2025-VIL-1352-ALH
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SGST High Court Cases

GST – Requirement of specific categorical finding of fraud, willful misstatement or suppression of fact for proceedings under Section 74 of the CGST Act, 2017 - Authorities initiated proceedings against the petitioner alleging circular trading - Whether the proceedings under Section 74 can be initiated without recording any specific categorical finding of fraud, willful misstatement or suppression of fact to evade payment of tax - HELD - For initiating proceedings under Section 74 of the GST Act, the adjudicating authority must record specific categorical finding of fraud, willful misstatement or suppression of fact to evade payment of tax or wrongful availment of input tax credit. Mere allegation of circular trading without any such finding is not sufficient to confer jurisdiction on the authorities to proceed under Section 74 - In the absence of specific finding of fraud, willful misstatement or suppression of fact, the proceedings under Section 74 are without jurisdiction. Further, the petitioner had duly disclosed all the transactions in its books of accounts and GST returns, and the authorities had failed to point out any defect in the same - Once the proceedings has been dropped against the supplier of the petitioner itself, no adverse inference can be drawn against the petitioner on that basis. The allegation made by the revenue that petitioner is engaged in the circular trading is of no aid to and without any material on record. The impugned orders passed by the State GST authorities under Section 74 of the GST Act are quashed – The writ petition is allowed - Whether the State GST authorities had jurisdiction to initiate proceedings against the petitioner in the absence of any cross-empowerment notification - HELD - The petitioner falls within the jurisdiction of Central GST department. The petitioner had specifically raised the issue of lack of jurisdiction of the State GST authorities in the absence of any cross-empowerment notification, but the authorities had failed to justify their jurisdiction. Mere initiation of proceedings by the State GST authorities does not confer jurisdiction on them, and in the absence of any material to establish the cross-empowerment, the proceedings initiated by the State GST authorities were without jurisdiction - Whether the authorities were justified in drawing adverse inference against the petitioner for non-production of toll plaza receipts - HELD - The GST Act and Rules do not mandate the production of toll plaza receipts to justify the actual physical movement of goods. The petitioner had produced tax invoices, e-way bills, and bilty, along with the bank statements showing the payments made to the transporter, which were sufficient to establish the actual movement of goods. The authorities had failed to point out any defect in the documents produced by the petitioner. The adverse inference drawn by the authorities against the petitioner for non-production of toll plaza receipts was patently perverse and without any basis.
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