Closure Of Non-Fraud GST Proceedings Does Not Bar Fraud-Related Proceedings By Central Authorities: Delhi HC

The Delhi High Court has held that the closure of proceedings by State GST authorities under Section 73 of the Central Goods and Services Tax Act, 2017 does not, by itself, prevent Central GST authorities from proceeding under Section 74 of the Act, observing that the two provisions operate on "altogether different considerations."

Section 73 applies to cases involving tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilised without allegations of fraud, wilful misstatement or suppression of facts. Section 74 applies where such allegations are involved.

A Division Bench of Justice Nitin Wasudeo Sambre and Justice Ajay Digpaul observed:

"It is apparent that Section 73 and Section 74 of the Act operates in different arenas. The language of said sections, recourse to be taken in regard to said sections, can very well be looked into by its face value."

It added, "Just because the petitioner was exonerated in the proceedings under Section 73, by itself, cannot lead to the petitioner being proceeded against by the Central GST Authorities under Section 74 of the Act. Both these sections operate on altogether different considerations."

The court was dealing with a writ petition filed by PEI Industries and others challenging an Order-in-Original dated March 30, 2026 passed by the Central GST authorities.

The petitioners contended that the State GST authorities had earlier closed proceedings after considering the documents furnished by them. They argued that the proceedings under Section 74 were based on the same set of documents and that the Central GST authorities refused to accept material that had formed the basis for closure of the earlier proceedings.

The petitioners further argued that they were not given notice to produce additional documents sought by the authorities. They also claimed that the evidence produced by them had been inappropriately appreciated. It was further contended that although four dates of personal hearing were reflected in the impugned order, hearing was granted only on two dates.

The respondents raised a preliminary objection to the maintainability of the petition, contending that the statute provided an effective alternative remedy of appeal. They also argued that proceedings under Sections 73 and 74 operate in altogether different arenas and that issues relating to appreciation of evidence could be examined by the appellate authority.

The court rejected this, observing that exoneration in proceedings under Section 73 would not, by itself, bar proceedings under Section 74, as the two provisions operate on different considerations.

The court further observed that the material produced by the petitioners in response to the show cause notice was independently available for scrutiny and appreciation.

Addressing the grievance regarding appreciation of evidence and production of additional documents, the Court observed that appreciation and re-appreciation of evidence are vested with the competent authorities.

The bench noted that the appellate authority can reappreciate the entire evidence and, if so required, permit the petitioners to produce additional evidence.

The petitioners argued that if relegated to the statutory remedy of appeal, they would be required to make a statutory pre-deposit. The Court, however, observed that the requirement of a statutory pre-deposit could not, by itself, justify bypassing the statutory appellate remedy.

Holding that the petitioners had a statutory remedy of appeal, the Court declined to exercise its writ jurisdiction and dismissed the petition.

For Petitioner: Advocates Anurag Kishore, Lakhan Kr. Mishra and Ritika Srivastava,

For Respondent: Abhishek Maratha, Senior Panel counsel of UOI with Advocate Nupur Sharma for R1/UOI; Sumit K. Batra; and Priyanka Jindal,