This circular provides clarification on the applicability of section 75(2) of the CGST Act and its impact on limitation in cases where demand proceedings initiated under section 74 fail due to non-establishment of fraud, wilful misstatement, or suppression of facts.

It explains that where an appellate authority, appellate tribunal, or court concludes that a show cause notice issued under section 74 is not sustainable and directs that the demand be re-determined by treating the notice as one issued under section 73, the proper officer must re-determine the tax, interest, and penalty accordingly. Such re-determination is required to be completed within two years from the date of communication of the appellate or court direction, as prescribed under section 75(3) of the CGST Act.

The circular further clarifies that re-determination under section 73 is subject to the limitation period applicable to non-fraud cases. Accordingly, only those demands relating to tax not paid, short paid, wrongly availed input tax credit, or erroneous refunds for which the original notice was issued within the time limit prescribed under section 73 can be re-determined. If the original notice under section 74 was issued beyond the limitation period applicable under section 73, the entire proceedings are required to be dropped as time-barred.

Where a single notice covers multiple financial years, re-determination under section 73 is permissible only for those financial years for which the notice was issued within the prescribed time limit. This clarification aims to ensure consistency and legal certainty in re-determination of GST demands following appellate outcomes.