Under-Declared Value of Boulder Sales in GSTR-1: Madras HC upholds Invocation of Extended Limitation u/s 74 [Read Order]

The Madras High Court has upheld the invocation of the extended limitation period under Section 74 of the Goods and Services Tax ( GST ) Act, 2017 suppressing the value of outward supplies of rock boulders in its GSTR returns.

Justice C. Saravanan held that discrepancies between the seigniorage fee paid for mineral extraction and the value disclosed in GSTR-1 returns was sufficient for the department to invoke proceedings under Section 74 alleging suppression of turnover.

KPR Enterprises challenged assessment orders dated July 15, 2024 for the tax periods 2018-19, 2019-20 and 2020-21. The petitioner submitted that the impugned orders were unsustainable as there was no finding of fraud, wilful misstatement or suppression of facts requiring invocation of Section 74.

It was further argued that the petitioner had entered into an arrangement with a contractor, B.T. Nagaraj Reddy, who extracted and sold the boulders from the quarry site and had discharged the applicable tax liability.

The petitioner also claimed that no incriminating material had been discovered during the departmental inspection conducted in March 2024 and that the assessment orders had been passed without granting a proper opportunity of hearing.

The State Tax Department, relying on seigniorage fees, estimated the petitioner's boulder extraction from FY 2018-19 to 2020-21, calculating corresponding GST liabilities of ₹10.17 lakh, ₹14.09 lakh, and ₹16.38 lakh. Since the petitioner disclosed only ₹34.09 lakh in their GSTR-1 outward supplies, the department inferred a substantial suppression of turnover.

The court observed that while the issue relating to the taxability of seigniorage fees itself was pending before the Supreme Court and had been kept in abeyance, the present dispute concerned under-reporting of the value of outward supplies.

It was noted that the GST department had estimated the escaped turnover using the National Standard Method and arrived at the value of supplies based on the quantity of minerals extracted, as reflected in the seigniorage fee records.

The bench stated that “Since the petitioner has paid a huge amount for the seigniorage fee, but has under-declared the value of the outward supply, it is evident that a prima facie case was made out for the invocation of the extended period of limitation under Section 74 of the respective GST enactments, as both under Section 73 and 74 of the respective GST enactments, the expression used is “Where it appears”.”

The court found no procedural irregularity in the adjudication process and declined to interfere with the impugned assessment orders and dismissed all three writ petitions. However, the petitioner was allowed to file statutory appeals before the appellate authority within thirty days.

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