier.
light of the statutory amendment and the factual matrix, the ITAT ruled that the CIT(A) had acted within jurisdiction in restoring the matter to the AO for a fresh assessment after granting adequate opportunity to the assessee. Consequently, the appeals were dismissed.
Compromise Can Reduce Sentence, Not Conviction: Supreme Court Clarifies in Criminal Appeal.
The Supreme Court recently allowed a plea filed by two men seeking reduction of their sentence to the period already undergone in view of a compromise reached with the complainant couple.
A bench of Justices B V Nagarathna and Prasanna B Varale, while upholding the conviction of Venkatesh and another, ordered their release after reducing the sentence to the period of two years and three months already undergone by them, out of the five-year jail term imposed earlier.
The appellants had been convicted by the Additional District and Sessions Judge, Salem, for offences under Section 326 IPC and Section 3(1) of the Tamil Nadu Property (Prevention of Damage and Loss) Act, 1992.
Under Section 326 IPC, they were sentenced to rigorous imprisonment for five years along with a fine of Rs 5,000 each, and in default of payment, to undergo six more months of rigorous imprisonment. Under Section 3(1) of the TNPPDL Act, they were sentenced to rigorous imprisonment for two years with a fine of Rs 5,000 each, and in default, to undergo six more months of rigorous imprisonment.
The appellants had challenged their conviction before the Madras High Court. However, by a judgment dated July 7, 2023, the high court dismissed their appeal and directed them to undergo the remaining sentence, while observing that the period of imprisonment already undergone would be set off under Section 428 of the Code of Criminal Procedure.
Aggrieved, the appellants approached the Supreme Court. Court issued notice to the respondents, limited only to the question of quantum of sentence.
During the hearing, counsel for the appellants submitted that they had already completed two years and three months of incarceration under Section 326 IPC. He urged the court to reduce the sentence to the period already undergone, particularly as a compromise and settlement had been arrived at between the parties. It was also pointed out that the appellants had served nearly half of the sentence imposed on them.
Opposing the plea, the State counsel submitted that there was no merit in the appeal, but left it to the court to pass appropriate orders.
Taking note of the submissions and the facts of the case, the bench observed that out of the five-year sentence imposed on the appellants, they had already completed two years and three months. Court also noted that notice had been issued only on the question of sentence.
Accordingly, while upholding the conviction, the Supreme Court reduced the sentence to the period already undergone and directed that the appellants be released forthwith from jail, if they were not required in any other case.
Case Title: Venkatesh & Anr Vs State Represented by The Inspector of Police
GST and Fraud Proceedings Applicability to Statutory Authorities
The Goods and Services Tax (GST) was introduced in India in 2017. It was introduced as a unified tax regime designed to simplify compliance and to promote transparency. Even after a decade of its enactment, it is still in the process of being implemented through litigation.
One of the most important issues that is still under judicial scrutiny is whether statutory authorities and public sector undertakings (PSUs) can be subjected to fraud-based proceedings under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act).
The recent writ petition of the Jaipur Development Authority (JDA) before the Rajasthan High Court has brought this question into the spotlight.
The case primarily challenges the levy of GST on statutory receipts and contests the jurisdiction of tax authorities to invoke Section 74 against a statutory body. The High Court has admitted the petition and stayed the operation of the impugned notice, setting the stage for a landmark adjudication in April 2026.
Section 74 of the CGST Act: The Core Issue
Section 74 provides for tax authorities to initiate proceedings where tax has been short-paid, not paid, or wrongly availed due to fraud, willful misstatement, or suppression of facts. It is a penal provision. It contains tax liability along with interest and penalties equivalent to the tax amount. In those cases, SCNs must be issued within five years, and orders within five years and six months from the same reference point.
Statutory authorities are government-created entities functioning under legislative mandates, often with transparent accounting and oversight. The controversy arises when such provisions are applied to the same. Critics argue that accusing such bodies of fraud against another statutory authority undermines the principle of governance and accountability.
