Failure to prove fraud converts Sec. 74 proceedings into Sec. 73, preserving tax demand but excluding extended-period consequences {M/s Fastenex Private Limited v. State Tax Officer (Inspection-VI), Madras High Court [2026] 188 taxmann.com 219 (Madras)}
Facts:
The department issued demand proceedings under Section 74 of the CGST Act, alleging fraud/suppression for non-payment/short payment of tax. The assessee challenged the invocation of Section 74 on the ground that no material existed to establish fraud, wilful misstatement, or suppression of facts.
Issue:
Whether proceedings initiated under Section 74 can be treated as proceedings under Section 73 when the department fails to establish fraud, wilful misstatement, or suppression of facts
Held:
The Madras High Court held that if fraud, wilful misstatement, or suppression is not proved, proceedings initiated under Section 74 can be converted into proceedings under Section 73 in terms of Section 75(2) of the CGST Act. The tax demand may survive, but the consequences specific to Section 74 (such as the extended limitation period and higher penalty) would not apply.
