2026-VIL-95-GSTAT-BLR
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SGST Tribunal

GST - Imposition of penalty under Section 74, Invocation of extended period of limitation, Effect of voluntary pre-SCN payment of tax and interest, Applicability of Sections 73 and 74 - Appellant was subjected to audit under Section 65 on three distinct issues relating to excess ITC in GSTR-3B versus GSTR-2A, ineligible ITC under Section 17(5), and irregular transitional credit under TRAN-1. Appellant voluntarily deposited agreed tax and applicable interest via Form GST DRC-03, prior to issuance of Show Cause Notice - Whether the First Appellate Authority was justified in imposing penalty under Section 74 when all records were available on departmental portal, Appellant had voluntarily discharged entire agreed tax and interest prior to issuance of SCN, no positive act of deliberate suppression or misstatement was established, and the SCN failed to disclose foundational facts demonstrating conscious deliberate device to evade tax - HELD - Section 74 is extraordinary provision conditioning exercise of extended period and penal provisions of 100 percent upon existence of specific positive mens rea elements being fraud, willful misstatement or suppression of facts with intent to evade tax - Supreme Court in Tata Steel Limited has established three inviolable principles for Section 74. In present case OIO made explicit findings that all records including GSTR-3B, GSTR-2A and TRAN-1 declarations were fully available on departmental portal and there was no positive act of deliberate suppression or intentional misstatement - Appellate Authority erred in holding that original authority had no option but to impose Section 74 penalty once tax was confirmed. Section 74 requires independent satisfaction of mens rea and issuance of SCN under Section 74 does not automatically bind adjudicator to confirm penal liabilities where deliberate intent is absent - When facts are known to both parties or accessible via statutory records, non-disclosure does not amount to suppression. Appellant voluntarily discharged entire agreed tax and applicable interest months prior to issuance of SCN. Where tax and interest are fully discharged prior to SCN and allegations of fraud or suppression are unsustainable, statutory mechanism under Section 73(5) read with Section 73(8) operates and intends to grant immunity from penalty to taxpayers who settle obligations prior to formal adjudication provided there is no deliberate intent to evade - The Appellate Authority's imposition of Section 74 penalty is set aside. The credit reversed and interest paid on are held to be payments under Section 73(5) of CGST Act - The appeal is allowed
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