Ford India Private Limited Vs Union of India & Anr. (Gujarat High Court)
Summary: The Gujarat High Court considered two writ petitions in which M/s Ford India Private Limited challenged show-cause notices and Orders-in-original issued under section 74 of the Central Goods and Services Tax (CGST) Act, 2017. The petitioner submitted that the adjudicating authority had failed to derive its conclusion from the material supplied pursuant to the show-cause notices and had itself observed that the data contained in the e-way bills for Financial Year 2018-19 was difficult to understand as no mechanism was provided. According to the petitioner, the proceedings emanated from Audit Queries of the Director General of Audit (Central), Ahmedabad dated 14.06.2023, 15.06.2023 and 03.08.2023 alleging suppression in taxable value compared with e-way bills. It was contended that section 61 of the CGST Act required scrutiny of returns and action concerning discrepancies or inconsistencies, but the prescribed procedure had not been followed before show-cause notices alleging wrongful availment of Input Tax Credit were issued under section 74.
The petitioner also disputed invocation of the extended five-year period, contending that there was no suppression, and stated that it had not been asked to provide additional invoices or e-way bills. The demands were stated to be Rs.4,57,61,572/- in SCA No.1344/2026 and Rs.19,36,67,23,154/- in SCA No.1351/2026. The respondents opposed the petitions, contending that the petitioner had failed to provide adequate details, that discrepancies remained in the e-way bills and that under section 155 of the CGST Act the burden lay upon the petitioner to explain that ITC had not been wrongly availed beyond entitlement. They further submitted that compliance with section 61 read with Rule 99 of the GST Rules, 2017 was not a prerequisite to invocation of section 74.
The High Court held that the matter required consideration. Prima facie, it observed that the Orders-in-original depicted the adjudicating authority’s inability to closely analyse the delivery channels, corresponding e-way bills, invoices and supporting records. The adjudicating authority had recorded that, even while analysing more than 2,000 entries for FY 2018-19 supplied in MS Excel format, it was not possible to ascertain which invoices were affected by the error and how they had subsequently been reconciled in the relevant returns. Similar inability was recorded regarding reconciliation of supporting Books of Accounts, including purchase registers. The Court further noted that the petitioner had never been called upon to supply additional material and was informed to have almost 4.5 lakh e-way bills and 2.5 lakh invoices, which, prima facie, would suggest that there was no intention to suppress or evade GST liability.
The Court issued Rule and, considering the complexity of the amounts involved and analysis of the invoices and e-way bills, directed that the ad-interim relief granted on 05.02.2026 would continue until final disposal of the petitions.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. In the present writ petitions, the petitioner has assailed impugned show-cause notices and Orders-in-original issued under section 74 of the Central Goods and Services Tax (CGST) Act, 2017 (for short “the CGST Act”).
2. Learned Senior Advocate Mr.Joshi, while pointing out the impugned show-cause notices and Orders-in-original, has submitted that the adjudicating authority has failed to derive its conclusion on the material supplied by the petitioner, pursuant to the show-cause notices, by observing that the data mentioned in the e-way bills for the Financial Year 2018-19 is difficult to understand as no mechanism is provided. He has further submitted that the petitioner has supplied all the details, which are incorporated in paragraph No.15.3 of the impugned Orders-in-original however, the same are brushed aside by observing that it was not possible to ascertain in what manner these supplies have been effected in the respective returns.
3. Learned Senior Advocate Mr.Joshi has further pointed out that in fact, the show-cause notices and Orders-in-original emanate from the Audit Query of the Director General of Audit (Central) Ahmedabad dated 14.06.2023, 15.06.2023 and 03.08.2023, wherein it was alleged that there was suppression in taxable value in comparison with e-way bills. He has submitted that as per section 61 of the CGST Act, various returns filed by the taxpayers have to be scrutinized by the proper officer to verify the correctness of the returns and suitable action has to be taken on any discrepancies or inconsistencies reflected in the returns and the proper officer designated by the audit was the Range Officer, and he was also requested to identify the inconsistencies after ascertaining from the petitioner and wherever applicable under section 61 of the CGST Act, verify the details and check whether such action can be taken or not.
