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

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  • Last Updated on 20 November, 2025

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fraud-based GST demand

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

List of Cases Referred to

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied