Case Law Details
Bharat Mint & Allied Chemicals Vs State of U.P. and another (Allahabad High Court)
SCN issued under Section 74 arising out of earlier SCN issued under Section 73 quashed as allegations of fraud, wilful misstatement or suppression of facts not invoked
The Hon’ble Allahabad High Court in the case of Bharat Mint & Allied Chemicals v. State of U.P. & Anr. [Writ Tax No. 2527 of 2025 dated May 30, 2025] held that where the proceedings were initially instated under Section 73 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) and subsequently a Show Cause Notice (“SCN”) arising out of the earlier SCN was issued under Section 74 of the CGST Act by the same officer without alleging fraud, suppression or wilful misstatement, then such an action is without jurisdiction. The Hon’ble Court quashed the subsequent SCN issued under Section 74 while allowing liberty to initiate fresh proceedings in accordance with law.
Facts:
Bharat Mint & Allied Chemicals (“the Petitioner”) was issued a SCN dated February 25, 2025 under Section 74 of the CGST/UPGST Act, by the State GST Authorities (“the Respondent”).
Prior to this, the Petitioner had received a SCN issued under Section 73 on February 20,2025. It covered ten issues, to which the Petitioner also submitted a detailed reply. However, with respect to Point Nos. 1, 6, 8, and 10, it was stated that further investigation was needed and a fresh SCN would be issued.
Subsequently, a fresh SCN was issued under Section 74 of the CGST/UPGST Act by the same officer. Aggrieved by the same, the Petitioner filed the present writ petition challenging the jurisdiction and validity of the SCN issued under Section 74.
Issue:
Whether issuance of SCN under Section 74, after adjudicating a prior SCN under Section 73 by the same officer and without any allegation of fraud, wilful suppression or misstatement, is valid under the GST law?
Held:
The Hon’ble Allahabad High Court in Writ Tax No. 2527 of 2025 held as under:
- Observed that, the Petitioner had earlier replied to the SCN issued under Section 73, and the order passed under Section 73(9) recorded that certain issues needed further investigation, leading to issuance of a fresh SCN under Section 74.
- Noted that, the SCN issued under Section 74 did not contain any allegations of fraud, wilful misstatement, or suppression of material facts, which are the essential preconditions for invoking Section 74.
- Held that, the situation was identical to the facts in M/s Vadilal Enterprises Ltd. v. State of U.P. & Ors. [Writ Tax No. 2486 of 2025 dated May 23, 2025], where the same officer had adopted a similar course of action, and thus the SCN issued under Section 74 was quashed, holding the same to be without jurisdiction.
- Further directed that, the Respondent is free to initiate fresh or appropriate proceedings in accordance with law.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. This writ petition has been filed by the petitioner aggrieved of the notice dated 25.02.2025 issued by respondent no. 2 under Section 74 of the Goods and Services Tax Act, 2017 (for short ‘the Act’) to the petitioner. The petitioner was earlier issued a notice under Section 73 of the Act, indicating as many as ten issues. The petitioner filed reply to the said show cause notice on all the aspects raised.
2. In the order passed under Section 73 (9) of the Act dated 20.02.2025, the authority in relation to the issues raised in Point Nos. 1, 6, 8 & 10 observed that as further investigation is required, a fresh notice would be issued and on rest of the aspects, the plea raised/response filed by the petitioner was accepted, whereafter the present notice under Section 74 of the Act has been issued.
3. Submissions have been made that the notice issued under Section 74 of the Act is without jurisdiction and deserves to be quashed and set aside, inasmuch as, none of the ingredients as required for issuance of notice under Section 74 of the Act are neither present nor have been alleged in the notice and, therefore, the notice is bad.
4. Reliance has been placed on an order passed by this Court in M/s Vadilal Enterprises Ltd. Vs. State of U.P. And 2 others: Writ Tax No. 2486 of 2025, decided on 23.05.2025.
5. Learned Standing Counsel contested the submissions made. It was indicated that it is not necessary to make allegations in the notice under Section 74 of the Act by using the language of Section 74 of the Act. The facts themselves speak for the ingredients and, therefore, the plea raised in this regard has no substance. However, it is not denied that the facts of order passed in the case of M/s Vadilal Enterprises Ltd. (Supra), are similar to the present case.
6. We have considered the submissions made by learned counsel for the parties and have perused the material available on record.
