GST Dept Can't Raise Fresh Demand U/S 73 If Explanation Offered By Assessee U/S 61(2) Was Accepted: Delhi High Court

The Delhi High Court has made it clear that Section 61(2) of the Goods and Service Tax Act, 2017 bars further action against an assessee, including any demand under Section 73.

For context, Section 61 empowers the proper officer to scrutinize the return furnished by the registered person and inform him of the discrepancies noticed.

Sub-section (2) thereof provides that in case the explanation offered by the registered person is found to be acceptable, no further action shall be taken.

A division bench of Justices Prathiba M. Singh and Shail Jain observed that since Section 73, which pertains to determination and recovery of tax, does not have a non-obstante clause, it comes within purview of Section 61(2) and thus, issuance of demand on the same ground on which the explanation was in fact found acceptable previously, would not be tenable.

The development comes in a plea filed by a company challenging action under Section 73 and consequent demand of Rs. 53,46,391/- for the financial year 2019-2020.

It was the Petitioner-company's case that initially, a notice under Section 61 of the Delhi Goods and Service Tax Act, 2017 was issued to it over alleged discrepancies in respect of Input Tax Credit.

However, after Petitioner submitted a detailed reply along with relevant documents, the matter was closed.

As such, Petitioner contended that action under Section 73 on the same grounds as the above notice, in respect to the same very transactions, is not permissible.

The High Court then perused Section 61 which says whenever any discrepancies are found by the proper officer, a notice can be issued to the tax payer and an explanation can be sought.

Upon the explanation being furnished, there are two courses of action-

● One, if the explanation is not satisfactory and the same has not been accepted, the discrepancies are accepted.

The Court noted that if upon such acceptance, the tax payer does not take corrective measures, then action under other provisions of the Act including Section 73 and 74 of the Act would be permissible.

● Two, if the explanation is found acceptable, then no further action can be undertaken,

In this regard the Court observed that Section 61(2) of the Act would create an embargo against any further demands being raised under Section 73 of the Act, as the term 'further action' under Section 61(2) of the Act would include demands under Section 73 of the Act as well.

“Further, Section 73 of the Act does not have a non-obstante clause. Under such circumstances, the issuance of demand on the same ground on which the explanation was in fact found acceptable previously, would not be tenable,” the Court said and allowed the plea.

Appearance: Mr. Preetam Singh, Adv. for Petitioner; Ms. Urvi Mohan, Adv. for Respondent

Case title: Kemexel Ecommerce Pvt. Ltd. v. Sales Tax Officer Class Ii / Avato Ward 105, Zone 4, Delhi

Citation: 2025 LiveLaw (Del) 1482

Case no.: W.P.(C) 16555/2025

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