The Allahabad High Court has declined to intervene at the preliminary stage regarding a show cause notice issued under Section 74 of the Uttar Pradesh Goods and Services Tax (UP GST) Act, 2017, which alleges the use of fraudulent input tax credit (ITC). However, the Court has instructed the GST department to provide all detrimental materials, including the Relied Upon Documents (RUDs), statements, and any other evidence used against the taxpayer before proceeding with the adjudication process.
The bench of Justice Saumitra Dayal Singh and Justice Vivek Saran has stated that the authority put reliance on DGGI inputs, citing four transactions that allegedly include fake invoices. Whether the same prima facie satisfaction was true or not can be analysed in writ proceedings at the same phase. It declined to interrupt only because the satisfaction had been drawn ex parte.
The impugned notice issuance was performed mechanically and without the existence of jurisdictional facts required to invoke section 74 of the GST law. It was said that all transactions with the supplier, M/s Maa Kamakhaya Trading, a registered firm based in Chhattisgarh, were genuine, supported by valid tax invoices and e-way bills, and payments were made via appropriate banking channels.
The company, department previously blocked the ITC on identical allegations. HC set aside the same action in an earlier writ petition, but liberty was provided before the department to start the fresh proceedings as per the law. As per the applicant, the authorities, rather than adhering to the mentioned legal course, issued the present SCN in haste.
The State, countering the appeal filed that the dispute consists of factual problems which cannot be adjudicated in writ jurisdiction at the phase of notice. The SCN was as per the data obtained from the Director General of GST Intelligence (DGGI), showing that the invoices relied upon by the applicant were fake and that ITC had been claimed fraudulently. Standing counsel cited.
The State argued that the adjudicating authority had thoroughly considered the available evidence and had formed a preliminary opinion concerning the presence of fraud. This justified the issuance of a notice u/s 74.
Only in the presence of jurisdictional facts such as fraud, wilful misstatement, or suppression of facts, a notice u/s 74 can be issued, HC repeated. At the phase of the notice, the adjudicating authority must form a prima facie subjective satisfaction grounded on the material before the same.
The court, while denying to quash the SCN, granted procedural safeguards to the applicant. It said that before moving further, the adjudicating authority needs to face the taxpayer with all adverse material along with relied-upon documents (RUDs) and statements recorded behind its back.
Although the Court declined to dismiss the show cause notice, it provided important procedural safeguards for the petitioner. The Court directed that before proceeding further, the adjudicating authority must present the taxpayer with all adverse materials, including relied-upon documents (RUDs) and statements recorded without the taxpayer’s knowledge.
| Case Title | Pilcon Infrastructure Pvt. Ltd vs State of U.P. and Another |
| Case No. | WRIT TAX No. – 7200 of 2025 |
| For Petitioner | Adarsh Singh, Aloke Kumar, Puneet Arun |
| For Respondent | C.S.C. |
| Allahabad High Court | Read Order |
