Adjudication Under CGST Section 74 Must Clearly Establish Fraud or Misstatement

Singh Electrical Store Vs Superintendent Cgst And Central Excise (Allahabad High Court)

The Allahabad High Court addressed a writ petition filed by Singh Electrical Store against an order issued by the Superintendent of CGST and Central Excise under Section 74 of the Central Goods and Services Tax Act, 2017. The court, upon reviewing the order dated February 21, 2025, noted a significant lack of application of mind by the respondent authority. The order stated that while Singh Electrical Store argued that an excess claim was due to a clerical error and should be considered under Section 73 (not involving fraud), the authority deemed it inappropriate to address this aspect at their level, citing the appellate authority’s jurisdiction under Section 75.

The High Court strongly disagreed with this reasoning, emphasizing that Section 74 explicitly requires the presence of fraud, willful misstatement, or suppression of material facts. This element is a mandatory prerequisite for invoking this particular section. The court expressed surprise at the lack of reasoning in the order regarding the crucial aspect of fraud. Consequently, finding a clear non-application of mind, the Allahabad High Court intervened and quashed the impugned order. The court directed the Commissioner of Central Goods and Services Tax, Varanasi, to investigate the issue of officers passing orders under Section 74 without providing adequate reasons for alleging fraud or misstatement. Furthermore, the court instructed the concerned authority to grant Singh Electrical Store a hearing and subsequently pass a reasoned order within twelve weeks. The writ petition was accordingly allowed.

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT