Can a Section 74 notice under the CGST Act stand where the allegation of suppression lacks foundational facts?

No. It is not mere lip service to the provisions that is intended when an extended limitation period is provided for recovering an excess benefit availed, short payment or excess refund. The foundational facts which led to the inference arrived at of fraud/willful misrepresentation/suppression should be evident from the notice itself; the mere employment of such words will not indicate an application of mind, upon which alone the satisfaction can be arrived at, and the words are not to be mechanically recited in the notice to enable recovery outside the normal limitation provided under the statute.

Central Goods and Services Tax Act, 2017 — s.73 — s.74 — Show Cause Notice — Extended period of limitation — Suppression of facts — Foundational facts — Protective demand — Central Goods and Services Tax Act, 2017 — s.74 — Extended period — Foundational facts in the notice — Held: The foundational facts which led to the inference arrived at of fraud/willful misrepresentation/suppression should be evident from the notice itself; the mere employment of such words will not indicate an application of mind. (¶14) Central Goods and Services Tax Act, 2017 — s.73 — s.74 — Satisfaction of the Assessing Officer — Held further: Proceedings under Section 73/74 can be initiated only on the satisfaction of the Assessing Officer; even if observations are made on audit, the Assessing Officer should enter his satisfaction before a notice is issued. (¶11, 13) Central Goods and Services Tax Act, 2017 — s.73(2) — s.73(10) — Limitation runs to the order — Held further: The limitation under Section 73(10) is to issue the order under Section 73(9) and not to issue a notice, sub-section (2) of Section 73 providing for a notice at least three months before that time limit. (¶12) Central Goods and Services Tax Act, 2017 — Protective demand — Not statutorily permitted — Held further: A fresh notice reviving an earlier notice and proposing a protective demand cannot be sustained, there being no such measure of protective assessment statutorily permitted under the GST Act. Appeal allowed with liberty. (¶10, 15)

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