Difference between GSTR-1 and GSTR-3B section 74 cannot be invoked- Rules Allahabad High Court
Difference Between GSTR-1 and GSTR-3B Does Not Automatically Attract Section 74 – Fraud is Sine Qua Non
Date & Year of Judgment
28 February 2025
Mere mismatch between returns (GSTR-1 and GSTR-3B) does not justify invocation of Section 74 unless fraud or suppression is specifically alleged.
Case Reference
Chandrashekhar Yadav vs. State of U.P. & AnotherWrit Tax No. 357 of 2025Neutral Citation: 2025:AHC:28354-DBBefore the Allahabad High Court (Chief Justice’s Court)Coram: Hon’ble Arun Bhansali, Chief Justice & Hon’ble Kshitij Shailendra, J.
1. Main Issue Involved
Whether a mere difference between declared liability in return i.e. GSTR-1 and GSTR-3B, along with non-response to Section 61 notice, permits invocation of Section 74.
The Court examined whether mismatch or delayed payment equals fraud or suppression.
2. Sections and Rules Discussed
Section 61 – Scrutiny of returns
Section 74 – Tax not paid by reason of fraud/suppression
Section 75 – General provisions
Insight: Section 61 proceedings cannot automatically escalate into Section 74 without statutory ingredients.
3. Facts of the Case
Show cause notice dated 12.10.2022 issued under Section 74.
Allegation: Difference between GSTR-1 and GST-3B of ₹13,55,943.
Notice also mentioned no response to Section 61 notice.
Petitioner deposited tax through DRC-03 on 14.11.2022.
Despite tax payment, order dated 16.03.2024 passed demanding interest and penalty under Section 74.
The tax liability itself was not disputed; only interest and penalty were sustained under Section 74.
4. Petitioner’s Submissions
No allegation of fraud, wilful misstatement or suppression.
Liability was clearly reflected in returns.
Tax was deposited voluntarily upon notice.
Section 74 invocation without foundational ingredients is without jurisdiction.
The petitioner framed the issue as absence of jurisdictional foundation.
5. Respondent’s Submissions
Though liability was reflected, it was not deposited.
Non-deposit was deliberate.
Therefore, Section 74 invocation justified.
Revenue attempted to equate delayed payment with deliberate suppression.
6. Analysis and Findings of the Court
A. Show Cause Notice Lacked Ingredients of Section 74
The Court examined the SCN and found:
It only mentioned difference between GST DRC-01 and GST-3B.
It did not allege fraud, wilful misstatement or suppression.
Order also did not record any such finding.
Absence of statutory ingredients in SCN is fatal to Section 74 proceedings.
B. Fraud/Suppression is Sine Qua Non
The Court emphasized that Section 74 can be invoked only where tax non-payment is “by reason of fraud, wilful misstatement or suppression.”
Since neither SCN nor order contained such allegation, jurisdiction itself was lacking.
Section 74 cannot be used merely because tax was unpaid or short paid.
Most Important Observations of the Court
(Para 9)
“Section 74 of the Act can be invoked where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised ‘by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax’.” “However, neither the show cause notice alleges the ingredients of Section 74 of the Act pertaining to suppression etc. nor the order passed under Section 74 of the Act dated 16.03.2024 makes any reference to the said ingredient of Section 74.”
(Para 10)
“For invoking Section 74 of the Act, the allegations pertaining to suppression etc. are sine qua non in absence thereof, the jurisdiction under Section 74 of the Act itself cannot be invoked by the authorities.”
The Court clearly treated fraud/suppression as a jurisdictional condition, not a procedural formality.
7. Final Judgment
Order dated 16.03.2024 quashed.
Section 74 invocation held unsustainable.
Petition allowed.
Even after tax deposit, penalty under Section 74 cannot survive without fraud allegation.
8. Similar / Related Judgments
Karnataka HC – NCS Pearson Inc. (jurisdictional fact doctrine)
Gujarat HC – Zodiac Energy Ltd. (Section 74 cannot override limitation)
Allahabad HC – Safecon Lifescience Pvt. Ltd.
Courts consistently restrict mechanical invocation of Section 74.
9. CA BTA Insights
This judgment is extremely useful in:
GSTR-1 vs GSTR-3B mismatch cases.
Section 61 scrutiny escalation matters.
Cases where tax is deposited but penalty imposed under Section 74.
Defending interest + penalty demands based solely on mismatch.
Strategic Points:
Examine SCN for explicit fraud allegation.
If absent, challenge jurisdiction at threshold.
Argue that mismatch ≠ suppression.
Emphasize sine qua non principle.
Return mismatch cases should ordinarily fall under Section 73, not Section 74.