In the GST return mismatch case, the Delhi Bench of Goods and Services Tax Appellate Tribunal (GSTAT) has held that once proceedings initiated under Section 74 of the CGST Act (fraud, suppression, or wilful misstatement) fail, the Appellate Authority cannot itself determine liability under Section 73. Instead, in terms of Section 75(2) of the Act, the matter must be remanded to the Proper Officer for fresh determination.
The bench of Justice (Retd.) Dr. Sanjaya Kumar Mishra (President) observed that the statutory scheme is clear: the power to re-determine liability under Section 73 in such circumstances lies with the Proper Officer and not with the Appellate Authority or the Tribunal. Therefore, once Section 74 charges fail, the matter must necessarily be remitted for fresh adjudication under Section 73. The Appellate Authority cannot itself compute and finalize liability under the deeming fiction of Section 75(2).
The case arose out of an alleged mismatch between outward tax liability declared in GSTR-1 and tax paid through GSTR-3B for Financial Year 2018–19. The department noted that the liability reported in GSTR-1 exceeded that disclosed in GSTR-3B by ₹27,06,634. Proceedings were initiated under Section 74, and a demand exceeding ₹65 lakh was raised, including tax, interest, and 100% penalty.
In the first appeal, the Appellate Authority held that fraud or suppression was not established and therefore Section 74 was not applicable. However, it proceeded to treat the matter as one under Section 73 (short payment without fraud), reduced the penalty to 10%, and confirmed tax and interest, recalculating total liability at approximately ₹45.6 lakh.
Before the GSTAT, the core legal issue was whether the Appellate Authority could directly convert proceedings under Section 74 into a finalized determination under Section 73 and impose penalty accordingly. The Tribunal examined Section 75(2) of the CGST Act, which provides that where an appellate authority concludes that fraud or suppression is not established in a notice issued under Section 74(1), the Proper Officer shall determine the tax payable as if the notice were issued under Section 73(1).
The Bench also rejected the Revenue’s argument that the Tribunal could not re-examine factual aspects. It clarified that Section 112 of the CGST Act grants the Tribunal wide jurisdiction and, unlike Section 100 of the Code of Civil Procedure, does not restrict it to substantial questions of law. GSTAT is the final fact-finding authority in GST matters.
While upholding the finding that there was no fraud or wilful suppression, the Tribunal set aside the portion of the appellate order that treated the case as finally determined under Section 73. The matter was remanded to the Proper Officer for fresh consideration, with liberty granted to the appellant to file appropriate amendment applications within 30 days. The Proper Officer was directed to provide a reasonable opportunity of hearing and examine the documents on merits before passing a fresh order.
Case Details
Case Title: M/s Sterling & Wilson Pvt. Ltd. Versus Commissioner
Case No.: APL/1/PB/2026
Date: 11/02/2026
Counsel For Appellant: ZARINE YAZDI DARUVALA
