Madras High Court Clarifies Threshold for Invoking Extended Limitation Under Section 74 of GST Enactments

Background and Proceedings
The Madras High Court, presided over by Justice C. Saravanan, delivered a common order disposing of multiple writ petitions filed by Sameera Hotels (Chennai) Pvt. Ltd. challenging assessment orders issued under Section 74 of the respective GST Enactments for the tax periods 2018-2019 to 2022-2023. The petitions were heard as part of a larger batch addressing the invocation of the extended period of limitation under Section 74.

Factual Matrix
The petitioner’s premises were subjected to a surprise inspection by the State Tax Officer, following which intimation notices and show cause notices were issued, alleging discrepancies in input tax credit (ITC) claims and non-payment of tax on import of services. The petitioner responded to the show cause notices, but assessment orders were subsequently passed, sustaining the tax demands.

Petitioner’s Submissions
The petitioner argued that the show cause notices failed to particularize the necessary ingredients for invoking Section 74 and that the impugned orders merely used the term “willfulness” without adequate reasoning. It was also contended that for certain tax periods, the limitation for passing orders under Section 73 had expired, rendering the proceedings time-barred.

Respondent’s Arguments
The State defended the proceedings, asserting that the orders were passed within the prescribed time limits and that the petitioner’s replies addressed the merits rather than jurisdictional issues. The respondents further argued that the writ petitions were filed belatedly, beyond the statutory period for appeal under Section 107 of the GST Enactments.

Court’s Reasoning and Legal Principle
The Court found no dispute that the petitioner had availed ITC in excess of the amount reflected in GSTR-2A and utilized it to discharge tax liability in GSTR-3B, indicating prima facie suppression of facts with intent to evade tax. Referring to a contemporaneous common order in related cases, the Court clarified that the threshold for invoking the extended period of limitation under Section 74 of the GST Enactments is “much lower” than under previous indirect tax legislations.

The Court also noted that the issue of limitation was already settled against the petitioner in light of prior decisions, and that for at least two assessment years, the time for passing orders under Section 73 had not expired. Additionally, the Court observed indications of non-discharge of tax liability under the reverse charge mechanism for commissions from foreign booking agencies.

Decision and Directions
Concluding that there was no merit in the writ petitions, the Court dismissed them, granting liberty to the petitioner to pursue remedies before the Appellate Commissioner. The petitioner was directed to file an appeal within 30 days, with the assurance that the appeal would be entertained and disposed of on merits, subject to compliance with Section 107 requirements. No costs were awarded, and connected miscellaneous petitions were closed.

This decision reinforces the legal position that the threshold for invoking the extended limitation period under Section 74 of the GST Enactments is comparatively lower, and emphasizes the importance of pursuing statutory appellate remedies in GST disputes.