In the case in hand, the Petitioner is Jaipur Development Authority, a statutory body responsible for urban planning and development and the respondent is the Additional Commissioner, CGST Audit. The argument by the petitioner was that a statutory authority cannot be alleged to have committed fraud against another statutory authority.
Rajasthan High Court admitted the petition and stayed the effect of the Section 74 notice until final adjudication.
This case is significant because it raises the broader question: Can statutory receipts, such as fees, charges, or levies collected by authorities, be treated as taxable supplies under GST, and if so, can fraud provisions apply?
Wider Legal and Policy Debate
1. Applicability of GST to Statutory Receipts Statutory authorities often collect charges like development fees, approval charges, or license fees. Whether these constitute “supply” under GST has been debated since its establishment. Some argue that such receipts are sovereign functions and cannot be considered as commercial transactions.
2. Fraud Allegations Against PSUs and Authorities Legal experts caution against indiscriminate use of Section 74 against PSUs. As one commentary notes, “Stop waving the Section 74 sword at PSUs”, highlighting that fraud provisions were meant for deliberate evasion, not routine compliance disputes.
3. Judicial Trends Courts have increasingly scrutinised the misuse of penal provisions. For instance, the Supreme Court clarified in 2025 that parallel proceedings under GST must be carefully limited to avoid taxpayer harassment in the case of M/S Armour Security (India) Ltd. vs Commissioner, CGST, Delhi East Commissionerate & Anr
To allege "suppression" by a PSU is, in substance, to claim the State is conspiring against itself. Courts and tribunals have repeatedly signalled this contradiction:
-In disputes involving Steel Authority of India Ltd., the judiciary has been wary of imputing suppression to PSUs absent compelling evidence of intent.
-Oil India Ltd. matters have emphasised that intent to evade cannot be presumed merely because a demand arose; if records are audited and positions are disclosed, intent is missing.
- In cases concerning Hindustan Aeronautics Ltd., tribunals have called the routine invocation of extended limitation against PSUs a logical absurdity where facts were in the department's grasp.
Tax Professionals argue that Section 74 should be reserved for clear cases of fraud, not applied mechanically. Policy Analysts stress that governance transparency in PSUs makes fraud allegations illogical. Judicial Observers note that the Rajasthan High Court’s stay signals judicial discomfort with extending penal provisions to statutory authorities.
Risks and Challenges Limiting Section 74’s scope may reduce enforcement leverage for tax authorities, and also, statutory authorities may face uncertainty until a clear judicial precedent is established. Also, Courts must balance revenue interests with principles of fairness and governance.
The Jaipur Development Authority’s challenge has opened a crucial debate on the limits of GST’s penal provisions. The High Court’s final adjudication is in April 2026. If the court rules in favour of JDA, it is likely to restrict the use of Section 74 against statutory authorities. Until then, the case serves as a reminder of the evolving nature of GST litigation and the need for careful statutory interpretation to ensure that India’s “one nation, one tax” framework remains both fair and effective
Focus on your responsibilities and give your best effort, but don't be attached to the success or failure (the "fruits") of your actions; this is the essence of the "You have the right to perform your duty, but not to the fruits of your actions"
Rahul Jha Associate Legal
GSTAT’s First Ruling – Section 74 Not Invocable for GSTR-1 vs GSTR-3B Mismatch Without Fraud.
Sterling and Wilson Pvt. Ltd vs COMMISSIONER, ODISHA, COMMISSIONERATE OF CT GST & ORS.- GSTAT Principal Bench .
The Goods and Services Tax Appellate Tribunal (GSTAT) has delivered its first reported judgment, laying down crucial principles on the incorrect invocation of Section 74 of the CGST Act, 2017 in cases involving mismatch between GSTR-1 and GSTR-3B.
