CA Urges CBIC to Intervene Over Alleged Misuse of Section 74 CGST by Delhi CGST Officers [READ LETTER]

CA Rakesh Garg has urged the Central Board of Indirect Taxes and Customs (CBIC) to intervene over alleged misuse of Section 74 CGST by Delhi CGST officers.

CA Rakesh Garg while writing to the CBIC Chairman requested for immediate intervention and remedial measures in reference to misuse of powers under section 74 of the Central Goods and Services Act, 2017 (CGST) by the Delhi CGST Offices.

The letter stated that it does not intend to highlight the quantum of penalty. Rather, it seeks to draw your esteemed attention to the grave concern surrounding the CHARGE OF 'FRAUD,' which carries far-reaching and damaging consequences. Such a label could adversely affect credit ratings (including CIBIL and others), disrupt access to banking facilities and credit lines, tarnish hard-earned business goodwill, jeopardize existing and prospective contracts, and inflict profound emotional distress and reputational harm.

CA Garg filed a Right to Information (RTI) application under the RTI Act, 2005; and received the information from the CGST Audit-I and CGST Audit-II. In their response, the Delhi GST Audit Departments revealed that 100% of show cause notices issued over the past three financial years were under section 74, without a single notice being issued under section 73. This statistic strongly indicates blanket and indiscriminate use of the fraud provision.

The Summary clearly shows that fraud and wilful intent have been alleged against taxpayers across the board—regardless of the actual nature of the discrepancies — without lawful justification or procedural fairness.

Similarly, the Directorate General of GST Intelligence also invokes section 74 in majority of cases without following the due process of law. In another RTI filed by my colleague, it has been informed that in the last three years for issuing show cause notices, the Directorate has invoked section 74 in 242 cases, out of a total of 265 cases. Further, in the year 2024- 25, the Directorate invoked section 74 in 100% cases.

With due regards, for the sake of repetition, the blanket application of Charge of Fraud has significant adverse consequences. Besides imposition of higher penalties, such actions may adversely impact the taxpayer personally and financially, including loss of business; such as, impact credit ratings (CIBIL and others), which may lead to disruption of banking facilities and credit lines; Blemish the reputation of the taxpayer before the business associates and harm its goodwill; and cause immense emotional distress and social stigma.

This conduct by the GST Departments also infringes upon the fundamental rights under Article 19(1)(g) of the Constitution of India—impairing the right to carry on trade or profession—by adversely affecting working capital and damaging the credibility of genuine businesses.

“I respectfully submit that I hold no personal or vested interest in this matter. This request is made purely in the public interest, with the sole aim of upholding the rule of law and contributing to the effective and judicious functioning of the Department,” the letter read.

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