The Calcutta High Court in the case of SAYAN BISWAS v. DEPUTY COMMISSIONER OF REVENUE & ORS. Vide WPA 4237 of 2025 dated 21.07.2025, has held that once a proceeding has been initiated under Section 74 and concluded by way of a speaking order, the department cannot initiate another proceeding for the same cause of action under Section 73. The Court emphasized that Section 73 and Section 74 are mutually exclusive, and once the penalty element under Section 74 is invoked, the same cannot be re-assessed under Section 73.

Facts of the Case: In this case, the petitioner is engaged in the business of retail of ferrous waste, scrap, and remelting scrap ingots. For the tax period April 2019 to March 2020, a show cause notice under Section 74 of the CGST/WBGST Act was issued on 29.04.2022, alleging fraud, wilful misstatement, or suppression of facts.

The petitioner made voluntary payments and the matter culminated in an order under Section 74 dated 20.10.2022, determining differential tax, interest, and penalty. An appeal under Section 107 was filed against the said order but was dismissed by an order dated 27.12.2023. The petitioner has not further challenged this order, citing the non-constitution of the Appellate Tribunal.

Subsequently, a second show cause notice under Section 73 dated 13.05.2024 was issued for the same period, raising three key issues i.e. ITC availed on inward B2B supply, including debit notes and amendments (Table 4(A)(5) of GSTR-3B), Short payment of output tax of ₹27,178.38 each under CGST and SGST, Demand under reverse charge mechanism.

The petitioner challenged this second notice and consequent order under Section 73 dated 19.07.2024, on grounds of duplicity of proceedings for the same period after adjudication under Section 74, inclusion of already adjudicated ITC claim in fresh proceedings under Section 73 and vagueness of the RCM-related demand.

Issue: Whether a second show cause notice under Section 73 can be issued for the same period when proceedings under Section 74 have already been concluded. Whether the ITC already adjudicated under Section 74 proceedings can again be made subject to demand under Section 73 proceedings.

Held that:

The Court held that Sections 73 and 74 operate on distinct grounds i.e. Section 73 covers cases not involving fraud or suppression, while Section 74 deals with fraud, wilful misstatement, or suppression of facts. Hence, issuing two notices for the same period is not barred, provided the basis of each is distinct.

The Court rejected the argument of vagueness. The show cause notice referred to relevant tables of GSTR-1, including RCM details (Table 4B) and HSN codes (Table 12). The Court noted that the petitioner did not challenge the notice earlier, nor did it appear for a hearing, and only filed a mechanical reply. Hence, no procedural infirmity or vagueness was found.

The Court held that the inclusion of ITC on B2B supplies already adjudicated under the Section 74 proceedings in the new Section 73 notice was impermissible. Even if the petitioner had not disclosed sufficient documentation, the tax authority could not reopen the issue once decided and not appealed further. The demand on ITC under points 1(I) and 3(M) of the SCN dated 13.05.2024 was quashed, along with the corresponding DRC-07 demand dated 19.07.2024.

The present writ petition was allowed and demand under DRC-07 dated 19.07.2024 is set aside. The respondent authorities are directed to issue a fresh DRC-07 excluding the quashed demand. The matter is deemed adjudicated finally; no further statutory remedy is open in respect of the fresh demand issued in compliance with this order.

To read the complete judgment 2025 Taxo.online 1622