(2026) 1 GSTAT E-Journal 1 (Principal Bench)Section 74Decision: In Favour of Assessee
GSTAT on GSTR-1 vs GSTR-3B Mismatch: Section 74 Cannot Apply Without Fraud and Tribunal Is Final Court of Fact
The GSTAT Principal Bench held that mere clerical mismatch between GSTR-1 and GSTR-3B cannot sustain Section 74 proceedings without proof of mens rea. Under Section 75(2), only the original Proper Officer has jurisdiction to redetermine tax under Section 73 upon remand.
Case Name / Parties
Sterling & Wilson Pvt. Ltd. v. Commissioner, Odisha, Commissionerate of CT GST & Ors.
Appeal Number
APL/1/PB/2026
Tribunal Bench
Principal Bench
Date of Judgment / Order
11/02/2026
Coram
Hon'ble Justice (Retd.) Dr. Sanjaya Kumar Mishra, President
For Appellant: Shri Joydip Rang, Authorised Representative
For Respondent: Shri Saurav Tiberwal, Additional Standing Counsel, along with Shri Kunu Padhi, Joint Commissioner
Facts of the Case
The Appellant, an engineering, procurement, and construction (EPC) company, declared an outward tax liability of ₹31,36,18,763/- in Form GSTR-1 for FY 2018–19, whereas the liability declared in Form GSTR-3B was ₹31,09,12,131/-. This created a discrepancy of ₹27,06,634/- (CGST ₹13,53,317/- and SGST ₹13,53,317/-). The Proper Officer issued an order under Section 74 of the OGST/CGST Act confirming tax of ₹27,06,634/-, interest of ₹11,04,582/-, and a 100% penalty of ₹27,06,634/-, totaling ₹65,17,849/-. The First Appellate Authority (FAA) found that the transactions were accounted for in books, debit/credit notes, and invoices without fraudulent intent, and modified the penalty from Section 74 to 10% under Section 73(9) (₹2,70,664/-) while confirming the tax and interest itself. Aggrieved, the taxpayer filed a second appeal before the GSTAT.
Issues Before GSTAT
- 1Whether the GST Appellate Tribunal has jurisdiction to examine questions of fact under Section 112 of the CGST Act, or is constrained by the substantial-question-of-law limitations of Section 100 CPC.
- 2Whether proceedings and penalties under Section 74 of the CGST Act can be sustained in the absence of fraud, wilful misstatement, or suppression of facts with intent to evade tax.
- 3Whether the First Appellate Authority could itself determine liability under Section 73, or whether Section 75(2) mandates remanding the matter to the original Proper Officer.
- 4Whether the taxpayer should be afforded an opportunity to amend its returns when discrepancies arose from timing and technical system constraints during early GST implementation.
Relevant Statutory Provisions & Rules
Statutory Sections
Section 73 of CGST Act, 2017Section 74 of CGST Act, 2017Section 75(2) of CGST Act, 2017Section 112 of CGST Act, 2017Section 34 of CGST Act, 2017Section 111 of CGST Act, 2017Section 117 of CGST Act, 2017Section 118 of CGST Act, 2017
GST Rules
Rule 112 of CGST Rules, 2017
Circulars & Notifications
Circular No. 254/11/2025-GST dated 27.10.2025
Contentions of the Parties
Appellant / Taxpayer Contentions
- •The discrepancy arose due to credit notes and advance adjustments across tax periods that could not be amended in GSTR-1 due to early system constraints.
- •All adjustments were fully accounted for in books of account and reflected in GSTR-3B, demonstrating absence of mens rea or revenue loss.
- •Once absence of intent to evade tax was conceded, the entire Section 74 proceeding collapsed.
- •Under Section 75(2), neither the First Appellate Authority nor the Tribunal has jurisdiction to convert and adjudicate under Section 73 directly; the matter must be remitted to the original Proper Officer.
Respondent / Revenue Contentions
- •Statutory returns are self-assessed and variations between GSTR-1 and GSTR-3B must be rectified within the statutory framework of Section 34(2).
- •The appellant failed to establish reversal of ITC by recipients of credit notes, creating a risk of unjust enrichment.
- •Under Section 75(2), the Appellate Authority was fully competent to reclassify the liability as non-fraudulent and confirm demand under Section 73 without remand.
- •The Tribunal cannot re-examine findings of fact, relying on Section 100 CPC principles and Supreme Court ruling in Hamida v. Md. Khalil.
Findings of GSTAT
Section 112 read with Rule 112 confers wide jurisdiction on the Appellate Tribunal to examine questions of fact. The limitations of Section 100 CPC (substantial questions of law) apply only to High Court appeals under Section 117 and Supreme Court under Section 118, not to GSTAT. The Tribunal is the final adjudicating forum on facts.
