The present case concerns proceedings initiated under Section 74 of the Uttar Pradesh Goods and Services Tax (UPGST) Act against M/s Safecon Lifescience Private Limited for the tax period of April 2021.
The proceedings alleged that the company had wrongly claimed ITC through GSTR-3B, on the ground that the credit was fraudulent or otherwise ineligible.
The adjudicating authority confirmed the GST demand, and the appellate authority upheld the assessment. Aggrieved by the decision, the taxpayer approached the Allahabad High Court, contending that the transactions were genuine, the goods had been duly supplied, taxes had been paid to the suppliers, and there was no evidence of fraud, wilful misstatement, or suppression of facts with an intent to evade tax.
Important: Allahabad HC: Section 74 GST Proceedings Unjustified When Goods Movement Is Proven by Assessee
The Allahabad High Court considered these submissions and said that the essential ingredients needed for invoking Section 74 were not present and therefore set aside the assessment and appellate orders.
The Revenue contested the judgment of the HC and filed a Special Leave Petition (Civil) No. 23993 of 2026 before the Supreme Court.
Issue: Whether proceedings u/s 74 of the UPGST Act alleging a fake claim of ITC can be kept when the taxpayer has proved genuine movement of goods and tax payment and the authorities did not record any finding of fraud, wilful misstatement or suppression of facts with intent to evade tax?
Key Findings of the Court
The Apex Court did not interfere with the Allahabad High Court’s judgment and set aside the special leave petition of the revenue after condoning the delay.
The Apex Court did not deny entertaining the appeal and affirmed the finding of the HC that invocation of Section 74 was completely unjustified in the absence of any evidence proving fraud, wilful misstatement or suppression of facts.
Read Also: Orissa HC Quashes GST Proceedings, Says Reversed ITC Cannot Be Demanded Again Without Credit
The conclusion of the Allahabad High Court was correct that the taxpayer had shown actual movement of goods, genuine purchase transactions and payment of applicable tax, and that mere allegations of forged or wrongful ITC could not explain resort to the strict norms of Section 74.
The refusal of the SLP arrives at the conclusion of the High Court’s ruling and supports the principle that penal proceedings u/s 74 can be initiated only where the regulatory ingredients are established by the department.
| Case Title | Additional Commissioner Grade 2 & Anr. vs. M/s Safecon Lifescience Private Limited |
| Case No. | WTAX No. 389 of 2023 |
| For Petitioner | Mr Bhakti Vardhan Singh, Mr J Tarun Kumar, Mr Sauvik Singh, and Mr Ankit Khatri |
| Supreme Court | Read Order |
