New Delhi – Chartered Accountant Rakesh Garg has formally approached the Central Board of Indirect Taxes and Customs (CBIC), alleging a troubling pattern of procedural overreach by Delhi GST offices. His detailed letter points to what he calls the “misuse” of Section 74 of the Central Goods and Services Tax (CGST) Act, 2017—provisions meant to tackle serious tax evasion involving fraud or intentional misstatement.
According to the letter, multiple GST field offices are initiating penalty proceedings and issuing show cause notices under Section 74, despite the legal preconditions not being met.
“These actions not only violate statutory safeguards but also foster an atmosphere of fear among honest taxpayers,” Garg wrote.
Harassment Without Just Cause? Concerns Over Due Process
Section 74 of the CGST Act is specifically designed to penalize willful fraud or misstatements in input tax credit (ITC) claims. However, Garg’s communication indicates that GST officials are invoking this provision even in cases involving clerical mismatches or minor errors, which are supposed to be addressed under other, less punitive sections of the Act.
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He cautioned that such enforcement undermines the government’s goals of promoting voluntary compliance and ease of doing business. The letter underlines the importance of distinguishing between genuine fraud and inadvertent filing errors—an area where the current system, he says, fails due to lack of training and clarity among field officers.
Demand for Training, Oversight and Legal Clarity
In his recommendations, Garg has urged the CBIC to:
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Issue clear instructions to GST officers to avoid indiscriminate application of Section 74.
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Ensure legal procedures are followed before initiating action.
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Conduct a detailed review of ongoing Section 74 cases in Delhi.
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Launch capacity-building programs to help officers differentiate between bona fide errors and deliberate fraud.
The letter also calls for a balanced approach to tax enforcement that does not erode the trust of taxpayers through unwarranted scrutiny.
With businesses already burdened by regulatory compliance, the letter serves as a critical reminder of the need for tax authorities to act judiciously. The response from the CBIC is now awaited, as companies, consultants, and legal experts closely watch the developments that may shape future GST enforcement norms.