Section 74 cannot be invoked merely because of a mismatch between GSTR-1 and GSTR-3B. Honest taxpayers must be protected where transactions are documented in books, invoices, and credit notes without fraudulent concealment.
Section 75(2) contains an explicit statutory command: where an appellate forum concludes that Section 74 is unsustainable, 'the proper officer shall determine the tax payable... deeming as if notice were issued under Section 73(1)'. The appellate authority cannot usurp the assessing power of the original proper officer.
In the early years of GST and during COVID-19 disruptions, technical constraints in return filing occurred. Substantive compliance must prevail over procedural rigidity, and taxpayers should be given an opportunity to file amendment petitions.
Ratio Decidendi
Key Legal Principle
“Proceedings under Section 74 cannot be sustained without positive establishment of fraud, wilful misstatement, or suppression. Under Section 75(2), where an appellate forum finds Section 74 unsustainable, only the original Proper Officer has jurisdiction to determine tax under Section 73 upon remand, not the appellate authority.”
Final Decision & Relief Granted
Outcome: The appeal was allowed by way of remand. The First Appellate Authority's order, to the extent it proceeded to determine liability and impose penalty under Section 73, was set aside. The matter was remitted to the original Proper Officer to re-determine tax, interest, and penalty under Section 73 after granting the Appellant 30 days to file an appropriate amendment petition and producing reconciliation documents.
Relief Granted: Setting aside of Section 74 adjudication and the FAA's unauthorized Section 73 determination; remand to original Proper Officer with 30-day window to file return amendment petition; opportunity of personal hearing.
Operative relief was verified against the Tribunal's order and accurately summarized without altering its legal effect.
Practical Implications for Taxpayers
- Taxpayers facing Section 74 notices based solely on GSTR-1 vs GSTR-3B mismatches should prove through books of accounts and credit note ledgers that no facts were suppressed.
- If the Department attempts to convert a Section 74 proceeding into a Section 73 order at the appellate stage, taxpayers can challenge the order on jurisdictional grounds under Section 75(2).
- Reconciliation of credit notes and advance adjustments with GSTR-9 and GSTR-9C should be prepared comprehensively to rebut any inference of fraudulent intent.
Practical Takeaways for Tax Professionals
- Check the SCN allegations carefully: if the SCN lacks specific allegations and independent evidence of fraud, argue that Section 74 is entirely without jurisdiction.
- Rely on Section 75(2) to resist attempts by First Appellate Authorities to self-adjudicate under Section 73 without giving the taxpayer a fresh hearing before the assessing officer.
- Maintain documented proof of early GST portal technical glitches, manual filings, and credit note timings to substantiate bona fide clerical error under Rule 112.
SKM
Editorial Commentary
SKM Laws Professional Analysis
This landmark ruling from the Principal Bench of GSTAT establishes two vital jurisdictional safeguards for GST litigation. First, it decisively rejects the Revenue's attempt to import Section 100 CPC restrictions into GSTAT appeals, cementing the Tribunal's status as the final and unfettered court of fact. Second, it enforces the strict legislative architecture of Section 75(2): when a Section 74 charge fails for want of mens rea, appellate authorities cannot bypass the statutory hierarchy by converting the case into a Section 73 demand on their own motion. The requirement of a formal remand to the original Proper Officer safeguards the taxpayer's statutory right to be heard and to file return amendment petitions. Practitioners should systematically invoke this precedent in all GSTR-1 vs GSTR-3B audit demands where Revenue has invoked Section 74 without proving deliberate concealment.
Related Cases & Precedents
(2026) 1 GSTAT E-Journal 51
Affirming that Section 74 cannot be invoked for differences in legal interpretation and directing Section 75(2) remand.
(2026) 1 GSTAT E-Journal 122
Holding that GSTR-9C disclosures negate Section 74 suppression.
Related GST Tools & Utilities
Source Citation & Forensic References:
Official Citation: (2026) 1 GSTAT E-Journal 1 (Principal Bench)
Source Publication: GSTAT E-Journal, Volume I (Till 31.08.2026), Published by Goods and Services Tax Appellate Tribunal
Journal Pages: 1-14
Legal Information Disclaimer
This case law analysis is published strictly for informational, educational, and research purposes. It does not constitute legal, tax, or professional advice. The ratio decidendi and commentary reflect professional editorial interpretations of the Goods and Services Tax Appellate Tribunal's reported judgment. Readers must refer to the full certified order of the Tribunal before initiating or defending litigation.