The Madras High Court addressed a case involving Tvl. Technocast Foundry, which disputed three assessment orders under Section 74 of the GST Acts for the assessment years 2018-19, 2019-20, and 2020-21. These orders stemmed from a surprise inspection in September 2024. The Department accused the petitioner of failing to maintain statutory records for goods sent to a sister concern for job work, and not proving their return within the required period as per Section 143 and Rule 45.
The petitioner argued that technical glitches prevented filing Form GST ITC-04 and claimed that the show cause notices lacked the necessary elements to invoke Section 74. Despite this, the authorities confirmed significant tax, interest, and penalty demands, treating the goods as deemed supplies due to non-compliance with job work provisions.
The Court ruled that the GST system relies on self-assessment, necessitating proper maintenance of job work records. It upheld the Department's right to invoke Section 74 if a taxpayer fails to show compliance with Section 143 and Rule 45. The petitioner's technical objections to invoking Section 74 were dismissed, as the threshold for extended limitation under this section is lower compared to previous indirect tax laws, unless it's a bona fide mistake.
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Since the petitioner could not produce evidence that the goods were returned or that tax was paid, the Department's actions were not quashed on procedural grounds. However, the Court remanded the case for reconsideration, allowing the petitioner 30 days to present evidence, after which a fresh order would be passed by the adjudicating authority following a hearing.
Order Date - 08 June 2026
Parties: Tvl. Technocast Foundry Vs The State Tax Officer, Roving Squad-4, Office of the Commercial Tax Officer, Coimbatore
Facts -
- Petitioner: Tvl. Technocast Foundry challenged three assessment orders passed under Section 74 of the GST Acts for AYs 2018-19, 2019-20 and 2020-21, arising from a surprise inspection conducted in September 2024.
- The Department alleged that the petitioner had sent goods to its sister concern for job work but failed to maintain statutory records and could not establish that the goods were returned within the prescribed period under Section 143 read with Rule 45.
- The petitioner contended that the inability to file Form GST ITC-04 was due to technical glitches and argued that the show cause notices did not contain the necessary ingredients for invoking Section 74.
- The authorities nevertheless confirmed substantial tax, interest and penalty demands, treating the goods as deemed supplies for non-compliance with the job work provisions.
Issue -
- Whether Section 74 proceedings were validly invoked for alleged violations of job work provisions, and whether the matter required reconsideration where the transaction could be revenue neutral.
Order -
- The Court held that the GST framework is based on self-assessment, making proper maintenance of job work records essential. Where a taxpayer fails to establish compliance with Section 143 and Rule 45, the Department is entitled to invoke Section 74 based on deficiencies found during scrutiny.
- The Court rejected the petitioner's technical objection that Section 74 was improperly invoked. It observed that under the GST regime, the threshold for invoking the extended limitation under Section 74 is lower than under the earlier indirect tax laws, except where the lapse is a bona fide mistake.
- The Court noted that the petitioner had not produced records proving that the goods sent for job work were returned within the statutory period or that tax had ultimately been paid on the goods. In such circumstances, the Department's action could not be quashed merely on procedural grounds.
- However, considering the petitioner's plea that the transaction may be revenue neutral, the Court remanded the matter to the adjudicating authority. It permitted the petitioner to produce evidence within 30 days, after which the authority was directed to pass a fresh order on merits after granting a hearing.