The ruling brings long-awaited clarity on three recurring issues under GST litigation:
1. Whether mere return mismatch can justify proceedings under Section 74
2. Whether appellate authorities can re-determine tax liability under Section 73
3. The scope of powers of GSTAT in second appeals.
Key Issues Before the Tribunal
1. Whether proceedings under Section 74 are sustainable when fraud, suppression, or intent to evade tax is absent
2. Whether the First Appellate Authority or Tribunal can themselves re-determine tax liability under Section 73
3. Whether GSTAT has jurisdiction to examine questions of fact in second appeal.
Findings and Legal Analysis by GSTAT
1. Section 74 Cannot Be Invoked Without Mens Rea.
The Tribunal categorically held that mere mismatch between GSTR-1 and GSTR-3B does not automatically attract Section 74. It was noted that: Transactions were recorded in books of accounts Debit and credit notes were disclosed There was no finding of fraud, wilful misstatement, or suppression In absence of any positive act indicating intent to evade tax, proceedings under Section 74 were held to be legally unsustainable. The Tribunal observed that Section 74 is a penal provision and must be strictly construed.
2. GSTAT Is the Final Fact-Finding Authority.
Rejecting the Revenue’s argument, the Tribunal held that GSTAT has full jurisdiction to examine questions of fact and law under Section 112 of the CGST Act read with Rule 112. The Tribunal distinguished: Second appeals under GST law from Second appeals under Section 100 of the Code of Civil Procedure, 1908 It held that limitations applicable to High Courts under CPC do not apply to GSTAT, making it the last adjudicating authority on facts.
3. Appellate Authorities Cannot Re-Determine Tax Under Section 73
A crucial aspect of the judgment relates to Section 75(2) of the CGST Act. The Tribunal held that: Once proceedings under Section 74 fail, Only the Proper Officer is empowered to re-determine tax liability under Section 73 Neither the First Appellate Authority nor the Tribunal can themselves compute or confirm demand under Section 73. This conclusion was reinforced by CBIC Circular No. 254/11/2025-GST, which clarifies that re-determination must be done only by the Proper Officer.
4. Protection of Honest Taxpayers and Natural Justice
In strong taxpayer-friendly observations, the Tribunal held that every honest taxpayer deserves protection.
Final Decision of GSTAT
-Proceedings under Section 74 were held unsustainable.
-Orders of the Proper Officer and First Appellate Authority, insofar as they treated the case under Section 73, were set aside .
-Matter was remanded to the Proper Officer for fresh adjudication under Section 73.
-Taxpayer was granted liberty to amend returns, submit reconciliation, and be heard on merits .
-No order as to costs was passed.
Regards
Adv Rahul Jha
Delhi NCR
7011821936
011-4176599
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Rahul Jha Associate Legal
Income Tax Litigation
Appeal & Litigation at ITAT.
1. Income Tax Appeal
2. Cross Objection
3. Income Tax ( Search & Seizure) Appeal.
4. Income Tax (Transfer Pricing ) Appeal
5. Income Tax ( International Taxation) Appeal.
6. Black Money Appeal.
7. Interest Tax Appeal.
8. Gift Tax Appeal.
9. TDS Appeal
10. Security Transactions Tax Appeal.
11. Stay Application
12. Miscellaneous Application.
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Delhi High Court held that both the one-year mandatory separation period and the six-month "cooling-off" period for mutual divorce can be waived in cases of exceptional hardship.
Case title - Shiksha Kumari vs Santosh Kumar 2025
The court deemed these provisions "directory," not mandatory, emphasizing personal autonomy and dignity
Key Details of the Judgement:
-Waiver of Waiting Periods: The court ruled that if the parties have made a case for waiver, the 6-month cooling-off period (for the second motion) and the 1-year separation period (for the first motion) can be waived, allowing for faster dissolution of marriage.
-Discretionary Power: The waiver is not automatic but dependent on court satisfaction that the marriage is irretrievably broken, with no possibility of reconciliation.
-Exceptions: This relaxation is designed for situations of extreme hardship or when waiting would cause unnecessary, prolonged suffering, rather than routine cases.
-Rationale: The court stated that legal procedures should not force couples to remain in dead marriages, and the law should facilitate, not prevent, the separation of consenting parties.
-Applicability: The ruling applies to petitions filed under Section 13B of the Hindu Marriage Act, 1955.
This judgment strengthens the legal precedent, ensuring that the legal process does not unduly burden individuals with unwanted, long-term legal, emotional, and financial constraints.
