GSTAT holds re-adjudication under Section 73 can be done only by the proper officer where Section 74 proceedings held unsustainable in appeal

 This Tax Alert summarizes a recent ruling of the Goods and Services Tax Appellate Tribunal (GSTAT) ^[1] on jurisdiction of the Appellate Authority to re-adjudicate proceedings where original proceedings initiated under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act) are held unsustainable due to the absence of any fraud or intent to evade tax on the part of the taxpayer.

A demand for tax, interest and penalty was confirmed on the assessee under Section 74 due to mismatch in tax liability reported in GSTR 3B vis-à-vis GSTR 1. The First Appellate Authority found no intent of taxpayer to evade tax, however, it upheld the tax and interest demand while reducing the penalty by applying the provisions of Section 73 of the CGST Act.

The key observations of the GSTAT are:

• Section 75(2) of the CGST Act provides that if an Appellate Authority, Tribunal, or court concludes that a notice issued under Section 74(1) is unsustainable due to failure to establish fraud, the proper officer (AO) must reassess the tax as though the notice had been issued under Section 73(1).
• Circular No. 254/11/2025-GST clarified that AO under Section 75(2) shall be the same officer who adjudicated original notice.
• Accordingly, where proceedings have been initiated under Section 74, the Appellate Authority, GSTAT or Court cannot adjudicate proceedings under Section 73 upon establishing that no element of fraud exists. The matter must be remanded to Adjudicating Authority for re-determining the liability under Section 73.

Basis above, GSTAT set aside the order passed by the First Appellate Authority in so far as the proceedings being diverted to Section 73, while upholding its finding that the case did not warrant action under Section 74. The matter was remanded to the AO for fresh consideration under Section 73, with liberty to the assessee to file an appropriate amendment petition.

Comments:

• While Section 75(2) of the CGST Act requires the proper officer to re-determine tax under section 73 in cases where proceedings initiated under Section 74 are held unsustainable, Section 107(11) prohibits the Appellate Authority from remanding the matter to the adjudicating authority.
• It may be necessary to examine whether a harmonious interpretation is warranted, so as to apply restriction under section 107(11) to all cases other than the cases where proceedings under Section 74 are held not sustainable.