The Madras High Court in the case of M/S. JIT AUTO COMP, REP. BY ITS MANAGING PARTNER K. VELMURUGAN VERSUS ASSISTANT COMMISSIONER, HOSUR vide W.P. No. 16474 of 2024 & W.M.P. Nos. 18033 & 18034 of 2024 dated 08.07.2025, held that initiation of proceedings under Section 74 merely on the ground of non-submission of CA certificate from the supplier was unjustified, especially when the petitioner had not engaged in fraud or misrepresentation. Cited Circular No. 183/15/2022-GST dated 27.12.2022, which clarifies that for verification of ITC, the authorities can conduct independent verification even without CA certificate from supplier.

 Facts of the Case: In this case, the petitioner was issued a show cause notice under Section 74 of the CGST Act, 2017 for alleged excess availment of Input Tax Credit during the period July 2017 to March 2020, based on discrepancies between GSTR-2A (auto-populated inward supplies) and GSTR-3B (ITC claimed).

The department alleged that the petitioner had fraudulently availed ITC without actual receipt of goods or services and without supporting documents, and initiated proceedings invoking fraudulent intent under Section 74.

In response, the petitioner filed a detailed reply, explaining that it could not initially obtain a certificate from the supplier confirming tax payment and supplies, as the supplier had gone into liquidation. Subsequently, the petitioner obtained and submitted a certificate from its own Chartered Accountant, certifying that the goods were received, payments including GST were made to the supplier, and ITC was duly availed.

However, the adjudicating authority did not consider the CA certificate or examine the petitioner’s evidence. The authority passed the impugned order confirming the demand and penalty under Section 74 and alleging fraudulent ITC claim. Aggrieved by this, the petitioner filed the present writ petition before the High Court contending that there was no fraud or willful misstatement involved, supplier’s liquidation was a genuine obstacle, CA certificate substantiated the legitimacy of the transactions and the respondent acted mechanically without applying mind to the facts and evidence.

Issue:

Whether the department was justified in invoking Section 74 and passing the assessment order without considering the petitioner’s explanation and Chartered Accountant’s certificate, especially when the supplier had gone into liquidation, and there was no evidence of fraud or misrepresentation

Held that:

The High Court observed that the only reason for invoking Section 74 was the petitioner’s initial failure to produce a certificate from the supplier, who had gone into liquidation, a fact not disputed by the department. Further, noted that the petitioner later submitted a certificate from its own CA, confirming receipt of goods, Payment made (including GST), and Legitimacy of ITC claim.

Circular No. 183/15/2022-GST dated 27.12.2022 mandates verification of such transactions, but even otherwise, the respondent had the authority to independently verify the claim. The petitioner’s submission of a valid CA certificate confirming supply, receipt, and payment of GST should have been duly considered. The Court held that the adjudicating authority failed to consider this certificate or conduct an independent verification of transactions, which is permissible even under Circular No. 183/15/2022-GST dated 27.12.2022.

The respondent did not render any findings on the CA certificate, nor verify the transactions. Hence, the impugned order was passed in a mechanical and non-judicious manner.

The Court emphasized that in the absence of fraud, willful misstatement, or suppression, proceedings should be under Section 73, not Section 74. Accordingly, the Court set aside the impugned assessment order and remanded the matter for fresh consideration by the authority. Directed that the proceedings be treated as under Section 73,

To read the complete judgment 2025 Taxo.online 1476