Punjab and Haryana HC Quashes GST Demand Notice Issued U/S 74 After Closure of Section 61 Proceedings

A Goods and Services Tax ( GST ) demand notice and order issued u/s 74 of the Central Goods and Services Tax Act, 2017 has been quashed by the Punjab and Haryana High Court, following the earlier closure of proceedings u/s 61 of the Central GST Act.

The case concerned JSB Trading, a firm dealing in iron scrap, which was accused of wrongly claiming GST Input Tax Credit ( ITC ) for FY 2017-18. A notice u/s 61 was issued before JSB Trading for scrutiny of returns for the ITC claims from suppliers whose GST registrations had been cancelled.

The Proper Officer following the response of the firm discovered that the explanation was satisfactory and closed the proceedings dated February 28, 2023.

Even after the closure under Section 61, a demand notice u/s 74(5) was issued dated February 23, 2023, followed via the SCN u/s 74(1) on April 21, 2023. Therefore the authority has charged a penalty and interest of Rs 25.94 lakh on June 14, 2023.

The applicant’s counsel furnishes that the response that has been discovered enough and intimation that has been obtained of no additional action to be taken against them, vide letter dated 28.02.2023, the applicant does not deposit any amount since claimed u/s 74(5) of the GST Act, 2017. On 21.04.2023 the notice was issued to them under section 74 of the Act for the same reasons and allegations as were cited in the notice u/s 61 of the Act.

Applicant had answered the SCN and pointed out that the proceedings stood dropped u/s 61 of the Act, hence the additional proceedings u/s 74(1) of the Act cannot have begun.

Indeed the order was vitiated based on a breach of the principles of natural justice since the applicant had asked as per section 75(4) of the GST Act for a chance of a personal hearing, which was not provided.

It was carried by the court that once the proceedings u/s 61 were concluded with no needed action then the initiating proceedings u/s 74 of the same period and issues was not proper.

Also, the HC mentioned that the measures of the proper officer specify the opposite conclusions since one order closed the proceedings and the other levied obligation.

A breach of natural justice was marked since no personal hearing was granted even after being obligated u/s 75(4) of the CGST Act.

The Punjab and Haryana High Court Division Bench of Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth therefore set aside the order on June 14, 2023, and the notice issued u/s 74(1) of the Goods and Services Tax Act.

It was reassured under the ruling to assessee that the GST framework does not allow the reopening of settled cases arbitrarily and the measures should align with procedural fairness and legal provisions.