Madras HC: GST Act Section 65 Does Not Require to Show the Audit Report Fraud For Demands U/S 74

The Madras High Court clarified that Section 65 of the Central Goods and Services Tax (CGST) Act, 2017 does not necessitate an audit report to demonstrate 'Fraud or Misstatement or Suppression of Facts' for invoking Demand under Section 74 of the GST Act. Justice Senthilkumar Ramamoorthy's single bench emphasized that the language of Section 65 does not mandate the inclusion of such findings in the audit report. \r

Instead, it specified that action under Section 73 or 74 can be initiated based on the audit report revealing the mentioned criteria. The case involved a public limited company engaged in light vehicle and parts supply and servicing, contesting notices issued by the respondent in April 2024. The company's audit reports for FY 2017-2018 to 2020-2021 were submitted, followed by issuance of show cause notices under Sections 73 and 74 of the CGST Act. \r

The applicant argued that the Section 74 notice lacked findings of fraud in the audit report and challenged the non-issuance of an Intimation in Form GST DRC-01A and the consideration of consolidated expenditure in the notice. The court dismissed the writ petition, stating that Section 65 does not mandate fraud findings in the audit report, and rejected objections regarding procedural grounds and expenditure considerations.