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Holds Sections 73 and 74 CGST Proceedings Can Co-Exist for
In a significant ruling that clarifies the interplay between two key adjudicatory provisions under the (CGST Act), the has held that proceedings under Sections 73 and 74 can lawfully co-exist where they concern distinct liabilities or contraventions. The Division Bench of Justices Anil Kshetarpal and Shail Jain dismissed a petition challenging parallel investigations by under Section 74, even though had already initiated proceedings under Section 73 for the same financial year and related input tax credit (ITC) claims.
The judgment provides much-needed clarity on the scope of the under , which prohibits simultaneous proceedings by Central and State officers for the . The court held that the bar operates only when the subsequent proceedings target the identical liability or contravention already under adjudication—not merely because they arise from the same assessee, period, or tax amount.
Background: The Provisions at Play
Sections 73 and 74 of the CGST Act empower tax authorities to issue demand notices for unpaid or short-paid tax, erroneous refunds, or wrong ITC claims. Section 73 applies in cases not involving fraud, wilful misstatement, or suppression of facts, while Section 74 is reserved for cases where such fraudulent elements are present. The distinction is critical because Section 74 carries a higher penalty and a longer .
Section 6(2)(b) of the Act states that officers under the Central or shall not proceed to adjudicate on the that is already pending before an officer of the other jurisdiction. This provision is designed to prevent and administrative conflict between Central and State tax administrations.
Facts of the Case
The petitioner, an unnamed taxpayer, was confronted with two separate sets of proceedings. The had issued a notice under Section 73 for the , including a demand concerning ITC claimed from a supplier named . Subsequently, the launched an investigation under Section 74 based on intelligence suggesting that the petitioner had fraudulently availed ITC through invoices that were not backed by actual supply of goods—essentially, .
The petitioner argued that the Central proceedings were barred under Section 6(2)(b) because both sets of proceedings involved the same assessee, the same financial year, and the same ITC amount of ₹6.12 lakh. It was contended that the State authorities had already taken cognisance of the ITC claim from , and the Central authorities could not reopen the same matter under a different section.
Court’s Reasoning: Not the
The rejected the petitioner’s argument, emphasising that the must be assessed with reference to the specific liability, deficiency, or contravention alleged, not merely the quantum or period.
“ under Section 6(2)(b) has to be understood with reference to the particular sought to be adjudicated.”
The court observed that the State proceedings under Section 73 were focused on a routine demand for ITC claimed from , without any allegation of fraud. In contrast, the Central proceedings under Section 74 were rooted in an intelligence-led investigation into a pattern of through invoices that did not correspond to actual supplies. The nature of the allegation—fraud versus non-fraud—was materially different, even though there was a factual nexus between the two.
“For the under Section 6(2)(b) to operate, it is necessary to establish identity of the liability or contravention which forms the subject matter of the two proceedings.”
The court further held that the mere invocation of different statutory provisions does not automatically circumvent the bar, nor does it establish the bar. What matters is the underlying infraction. In this case, the petitioner failed to place sufficient material to demonstrate that the alleged and fraudulent ITC claims had already been adjudicated by the State GST authority.
Rejection of Circumstantial Arguments
The petitioner had stressed that both proceedings pertained to the same financial year and the same ITC amount of ₹6.12 lakh. The court categorically dismissed these as insufficient to prove identity of subject matter.
“These circumstances could not by themselves establish the .”
The bench clarified that while a common factual background may exist, —such as a routine mismatch in ITC versus a deliberate scheme to claim credit without underlying supply—do not become the simply because they involve the same assessee or period.
Implications for Tax Practitioners and Authorities
This ruling has practical significance for GST litigation. It confirms that the Central and are not precluded from independently investigating and adjudicating separate aspects of a taxpayer’s conduct, even if those aspects arise from the same set of transactions. Taxpayers cannot rely on a pending Section 73 proceeding to shield themselves from a Section 74 investigation that targets a different type of violation—especially one involving fraud.
The judgment also underscores the importance of the on the party invoking the bar under Section 6(2)(b). Mere overlap of facts, time, or amount is insufficient; the petitioner must demonstrate that the same contravention is being adjudicated in both forums.
For legal professionals, the case serves as a reminder to carefully analyse the allegations forming the basis of each proceeding before raising a . It also highlights the need for robust documentation when seeking to establish that a matter has already been covered by an earlier adjudication.
Conclusion
By dismissing the petition, the has reinforced the principle that the CGST Act’s dual enforcement mechanism can operate harmoniously as long as the proceedings address distinct liabilities. The court granted the petitioner liberty to avail statutory remedies against the Section 74 notice, but the core legal question has been settled: Sections 73 and 74 are not when the underlying contraventions are different.
The decision will likely guide future disputes where taxpayers attempt to use Section 6(2)(b) as a blanket shield against parallel investigations. As GST litigation continues to evolve, this judgment provides a clear analytical framework for determining when the bar applies—and when it does not.
