HC Quashes Section 74 GST Proceedings for Lack of Fraud Allegations and Jurisdiction

M/s Raghuvansh Agro Farms Ltd. challenged the assessment order dated 31.05.2023 and the appellate order dated 10.01.2025 passed under Section 74 of the UPGST Act, arising from a survey conducted on 22.01.2019. The show cause notice alleged wrongful availment of input tax credit and circular trading.

The petitioner maintained that all transactions were supported by valid invoices, e-way bills, banking payments, and were duly reflected in statutory returns. It was also contended that the proceedings were initiated by State GST authorities despite the petitioner being under Central GST jurisdiction and without any cross-empowerment. Adverse inference was further drawn solely due to the non-production of toll plaza receipts.

Main Issue: Whether proceedings under Section 74 could be sustained in the absence of specific findings of fraud, wilful misstatement or suppression, and whether State GST authorities had jurisdiction to initiate proceedings without cross-empowerment.

HC’s Order: The Hon’ble High Court quashed the assessment and appellate orders, holding that Section 74 can be invoked only where fraud, wilful misstatement or suppression with intent to evade tax is specifically alleged and established, which was absent in the present case.

The Court found the allegation of circular trading unsupported by evidence and held that adverse inference based solely on the non-production of toll receipts was perverse. It further accepted the jurisdictional objection, noting the absence of any material showing cross-empowerment of State authorities. The writ petition was allowed with a direction to refund any amount deposited within one month.

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