Tax Vista Your weekly tax recap Edn. 262 - 17th November 2025 Kasi Viswanathan V

 

 

Litigation:

No mechanical remand for reasonless Section 74:

The High Court held that in the absence of any charge or allegation of fraud, wilful misstatement, or suppression of facts to evade tax either in the show cause notice or in the order, Section 74 could not have been invoked, and accordingly quashed both. The sequence of facts, as recorded, proceedings began with an inspection under Section 67, a notice under Section 74 followed, no reply was filed, an order was passed, the time for appeal expired, and the writ petition was filed thereafter.

 

The Court observed that Section 74 is not an innovation in GST and distilled principles from existing jurisprudence on extended limitation and applied the same. It reiterated that the presence of one or more of the three elements fraud, wilful misstatement, or suppression of facts is a sine qua non for invoking Section 74. The show cause notice and order must indicate the offending conduct and it is not necessary to reproduce the statutory language.

 

The Revenue's counsel relied on the earlier decision of the same Court in 2025-VIL-96-MAD. In that case, the proceedings originated from an inspection under Section 67, tax had in fact been paid and the assessee had pursued the appellate remedy diligently and thereafter Writ remedy was pursued challenging the appellate order. In the cited case, it was argued that taking note of conduct of the petitioner to evade tax, Writ relief had been denied.

 

In the present case, the Court, however, distinguished that decision on three grounds: (a) It did not consider the earlier ruling in 2024-VIL-1499-MAD, wherein the order was quashed as in the said case also there was no whisper about the requisite elements in the proceedings, (b) the expression 'by reason of' in Section 74 had not been brought to the Court's notice (it is not the fact of non-payment but the reason for such non-payment that must correspond to one of the elements) and (c) circular dated 13.12.2023 was not referred.

 

From the portions recorded in that decision (especially para 16 of 2025-VIL-96-MAD), it appears that although the statutory expressions used in Section 74 were not expressly referred, the necessary charge was implicitly present in the impugned orders challenged before the Court in that case. This fact itself would have been sufficient to distinguish the case.

 

The prayer for remand by Revenue based on an earlier decision of same court in 2024-VIL-1555-MAD was rejected. The Court held that remand is appropriate only where an order is set aside for procedural violations, not when jurisdictional facts are absent. In the absence of even an allegation of presence of element, it is a clear lack of jurisdiction, and the Court must stop at quashing the proceedings. It needs to be noted, in case an allegation been made by the proper officer, the existence of the requisite element would have been an adjudicatory fact, and the scope of Writ intervention would have been materially different.

 

Another reason in the HC order is that the show cause notice stated that tax, interest, and penalty had been "determined," whereas Section 74(1) requires these to be specified, indicating pre-determination by the proper officer. Liberty was granted to issue a fresh notice under Section 73. In such a scenario, Section 75(1) would apply for exclusion of time while computing limitation [see: 2025-VIL-1168-MAD].

 

A comedy of errors:

The petitioner before the Allahabad High Court contended that (1) the notice and order under Section 73 relates to GSTIN different from that of the petitioner [the order related to GSTIN 09ABLFS0522M1ZV, the notice related to 09AHZPA5029R1ZC, whereas the Petitioner GSTIN was 09AHZPA5029R1ZG] (2) Consequently, neither the notice nor the order had been served on the petitioner and (3) the demand confirmed in the Order exceeded the demand proposed in the show cause notice. While instructions from the department were awaited by Revenue counsel, the High Court, upon perusal of records, found the mistake to be glaring and accordingly set aside both the order(s) and notice. The Court, however, granted liberty to department to issue a fresh notice under Section 73, observing that ground of lapse of limitation would not arise as the proceedings are remitted in exercise of extra-ordinary jurisdiction under Article 226 and with consent of both parties.

 

A few aspects are not entirely clear from the facts recorded in the Writ Petition. While the opening portion of decision refers only to a challenge against the adjudication order dated 30.08.2024, the operative portion of the order goes on to set aside not only the order dated 30.08.2024 but also to the orders dated 11.08.2025 and 31.08.2025. Further a subsequent paragraph records that 'orders' and the show cause notice have been set aside on technicality. Another ambiguity arises from the GSTIN mentioned in the notice(09AHZPA5029R1ZC), as recorded in the order, which carries the Petitioner's PAN (AHZPA5029R) and therefore cannot pertain to the registration of any other assessee, contrary to what has been asserted by the Petitioner. Further there is no such registration.