4. It is submitted by learned Senior Advocate Mr.Joshi that pursuant to the aforesaid Audit Query, the petitioner supplied various documentary evidence to the Range Officer and thereafter, they only said “There is a discrepancy”. It is submitted that no procedure under section 61 of the CGST Act has been followed, and the petitioner was only intimated about the alleged discrepancies. He has also contended that on the very same Audit Query, the show-cause notices for alleged wrongful availment of the Input Tax Credit has been issued invoking the provision of section 74 of the CGST Act. It is also contended that the power has been exercised in the extended period of five years as provided under Explanation 2 to section 74 of the CGST Act however, there is no suppression by the petitioner, and it is the only aspect regarding the detailed scrutiny and analysis of the e-way bills and the invoices which were supplied to the adjudicating authority.
5. It is further submitted by the learned Senior Advocate that the petitioner was never called upon to supply additional invoices or e-way bills, and an exorbitant demand of Rs.4,57,61,572/- (in SCA No.1344/2026) and Rs.19,36,67,23,154/- (in SCA No.1351/2026). He has further submitted that there is no allegation referred in the impugned show-cause notices about the evasion of any tax liability, mentioned in the e-way bills generated by the petitioner.
6. Opposing the present writ petition, learned Senior Standing Counsel Ms.Sancheti has submitted that the writ petitions may not be entertained as despite having given opportunity to the petitioner, it did not supply the details of e-way bills and invoices, and whatever documents were supplied, on a close scrutiny, it was found that there was discrepancies in such e-way bills. She has referred to the provision of section 155 of the CGST Act, and has submitted that burden lies on the petitioner to explain that he has not wrongly availed the Input Tax Credit in excess of its entitlement. She has also referred to the provision of section 61 of the CGST Act read with Rule 99 of the Goods and Services Tax (GST) Rules, 2017 and has contended that in fact, it is not necessary or incumbent upon the respondent authorities to follow the procedure of section 61 of the CGST Act before invoking the provision of section 74 of the CGST Act, and the exercise conducted under the provision of section 54 of the CGST Act by the respondent authority is appropriate. She has also referred to the various observations made in the impugned Orders-in-original.
7. After hearing the learned advocates appearing for the respective parties, we are of the opinion that the matter requires consideration.
8. Prima facie, we are of the opinion that the impugned Orders-in-original depict the inability of the adjudicating authority in closely analyzing the details of delivery channels, corresponding e-way bills, invoices, etc., as he himself has expressed his inability to undertake such exercise, as there is no mechanism to understand this. In paragraph No.15.11 of the Orders-in-original, while examining the invoices, which are submitted in MS Excel format by the petitioner, it is recorded that “on analysis of this data, containing more than 2,000 entries for Financial Year 2018-19 alone, it is not possible to ascertain as to which particular invoices were affected by this error and subsequently how these have been reconciled in the relevant returns”. Similarly, he has expressed his inability for reconciliation of the supporting documents of the Books of Accounts, which include purchase registers and others.
9. The petitioner was never called upon to supply any additional material by the adjudicating authority, and as informed to us, there are almost 4.5 lakhs e-way bills and 2.5 lakhs invoices, which would suggest that there was no intention of the petitioner to suppress or evade the liability of payment of the GST.
10. Issue RULE. Learned Senior Standing Counsel Ms.Sancheti waives service of notice of rule for and on behalf of the respondent.
11. We are of the considered opinion that, looking to the complexity of the amounts involved and the analysis of the invoices and e-way bills, the initial action, which was resorted to by the audit, was necessary. Hence, the ad-interim relief granted by this Court vide order dated 05.02.2026 shall remain in operation till the final disposal of the petitions.
Registry to place a copy of this order in the connected matter(s).
