Tax paid pre-SCN no intent to evade tax proceedings invoking section 74 improper and denial of relief unsustainable { Apollo Tyres Ltd. vs. Union of India [2026] 185 taxmann.com 106 (Madras)}
Facts
- Assessee supplied tyres, tubes and flaps together, which created confusion regarding the correct GST treatment due to different applicable tax rates.
- During investigation, the assessee voluntarily deposited a part of the tax and later paid the entire tax liability along with interest before issuance of the Show Cause Notice.
- Despite such payment, the department issued SCN under Section 74 of the CGST Act alleging suppression of facts and intent to evade tax.
- The demand was confirmed by the adjudicating authority and upheld in appeal, after which the assessee approached the High Court.
Issue
Whether proceedings under Section 74 (fraud/suppression cases) can be invoked when the tax along with interest was already paid before issuance of SCN and there was no intention to evade tax.
Held
- The High Court held that Section 74 can be invoked only where there is fraud, wilful misstatement, or suppression of facts with intent to evade tax.
- In the present case, the assessee voluntarily paid the tax with interest before issuance of SCN and the dispute arose due to interpretational confusion in the industry.
- Therefore, the essential ingredients for invoking Section 74 were absent.
- At best, the matter could fall under Section 73 (cases without fraud or suppression).
- Accordingly, invoking Section 74 and denying relief was unsustainable and the proceedings were set aside.
