Case Study: M/s Sterling & Wilson Pvt. Ltd. v. Commissioner, Odisha
On February 11, 2026, the Principal Bench of the GST Appellate Tribunal (GSTAT), New Delhi, delivered its first substantive tax appeal judgment since the Tribunal became operational.
This ruling marks a pivotal shift in GST litigation. For years, businesses have struggled with aggressive tax demands triggered by simple return mismatches. This judgment sends a clear message:
🚨 A mismatch between GSTR-1 and GSTR-3B does not automatically amount to fraud.
The era of “mechanical” tax demands is finally under judicial scrutiny.
The case concerned Financial Year 2018–19, where a mismatch of approximately ₹27.06 lakhs was identified between:
GSTR-1: Outward tax liability declared.
GSTR-3B: Actual tax discharged.
The Proper Officer treated the discrepancy as short payment due to suppression, invoking Section 74 of the CGST Act—a provision strictly reserved for cases involving fraud or willful misstatement. A 100% penalty was imposed.
Sterling & Wilson argued that the difference was not "hidden" income but rather:
Timing differences between different return periods.
Adjustments made through Credit/Debit Notes.
Technical limitations of the GST portal during its early years.
Transactions fully recorded in the books of accounts, proving no intent to evade tax.
The Principal Bench set aside the earlier orders and established these critical legal guardrails:
The Tribunal held that a numerical difference between returns is not "conclusive evidence" of suppression. The Department must demonstrate a deliberate intent to evade tax. If books of accounts explain the difference, Section 74 cannot be applied mechanically.
Under Section 75(2), if a fraud allegation (Section 74) fails, the tax can still be collected under the non-fraud category (Section 73). However, the Tribunal clarified that only the original Proper Officer can perform this re-determination. Appellate authorities cannot simply "convert" and quantify the tax themselves.
The Tribunal took judicial notice of the 2018–19 reality: auto-population errors and manual filing constraints. Systemic limitations during the GST rollout require reconciliation, not automatic punishment.
While High Courts focus on laws, GSTAT is the final stop for facts. It is empowered to scrutinize reconciliation statements and documents to determine if a discrepancy is a genuine error or a deliberate act.
| Issue | Earlier Practice | Post-GSTAT Position |
| Section 74 for Mismatches | Frequently invoked as a default. | Requires specific proof of intent. |
| Fraud vs. Non-Fraud | Often blurred, leading to high penalties. | Must be clearly established with evidence. |
| Conversion of Proceedings | Done at the appellate stage. | Must be remanded to the Proper Officer. |
| Reconciliation Opportunity | Often overlooked during audits. | Central to adjudication; must be granted. |
This ruling is a lifeline for companies facing:
Legacy notices for FY 2018–19.
100% penalties based solely on automated system alerts.
Demands generated through automated scrutiny without human review.
The judgment compels the Department to move away from "algorithm-driven" enforcement and return to evidence-based adjudication.
📢 Final Takeaway: GST enforcement must be fair. Technical discrepancies do not equal criminal intent.
If your business is facing aggressive Section 74 demands for legacy periods, this precedent provides the legal ammunition you need to seek a fair re-adjudication.
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