 

Leaving the above ambiguities aside, once such glaring errors in the adjudication process came to light, it would have been more in consonance with judicial fairness to merely annul the proceedings and leave it to the Department to issue fresh show cause notice after taking aid of Section 75(1), which already provides a codified mechanism for exclusion of time while computing limitation, instead of providing an open-ended second innings [see: 2025-VIL-1164-ALH].

 

HC: No penalty for failure to update Part-B of E-way bill:

The Petitioner challenged the appellate order that had upheld the penalty imposed under Section 129(3) for failure to update Part-B of the e-way bill. The Petitioner's case was that Part-B could not be generated due to a technical glitch and that there was no intention to evade tax. The Allahabad High Court noted that, at all stages, it was undisputed that the lapse was purely technical and there was also no finding by the lower authorities suggesting any intent to evade tax. Relying on an earlier decision of the same Court, the High Court quashed the impugned orders.

 

Two important aspects emerge from the decision. First, whether non-filling of Part-B constitutes a mere procedural lapse. Explanation 2 to Rule 138(3) stipulates that an e-way bill is not valid unless Part-B information is furnished. It is therefore a quintessential and mandatory component. Para 3 of Circular No. 64/38/2018-GST dated 14.09.2018 reiterates this position and para 5 illustrates situations where only a penalty under Section 125 is warranted and proceedings under Section 129 are not to be initiated.

 

On the contrary, the Madhya Pradesh High Court, in multiple decisions (2025-VIL-780-MP and 2025-VIL-751-MP), has categorically held that non-generation of Part-B is a contravention of a mandatory statutory requirement, not merely a procedural formality. The incidental issue of whether subsequent updation of Part-B before the detention order (after interception) cures the defect was answered favourably in an one-off instance (2020-VIL-594-KER) and has been raised (2025-VIL-748-GUJ) but the issue awaits a conclusive view. Similar is the position in case of extension of expired e-way bill after detention [2019-VIL-404-PAT]. The issue is far from settled. In the present case, however, the undisputed technical glitch in generating Part-B saved the day.

 

Second, whether Section 129 presupposes an intention to evade tax. Although the provision does not expressly incorporate such a requirement, courts have recognised that confiscation is penal in nature and should only apply in cases of a clear intent to evade tax as opposed to mere procedural lapses such as an incomplete EWB when other valid documents are present [2025-VIL-52-DEL following 2019-VIL-623-GUJ]. In the present case, the accompanying documents were in order and the goods confirmed to the invoice description. In this backdrop, the High Court's decision to set aside the penalty is consistent with this broader principle [see: 2025-VIL-1172-ALH].

 

Notification/instructions:

Circulation of DGFT notification: Instruction No. 32/2025 - Customs dated 10.11.2025 has been issued to bring to the notice of the authorities, the DGFT Notification No. 44/2025-26 dated 15.10.2025, which aligns Schedule-I (Import Policy) of ITC (HS) 2022 with the amendments made (such as updates to Chapter Notes, HS Codes, and Product Descriptions) to the First Schedule to the Customs Tariff Act, 1975 by the Finance Act, 2025.

 

Clarification on AA redemption impacted by Rule 96(10) of CGST Rules, 2017: DGFT has issued Policy Circular No. 07/2025-26 dated 11.11.2025 reiterating that EODC shall not be withheld where all other requirements are fulfilled and the pre-import condition stands (applicable for imports made during relevant period i.e. 13.10.2017 to 09.01.2019) complied with by way of:

 

i. payment of IGST in cash during the relevant period [compensation cess not specifically addressed], (or)

ii. non-availment of exemption on IGST, compensation cess (or)

iii. Fulfilment of the pre-import condition

 

(The views expressed are personal. The author can be reached for feedback or queries on v.k.vishwa@gmail.com)