2 weeks ago | [YT] | 0
View 0 replies
Rahul Jha Associate Legal
ROC Strike-Off Does Not Invalidate Reassessment where S.148 Notice Predates It: ITAT Surat Bench.
Title- Amizara Construction Private Limited vs ITO Surat.
Important - post–Finance Act 2024, the CIT(A) is statutorily empowered to set aside best judgment assessments and remand matters for fresh consideration.
Finance Act, 2024 had inserted a proviso to Section 251(1) of the Income Tax Act, 1961 with effect from 1.10.2024, expressly enlarging the powers of the appellate authority to set aside assessments framed under Section 144 and remand the matter for fresh adjudication.
The Income Tax Appellate Tribunal, Surat (ITAT) held that reassessment proceedings are not rendered invalid merely because the assessee company’s name was subsequently struck off by the Registrar of Companies (ROC), where the notice under Section 148 had been issued prior to such strike-off.
Amizara Construction Private Limited, the appellant from Surat, challenged separate appellate orders passed for the Assessment Years 2010-11 and 2012-13. The case arose after the AO reopened the assessments based on information relating to substantial cash deposits made in the company’s bank account and issued notice under Section 148 of the Income Tax Act, 1961 on 31.03.2017.
Since no return of income was filed and no satisfactory explanation regarding the source of cash deposits was furnished, the AO completed the assessment under Section 144 read with Section 147 of the Income Tax Act, 1961, treating the deposits as unexplained income .
Before the first appellate authority, the appellant contended that as the company was non-existent as its name had been struck off from the records of the Registrar of Companies (ROC) on 21.06.2017, and therefore, the assessment itself was invalid. The CIT(A) set aside the assessment order and directed the AO to conduct a fresh assessment after granting due opportunity to the assessee.
The Bench of Suchitra Raghunath Kamble, Judicial Member, and Bijayananda Pruseth, Accountant Member, upheld the order of the CIT(A). The Tribunal observed that the Finance Act, 2024 had inserted a proviso to Section 251(1) of the Income Tax Act, 1961 with effect from 1.10.2024, expressly enlarging the powers of the appellate authority to set aside assessments framed under Section 144 and remand the matter for fresh adjudication.
The Tribunal further noted that the assessee had failed to file any return of income or produce evidence explaining the nature and source of the cash deposits, and that the reopening notice had been issued prior to the striking off of the company’s name.
The Tribunal rejected the assessee’s contention, holding that the plea of non-existence was factually incorrect, as the company was very much in existence on the date of issuance of notice under Section 148. The Bench noted that the ROC strike-off took effect only on 21.06.2017, whereas the reassessment proceedings had already been validly initiated earlier.
light of the statutory amendment and the factual matrix, the ITAT ruled that the CIT(A) had acted within jurisdiction in restoring the matter to the AO for a fresh assessment after granting adequate opportunity to the assessee. Consequently, the appeals were dismissed.
#incometaxappeal
#incometaxlitigation
#itatsurat.
#companynamestrikedoff.
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Rahul Jha Associate Legal
Compromise Can Reduce Sentence, Not Conviction: Supreme Court Clarifies in Criminal Appeal.
The Supreme Court recently allowed a plea filed by two men seeking reduction of their sentence to the period already undergone in view of a compromise reached with the complainant couple.
A bench of Justices B V Nagarathna and Prasanna B Varale, while upholding the conviction of Venkatesh and another, ordered their release after reducing the sentence to the period of two years and three months already undergone by them, out of the five-year jail term imposed earlier.
The appellants had been convicted by the Additional District and Sessions Judge, Salem, for offences under Section 326 IPC and Section 3(1) of the Tamil Nadu Property (Prevention of Damage and Loss) Act, 1992.
Under Section 326 IPC, they were sentenced to rigorous imprisonment for five years along with a fine of Rs 5,000 each, and in default of payment, to undergo six more months of rigorous imprisonment. Under Section 3(1) of the TNPPDL Act, they were sentenced to rigorous imprisonment for two years with a fine of Rs 5,000 each, and in default, to undergo six more months of rigorous imprisonment.
