The Allahabad High Court quashed proceedings under Section 74 of the UPGST Act against M/s Raghuvansh Agro Farms Ltd., a GST-registered dealer, due to the absence of fraud allegations and lack of jurisdiction. The case arose from a survey conducted in January 2019, which led to allegations of circular trading and wrongful Input Tax Credit (ITC) claims. Despite the petitioner providing tax invoices, e-way bills, GSTR filings, and bank records, the adjudicating authority issued orders without a personal hearing or findings of fraud, willful misstatement, or fact suppression.
The petitioner argued that State GST authorities lacked jurisdiction as the company fell under Central GST jurisdiction, with no cross-empowerment notification issued. The Court examined whether proceedings under Section 74 could proceed without specific fraud allegations and if State GST authorities could assume jurisdiction without proper cross-empowerment.
The Court determined that invoking Section 74 requires clear fraud allegations, which were absent in this case. Allegations of circular trading without evidence and documentation like invoices and GSTR filings were insufficient to deny ITC. The Court found the non-production of toll plaza receipts irrelevant, as GST law does not mandate them. The proceedings were deemed jurisdictionally flawed, as State authorities did not establish cross-empowerment over the Central GST jurisdiction taxpayer.
Consequently, the Court quashed the adjudication and appellate orders, allowed the writ petition, and directed a refund of any deposited amount within a month.
Parties: M/s Raghuvansh Agro Farms Ltd. v. State of Uttar Pradesh & Ors.
Order date: 17 December 2025
Facts –
- The petitioner, a registered GST dealer engaged in agricultural goods trading, was subjected to proceedings under Section 74 of the UPGST Act pursuant to a survey conducted in January 2019.
- Show cause notices and adjudication orders alleged circular trading and wrongful availment of ITC, despite the petitioner producing tax invoices, e-way bills, GSTR filings, and bank payment records.
- The adjudicating authority passed orders without granting personal hearing and without recording findings of fraud, wilful misstatement, or suppression of facts.
- The petitioner also contended that State GST authorities lacked jurisdiction as the petitioner fell under Central GST jurisdiction, in the absence of any cross-empowerment notification.
Issue –
- Whether proceedings under Section 74 of the GST Act can be sustained in the absence of specific allegations and findings of fraud, wilful misstatement, or suppression of facts?
Order –
- The Court held that invocation of Section 74 requires clear and specific allegations of fraud, wilful misstatement, or suppression of facts, which were entirely absent in the show cause notice and adjudication orders.
- It was observed that mere allegations of circular trading, without supporting evidence and without disproving documentary records such as invoices, e-way bills, and GSTR filings, are insufficient to deny ITC.
- The Court ruled that adverse inference drawn solely on the non-production of toll plaza receipts is legally unsustainable, as no such requirement exists under the GST law.
- The proceedings were also held to be without jurisdiction, as the State GST authorities failed to establish valid cross-empowerment over a taxpayer falling under Central GST jurisdiction.
- Accordingly, the impugned adjudication and appellate orders were quashed, the writ petition was allowed, and refund of any amount deposited was directed within one month.
