Third-Party Supplier Default Cannot Be Attributed to Recipient for Alleged Suppression Under Section 74

This ruling is an important precedent on the distinction between Section 73 and Section 74 proceedings under GST. The Tribunal has reaffirmed that a mere mismatch between GSTR-3B and GSTR-2A, by itself, cannot justify allegations of fraud or suppression.

The decision clarifies that where a taxpayer voluntarily pays tax and interest before issuance of a show cause notice — even after departmental verification — the department must still independently establish fraud, wilful misstatement, or deliberate suppression before invoking Section 74 and imposing a 100% penalty.

The judgment also reiterates that supplier-side reporting failures or procedural mismatches cannot automatically be treated as evidence of suppression by the recipient. For invoking the extended limitation period and penal consequences under Section 74, tax authorities must demonstrate a clear intent to evade tax supported by specific evidence, and not merely rely upon the existence of an ITC mismatch.