Fraud-Based GST Demand Invalid Without Finding of Fraud | High Court Orders Refund

Case Details: S.A. Iron & Alloys (P). Ltd. vs. State of U.P. [2025] 180 taxmann.com 420 (Allahabad)

Judiciary and Counsel Details

• Piyush Agrawal, J.
• Aloke Kumar for the Petitioner.

Facts of the Case

The petitioner, a private company engaged in sponge iron and MS ingot production, was surveyed in 2018 for alleged excess production, inferred from electricity consumption and discrepancies in declared weights. After three years, a show cause notice under Section 74 of the CGST Act/Uttar Pradesh GST Act was issued. The petitioner filed a detailed reply, but the assessing officer levied tax, interest, and penalty, with the appellate authority partly upholding the demand. It was submitted that there was no recorded finding of fraud, wilful misstatement, or suppression with intent to evade. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that a fraud-based determination under Section 74 could be invoked only if the record contained a finding that ITC was availed or tax short paid due to fraud, misstatement or suppression. In the absence of such a finding, the initiation of proceedings and the levy of tax, interest, and penalty were unsustainable. The Court modified the appellate order, partly upholding the demand and allowed the writ petition. Refund of tax deposited, with interest at 4% per annum from the date of deposit, was directed.

List of Cases Reviewed

• Diamond Steel v. State of UP [2023] 149 taxmann.com 366/97 GST 960/73 GSTL 307 (All) (para 10) followed

List of Cases Referred to

• Diamond Steel v. State of UP [2023] 149 taxmann.com 366/97 GST 960/73 GSTL 307 (All) (para 5).