• Dated 12^th August, 2025

Calcutta High Court Clarifies Scope of GST Sections 73 & 74 under GST Law and Prevents Dual Demand on Previously Adjudicated Matters

Brief Facts:

Sayan Biswas, proprietor of M/s. S. K. Trading & Co., engaged in retail of ferrous waste and scrap and remelting scrap ingots, faced proceedings under Section 74 of the WBGST/CGST Act, 2017 for the period April 2019 to March 2020. An order was passed on 20.10.2022 after voluntary payment by the petitioner. The petitioner filed an appeal under Section 107, which was rejected on 27.12.2023. Subsequently, a fresh notice under Section 73 was issued for the identical period, including demand for ITC availed on inward B2B supply (Table 4(A)(5) of GSTR-3B), short payment of output tax on outward supply, and demand related to reverse charge mechanism (RCM). The petitioner challenged the order dated 19.07.2024 issued under Section 73, contending that certain demands had already been adjudicated and that the RCM demand was vague.

Assessee's Contention:

The Assessee contended that once a Section 74 notice is issued and adjudicated, no further Section 73 notice could be issued for the same period. The petitioner argued that the demand for ITC availed on inward B2B supply had already been part of the Section 74 proceedings and had reached finality through the appellate order dated 27.12.2023. The petitioner also challenged the RCM demand as being vague and lacking proper details.

Department's Contention:

The Department contended that Sections 73 and 74 have fundamentally different scopes. Section 74 proceedings are initiated on grounds of fraud, misrepresentation, and willful suppression, while Section 73 addresses tax not paid or short-paid for reasons other than fraud. Therefore, separate notices for the same period were permissible. Regarding the RCM demand, the Department argued that GSTR-1 forms contained all necessary details including HSN codes, and the petitioner failed to provide adequate documentation despite opportunities.

Decision:

The Hon'ble Calcutta High Court partly allowed the writ petition. The Court held that while Sections 73 and 74 have distinct foundational reasons and separate notices can be issued for the same period, once an issue has been adjudicated and reached finality, it cannot be re-agitated in subsequent proceedings. The Court quashed the specific demand related to ITC availed on inward B2B supply as this matter had already been decided through the prior Section 74 proceedings and appellate order dated 27.12.2023. However, the Court upheld the validity of issuing separate notices under both sections for the same period and rejected the petitioner's argument that the RCM demand was vague, finding inadequate details in Form GSTR-1. The Court directed the respondents to issue a fresh demand in Form GST DRC-7, excluding the quashed demand.

BTA's Comment:

This ruling establishes crucial precedents regarding the scope and application of GST Sections 73 and 74. The judgment clarifies that while these sections serve different purposes and can operate independently for the same period, the principle of finality in adjudication prevents double demands on previously decided matters.

The Court's distinction between the two sections is legally sound - Section 73 addresses technical defaults and short payments, while Section 74 specifically targets fraudulent activities and willful misstatements. This differentiation allows the Revenue to pursue legitimate claims under different legal frameworks while preventing harassment through repetitive demands on settled issues.

The decision reinforces the fundamental principle that once a matter reaches finality through proper adjudication, it attains the status of res judicata and cannot be reopened in subsequent proceedings. This provides valuable protection to taxpayers against double jeopardy while maintaining the Revenue's legitimate right to pursue distinct violations under appropriate legal provisions.

The judgment promotes judicial efficiency by preventing unnecessary litigation on matters already decided, while ensuring that the Revenue's enforcement powers remain intact for genuine violations that fall under separate statutory provisions.

Author: Bijay Kumar Sharma

Edited by: Shaily Gupta