7. The notice issued by the respondents under Section 74 of the Act reads as under:
| Sr. | Issue | Taxable Value |
| A | B2B Supply | 1808927201.20 |
| B | B2C Supply (if any)
(GSTR1_7+GSTR1_5A_5B) |
0.00 |
| C | Advances Received (if any) (GSTR1_11A_1) | 0.00 |
| D | Sub Total (A)+(B)+(C) | 1808927201.20 |
| E | Credit/Debit Note (if any) (GSTR1_9B) | 2521305.23 |
| F | Advances adjustment if any (GSTR1_11B_1) | 0.00 |
| G | Subtotal (D)-[(E)+(F)] | 1806405895.97 |
| H | Outward taxable supplies (other than zero rated, nil rated and exempted) (GSTR3B_(3.1A)) | 1560634258.47 |
| I | Difference (G) – (H) | 245771637.50 |
| Sr | Issue | SGST | CGST | IGST | CESS | TOTAL |
| A | B2B Tax | 7322442
4.03 |
7322442
4.03 |
4191546
0.40 |
0.00 | 188364308
.46 |
| B | B2C Tax (if any) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| C | Advances Received (if any) |
0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| D | Subtotal (A) +
(B) + (C) |
7322442
4.03 |
7322442
4.03 |
4191546 0.40 | 0.00 | 188364308 .46 |
| E | Credit/Debit Note (if any) |
178278.31 | 178278.3 1 | 0.00 | 0.00 | 356556.62 |
| F | Advance adjustment if any | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| G | Subtotal (D)-[E) +(F)] | 7304614
5.72 |
7304614 5.72 | 4191546 0.40 | 0.00 | 188007751 .84 |
| H | Outward taxable supplies (other than zero rated, nil rated and exempted) |
7984840 5.83 | 7984840 5.83 | 22383814.00 | 0.00 | 182080625 .66 |
| I | Difference (G) – (H) | –
6802260. 11 |
–
6802260. 11 |
1953164 6.40 | 0.00 | 5927126.18 |
| S.No. | Issue | Taxable Value |
| A | EWB Total Tax (in lakhs) | 2043.49 |
| B | GSTR-3B Total Tax (in lakhs) | 1939.25 |
| C | Difference (A-B) (in lakhs) | 104.24 |
–
Tax rate % |
Turn over |
Tax period |
Act |
POS (Place of Supply |
Tax |
Interest |
penalty |
Others/ RITC |
TOTAL |
||
From |
To |
||||||||||
1 |
Apr- 20 |
Mar- 21 |
SGST |
NA |
12014 260 |
95271 44 |
1201 4260 |
0 |
33555 664 |
||
2 |
Apr- 20 |
Mar- 21 |
CGST |
NA |
12014 260 |
95271 44 |
1201 4260 |
0 |
33555 664 |
||
3 |
Apr-20 |
Mar- 21 |
IGST |
UP |
34246 367 |
27156900 |
3424 6367 |
0 |
95649 634 |
||
TOTAL |
58274887 |
46211187 |
5827 4887 |
0 |
16276 0961 |
||||||
8. This Court in the case of M/s Vadilal Enterprises Ltd. (Supra) wherein the same officer in identical circumstances had adopted the similar method i.e. while deciding the notice under Section 73 of the Act, finding paucity of time, left the issues undecided and issued notice under Section 74 of the Act, came to the following conclusion:
“8. A bare perusal of the language indicated therein clearly reflects that a reference to notice issued under Section 73 has been made and that the explanation filed, could not be verified and, therefore, further explanation was expected. The very fact that the respondents have sought further explanation and not a word has been indicated that the petitioner, inter alia has committed fraud, has given wilful misstatement or has suppressed material facts, which are the ingredients based on which provisions of Section 74 of the Act can be invoked necessarily shows lack of requisite ingredients in the notice.
9. In view of the above fact situation, the jurisdictional aspect for invoking provisions of Section 74 of the Act insofar as the present notice is convened, being not present, the same cannot be sustained.
10. Consequently, the petition is allowed.
11. Notice issued under Section 74 of the Act is quashed and set aside. However, the respondents would be free to take appropriate/ fresh proceedings in accordance with law. “
9. The present case is squarely covered by order in the case of M/s Vadilal Enterprises Ltd. (Supra).
10. Consequently, the writ petition is allowed. The notice issued under Section 74 of the Act is quashed and set aside. However, the respondent would be free to take appropriate/fresh proceedings in accordance with law.
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