The appellants had challenged their conviction before the Madras High Court. However, by a judgment dated July 7, 2023, the high court dismissed their appeal and directed them to undergo the remaining sentence, while observing that the period of imprisonment already undergone would be set off under Section 428 of the Code of Criminal Procedure.
Aggrieved, the appellants approached the Supreme Court. Court issued notice to the respondents, limited only to the question of quantum of sentence.
During the hearing, counsel for the appellants submitted that they had already completed two years and three months of incarceration under Section 326 IPC. He urged the court to reduce the sentence to the period already undergone, particularly as a compromise and settlement had been arrived at between the parties. It was also pointed out that the appellants had served nearly half of the sentence imposed on them.
Opposing the plea, the State counsel submitted that there was no merit in the appeal, but left it to the court to pass appropriate orders.
Taking note of the submissions and the facts of the case, the bench observed that out of the five-year sentence imposed on the appellants, they had already completed two years and three months. Court also noted that notice had been issued only on the question of sentence.
Accordingly, while upholding the conviction, the Supreme Court reduced the sentence to the period already undergone and directed that the appellants be released forthwith from jail, if they were not required in any other case.
Case Title: Venkatesh & Anr Vs State Represented by The Inspector of Police
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Rahul Jha Associate Legal
GSTAT Orders Registry 6-Month Leniency in Scrutiny of GST Appeal Filings on Portal.
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Rahul Jha Associate Legal
FEMA Advisory & Litigation Servces
FEMA Advisory Includes:
Transaction Structuring: Guidance on structuring FDI, ECB, overseas investments, joint ventures, and technical collaborations.
Regulatory Compliance: Assisting with forms (e.g., FC-GPR, APR), filings with the RBI, and ensuring adherence to FEMA/RBI guidelines.
Reporting & Documentation: Preparation and submission of various regulatory reports and documentation.
Remittances: Advice on funds flow for royalties, technical fees, and general remittances.
Risk Assessment: Identifying potential non-compliance and implementing preventive measures.
FEMA Litigation Includes:
Handling Show-Cause Notices: Responding to notices from authorities like the RBI or ED regarding alleged contraventions.
Penalty & Compounding Proceedings: Managing compounding applications to settle violations.
Representing Clients: Providing legal representation in enforcement proceedings and appeals.
Compliance Audits: Conducting deep dives to find non-compliance issues that could lead to litigation.
Dispute Resolution: Addressing disputes with regulatory bodies or investors related to FEMA issues.
#FEMAadvisory
#femalitigation
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GST Litigation
- ITC Issues , Block ITC and challenge this action
-GST Refund issue- Application & Challenge in court
- Eway bill issue- Allegation of Bogus ITC, Invoice , Fraud
- Assessment- Mismatch in GSTR 2A /GSTR 3B
- Challenges to Search / Seizure
-Penalties & Prosecution
-Compliance issues
-Section 73/ 74/ 74A Notice handling & also Challenge it in Court
- Anticipatory and Regular Bail under GST
- Challenge Recovery Proceedings
- Challenge Show Cause Notice
- Restore of GST registration already cancelled
.- Defence lawyer in Economic offence allegation
- Appeal & Revision-Appeal to First Appellate Authority( All Over India)
- Appeal to GSTAT ( Appellate Tribunal)
- Appeal to High Court
- Appeal to Supreme Court
-Writ Petition
- SLP
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Rahul Jha Associate Legal
GST and Fraud Proceedings Applicability to Statutory Authorities
The Goods and Services Tax (GST) was introduced in India in 2017. It was introduced as a unified tax regime designed to simplify compliance and to promote transparency. Even after a decade of its enactment, it is still in the process of being implemented through litigation.
One of the most important issues that is still under judicial scrutiny is whether statutory authorities and public sector undertakings (PSUs) can be subjected to fraud-based proceedings under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act).
The recent writ petition of the Jaipur Development Authority (JDA) before the Rajasthan High Court has brought this question into the spotlight.
The case primarily challenges the levy of GST on statutory receipts and contests the jurisdiction of tax authorities to invoke Section 74 against a statutory body. The High Court has admitted the petition and stayed the operation of the impugned notice, setting the stage for a landmark adjudication in April 2026.
Section 74 of the CGST Act: The Core Issue
Section 74 provides for tax authorities to initiate proceedings where tax has been short-paid, not paid, or wrongly availed due to fraud, willful misstatement, or suppression of facts. It is a penal provision. It contains tax liability along with interest and penalties equivalent to the tax amount. In those cases, SCNs must be issued within five years, and orders within five years and six months from the same reference point.
Statutory authorities are government-created entities functioning under legislative mandates, often with transparent accounting and oversight. The controversy arises when such provisions are applied to the same. Critics argue that accusing such bodies of fraud against another statutory authority undermines the principle of governance and accountability.
In the case in hand, the Petitioner is Jaipur Development Authority, a statutory body responsible for urban planning and development and the respondent is the Additional Commissioner, CGST Audit. The argument by the petitioner was that a statutory authority cannot be alleged to have committed fraud against another statutory authority.
Rajasthan High Court admitted the petition and stayed the effect of the Section 74 notice until final adjudication.
This case is significant because it raises the broader question: Can statutory receipts, such as fees, charges, or levies collected by authorities, be treated as taxable supplies under GST, and if so, can fraud provisions apply?
Wider Legal and Policy Debate
1. Applicability of GST to Statutory Receipts Statutory authorities often collect charges like development fees, approval charges, or license fees. Whether these constitute “supply” under GST has been debated since its establishment. Some argue that such receipts are sovereign functions and cannot be considered as commercial transactions.
2. Fraud Allegations Against PSUs and Authorities Legal experts caution against indiscriminate use of Section 74 against PSUs. As one commentary notes, “Stop waving the Section 74 sword at PSUs”, highlighting that fraud provisions were meant for deliberate evasion, not routine compliance disputes.
3. Judicial Trends Courts have increasingly scrutinised the misuse of penal provisions. For instance, the Supreme Court clarified in 2025 that parallel proceedings under GST must be carefully limited to avoid taxpayer harassment in the case of M/S Armour Security (India) Ltd. vs Commissioner, CGST, Delhi East Commissionerate & Anr
To allege "suppression" by a PSU is, in substance, to claim the State is conspiring against itself. Courts and tribunals have repeatedly signalled this contradiction:
-In disputes involving Steel Authority of India Ltd., the judiciary has been wary of imputing suppression to PSUs absent compelling evidence of intent.
-Oil India Ltd. matters have emphasised that intent to evade cannot be presumed merely because a demand arose; if records are audited and positions are disclosed, intent is missing.
- In cases concerning Hindustan Aeronautics Ltd., tribunals have called the routine invocation of extended limitation against PSUs a logical absurdity where facts were in the department's grasp.
Tax Professionals argue that Section 74 should be reserved for clear cases of fraud, not applied mechanically. Policy Analysts stress that governance transparency in PSUs makes fraud allegations illogical. Judicial Observers note that the Rajasthan High Court’s stay signals judicial discomfort with extending penal provisions to statutory authorities.
Risks and Challenges Limiting Section 74’s scope may reduce enforcement leverage for tax authorities, and also, statutory authorities may face uncertainty until a clear judicial precedent is established. Also, Courts must balance revenue interests with principles of fairness and governance.
The Jaipur Development Authority’s challenge has opened a crucial debate on the limits of GST’s penal provisions. The High Court’s final adjudication is in April 2026. If the court rules in favour of JDA, it is likely to restrict the use of Section 74 against statutory authorities. Until then, the case serves as a reminder of the evolving nature of GST litigation and the need for careful statutory interpretation to ensure that India’s “one nation, one tax” framework remains both fair and effective
#gstappeal
#gstlitigation
#section74
#rajasthanhighcourt
rahuljhaassociatelegal.com/
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Rahul Jha Associate Legal
Focus on your responsibilities and give your best effort, but don't be attached to the success or failure (the "fruits") of your actions; this is the essence of the "You have the right to perform your duty, but not to the fruits of your actions"
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