A significant ruling by the Allahabad High Court has clarified that GST authorities do not have the power to initiate proceedings under Section 73 to levy tax on payments received post-GST if the work was actually completed during the VAT regime.
The Context: In this specific case, the petitioner, who works under a work contract, faced a show-cause notice issued on 31.01.2024 regarding FY 2018–19. The department alleged a discrepancy between the turnover declared in GSTR-3B and the income shown in the Form 26AS (based on Income Tax data).
Crucially, this notice was only uploaded to the “Additional Notice and Order” tab on the portal. Because the petitioner was unaware of this upload, they couldn’t file a reply. Consequently, an ex parte order was passed on 28.04.2024, demanding tax, interest, and penalty.
The Argument: When the petitioner’s appeal was dismissed on 21.01.2025 without proper consideration of the evidence, they moved to the High Court. Their defence was simple: the income shown in Form 26AS was payment for work finished during A.Y. 2015–16 and 2016–17—strictly within the VAT regime—before GST was implemented. Even though the payment arrived later, the supply itself did not happen under the GST Act, meaning the authorities lacked jurisdiction.
The Verdict: Upon reviewing original records, the Court confirmed the contracts were executed under the VAT regime. The Bench criticised the authorities for initiating action based solely on a mismatch between GSTR-3B and Form 26AS without verifying the nature or period of the supply.
Read Also: Delhi HC Allows Tax Relief to Assessee Over GST Mismatch in GSTR-3B, GSTR-2A, and GSTR-1
Held: The Court ruled that receiving consideration after 01.07.2017 does not trigger GST liability if the actual execution occurred earlier. Since the supply happened under VAT, the authorities had no jurisdiction under Section 73 to demand tax.
A data mismatch alone is not proof of liability; the department acted arbitrarily by not consulting VAT assessing authorities or reviewing the underlying records.
Consequently, the Court quashed the Section 73 notice, the ex parte order, and the appellate order, declaring them illegal. It ordered that any amount deposited by the petitioner be refunded with interest within one month.
| Case Title | M/S Vimlesh Kumar Contractor vs. State of U.P. and 3 others |
| Case No. | WRIT TAX No. – 1021 of 2025 |
| Counsel for Petitioner | Aditya Pandey and Shailendra Kumar Tripathi |
| Counsel for Respondents | C.S.C., Sanjay Kumar |
| Allahabad High Court | Read Order |
