GST / Indirect Tax : Availing Excess ITC & Scope of Interference in Action taken under S.74 of CGST Act, 2017

GST / Indirect Tax : Availing Excess ITC & Scope of Interference in Action taken under S.74 of CGST Act, 2017 

In the recent case of Chetak Motors Pvt Ltd v. Additional Commissioner [2025] GCtR 1566 (Delhi), the Department has issued Show cause notice under S. 74 of the CGST Act, 2017 against M where allegations of excess availment of ITC was made. M argued that S.74 cannot be invoked because there is no fraud or wilful misstatement or suppression of facts. The action of Department in this case was found not liable to interference under A.226. 

Department has alleged that M's non disclosure of the material facts in their GST returns appear to be wilful and intentional because noticee have failed to explain the reason of non-disclosure during investigation. Further, M (noticee) have acted upon a meticulously designed but nefarious plan and thereby indulged himself with mensrea, in the evasion of GST liabilities.

Some aspects relevant for S.74 of CGST Act, 2017 are as follows : 

(A) Tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed ;

(B) Notice on the person chargeable with tax ;

(C) Amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice ;

(D) S.74 (5) operates before service of notice ; Tax + interest + 15% penalty ;

(E) S. 75 (8) says on payment of Tax + Interest + Penalty (25% of tax) in 30 days from date of notice, proceedings wrt said notice become concluded.