Maxwell Company Ptv. Ltd. Vs U.O.I. (Allahabad High Court)
Summary: The Allahabad High Court, Lucknow, stayed the operation of a show cause cum demand notice dated 26 August 2026 issued to the petitioner under Section 74 of the Central Goods and Services Tax Act, 2017. The petitioner contended that the notice disclosed no fraud, concealment or misrepresentation warranting invocation of that provision. It relied on its GSTR-9 returns, which separately disclosed taxable and exempt supplies, whereas the notice showed very similar exempted and total turnover figures for four financial years that did not match those returns. During the audit, the petitioner had also submitted that the issues were revenue-neutral and involved no unjustified enrichment. The Court observed that the records did not appear to disclose suppression or concealment and that the notice contained no specific violation concerning the prerequisites for invoking Section 74. Referring to the Supreme Court decisions in Tata Steel Limited and G.R. Infra Projects Limited Ratlam, it explained that allegations and foundational facts supporting an inference of fraud, wilful misrepresentation or suppression must emerge from the notice itself; mechanically repeating statutory expressions does not establish application of mind. The Court granted an interim stay, directed the respondents to file a counter affidavit within six weeks, permitted a rejoinder within two weeks thereafter and listed the case for 10 December 2026.
Cases Discussed
- M/s Tata Steel Limited vs. Union of India through the Secretary Ministry of Finance and Ors — arising out of SLP (C) No.16859 of 2026, decided on 25.08.2026 (Supreme Court). Considered for the requirement that foundational facts supporting fraud, wilful misrepresentation or suppression must be evident from the notice itself, rather than a mechanical recital of statutory language.
- M/s G.R. Infra Projects Limited Ratlam vs. The State of Madhya Pradesh & Ors. — Civil Appeal No.11277 of 2026 arising out of Special Leave Petition (C) No.33594 of 2025, decided on 19.08.2026 (Supreme Court). Considered for the requirement that allegations supporting invocation of the extended period must emanate from the show cause notice itself.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. The memo of appearance filed today by Shri Paavan Awasthi, learned counsel on behalf of respondent No.1 is taken on record.
2. Heard Shri Pranjal Shukla, learned counsel appearing on behalf of petitioner, Shri Paavan Awasthi, learned counsel appearing on behalf of respondent No.1 and Shri Kuldeepak Nag, learned counsel appearing on behalf of respondent No.2.
3. By means of the present writ petition, the petitioner has prayed for the following reliefs:
“a) issue a writ or direction or pass an order in the nature of certiorari quashing the impugned Show Cause cum Demand Notice No.10/JC-ADC/Audit/LKO/2026-27 dated 26.08.2026, uploaded in Form GST DRC-01 No.ZD0908262443047 dated 27.08.2026 (Case ID AD090826071286L), issued by the Additional Commissioner (Circle-I), CGST & Central Excise, Audit Commissionerate, Lucknow, i.e., the Respondent No.2, under Section 74 of the Central Goods & Service Tax Act, 2017 (Annexure No.1 to the writ petition);
b) issue a writ or direction or pass an order in the nature of Prohibition/Mandamus restraining the respondents from proceeding to adjudicate the impugned show cause notice or passing any order thereon, and directing the respondents not to take any coercive action against the petitioner pursuant to the impugned notice.”
4. Learned counsel for the petitioner has placed on record the show cause notice under challenge and submitted that the show cause notice does not indicate any fraud, concealment of facts, or any kind of misrepresentation, which is the sine qua non for the issuance of a notice under Section 74 of the Central Goods and Services Tax Act, 2017. He has also placed reliance on the GSTR-9 forms that have been filed, which indicate distinct figures of supplies/sales in relation to taxable items as well as exempted items. In the chart provided in the show cause notice, at page no.13 thereof, the figures of exempted turnover and total turnover for the four financial years appear to be very similar and do not match the figures reflected in the GSTR-9 forms that have been filed.
5. Furthermore, it is on record that, when the audit was conducted in respect of the petitioner, the petitioner replied to the issues raised by the auditor and submitted that the issues were revenue-neutral and there had been no unjustified enrichment on the part of the petitioner. Furthermore, it is clear from the records that there does not appear to be any suppression and/or concealment of any fact. The explanation given in the show cause notice by the authority issuing the same also does not contain any specific violation by the petitioner with regard to the prerequisites of fraud, concealment of facts and suppression of material particulars.
6. We have also perused the judgements of the Hon’ble Supreme Court in M/s Tata Steel Limited vs. Union of India through the Secretary Ministry of Finance and Ors, arising out of SLP (C) No.16859 of 2026 decided on 25.08.2026 and M/s G.R. Infra Projects Limited Ratlam vs. The State of Madhya Pradesh & Ors., Civil Appeal No.11277 of 2026 arising out of Special Leave Petition (C) No.33594 of 2025 decided on 19.08.2026, wherein the Hon’ble Supreme Court has held that what is required for the extended time to be applied are the allegations in the show cause notice which lead to the inference of fraud or the concealment attempted by the assessee, resulting in the suppression of facts and the same should emanate from the show cause notice itself. Further, the Hon’ble Supreme Court has also held that the foundational facts which lead to the inference arrived at of fraud, willful misrepresentation, or suppression should be evident from the notice itself and the mere employment of such words in the show cause notice will not indicate an application of mind upon which alone the satisfaction can be arrived at. The authority in the show cause notice cannot just mechanically recite the provisions of Section 74 of the Central Goods and Services Tax Act, 2017 to invoke the same.
7. In view of the aforesaid, the operation of the impugned show cause notice shall remain stayed.
8. Let counter affidavit be filed by respondents within a period of six weeks.
9. A rejoinder affidavit, if any, may be filed by the petitioner within two weeks thereafter.
10. List this case on 10.12.2026.
