The Allahabad High Court recently addressed a case involving M/s Varanasi Sangam Expressway Pvt. Ltd. and the Commissioner of State Tax, U.P., where a show cause notice (SCN) under Section 74 of the U.P. GST Act, 2017 was challenged. The petitioner argued that the notice, dated June 20, 2025, was invalid as it lacked any specific allegations or evidence of fraud, wilful misstatement, or suppression of facts, which are essential elements for invoking Section 74. The petitioner’s counsel emphasized that a procedural discrepancy or omission does not justify the use of Section 74, which requires a deliberate intent to evade tax.
The State authorities admitted that the notice did not contain the necessary allegations or prerequisites. The core issue was whether an SCN under Section 74 is valid without specifying allegations or evidence of fraud, wilful misstatement, or suppression of facts. The Court observed that Section 74 pertains to intentional evasion through fraud or suppression, and invoking it without the requisite material renders the proceedings jurisdictionally invalid.
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Both parties acknowledged the lack of foundational facts in the notice, leading the Court to deem the SCN unsustainable in law. Consequently, the Court quashed the notice but allowed the department the liberty to proceed under any other appropriate provision of the U.P. GST Act, in accordance with the law. The writ petition was disposed of based on these considerations.
Order Date: 08 October 2025
Case Title: M/s Varanasi Sangam Expressway Pvt. Ltd. v. Commissioner of State Tax, U.P. & Anr.
Facts:
- The petitioner challenged a show cause notice dated 20.06.2025 issued under Section 74 of the U.P. GST Act, 2017, on the ground that it did not contain any specific allegation or evidence of fraud, wilful misstatement, or suppression of facts — the necessary ingredients under Section 74.
- The counsel for the petitioner contended that a mere procedural discrepancy or omission cannot justify invocation of Section 74, which presupposes mens rea or deliberate intent to evade tax.
- The State authorities fairly conceded that the impugned SCN lacked such averments and prerequisites.
Issue:
- Whether a show cause notice under Section 74 of the U.P. GST Act is valid if it fails to specify allegations or evidence of fraud, wilful misstatement, or suppression of facts?
Order:
- The Court observed that Section 74 specifically deals with cases involving intentional evasion through fraud or suppression, and its invocation without requisite material renders the proceedings without jurisdiction.
- As both sides acknowledged that the impugned notice lacked foundational facts required under Section 74, the Court found the SCN unsustainable in law.
- Accordingly, the show cause notice dated 20.06.2025 was quashed and set aside, while granting liberty to the department to proceed under any other appropriate provision of the U.P. GST Act in accordance with law.
- The writ petition was disposed of on these terms.
