TaxTMI 
TaxTMI 
TaxTMI 
Part One. The Story
M/s.Singhal Iron Traders purchased goods during February 2019 and March 2019. Full dues were paid to supplier through banking channel. Supplier filed GSTR 1 as well as GSTR 3B up to March 2019 correctly and paid the taxes. Only due to the fact that the suppliers registration got cancelled on 30/04/2019, both the adjudicating officer as well as Additional Commissioner (Appeal) passed adverse orders.
Show Cause Notice was issued on 01/04/2021 well within the time permissible under section 73, but section 74 was applied while issuing SCN only to impose the penalty. The SCN was duly replied with all supporting documents, despite the fact that the tax authorities are aware that applicable taxes have been duly paid as reflected from the respective GSTR 3 of the supplier for the period under dispute.
The adjudication officer passed orders on 30/09/2021 confirming reversal of ITC of Rs. 6,75,194 and also imposed penalty of Rs. 6,75,194 as the SCN was issued applying section 74. Aggrieved by the above order, appeal was filed before Additional Commissioner (Appeal). Without considering the merits of the case, appeal was dismissed on 23/06/2022.
Left with no option, Singhal Iron Traders approached the jurisdictional high court by way of writ. The High Court examined the case in depth and quashed and set aside both the orders passed by Assistant Commissioner as well as Additional Commissioner and allowed the appeal on 26/09/2025.
Case reported in M/s Singhal Iron Traders Versus Additional Commissioner And Another - 2025 (10) TMI 59 - ALLAHABAD HIGH COURT.
Part two- Questions to be answered.
1. Despite clear instructions from CBIC vide instruction dated 13/12/2023, the provision of Section 74 was wrongly applied. The instruction reads as below: “From the perusal of wording of section 74(1) of CGST Act, it is evident that section 74(1) can be invoked only in cases where there is a fraud or wilful mis- statement or suppression of facts to evade tax on the part of the said taxpayer. Section 74(1) cannot be invoked merely on account of non-payment of GST, without specific element of fraud or wilful mis-statement or suppression of facts to evade tax. Therefore, only in the cases where the investigation indicates that there is material evidence of fraud or wilful misstatement or suppression of fact to evade tax on the part of the taxpayer, provisions of section 74(1) of CGST Act may be invoked for issuance of show cause notice, and such evidence should also be made a part of the show cause notice”.
2. All the required information to prove that ITC is eligible such as payment made to supplier, supplier paid the applicable taxes to Government, there was no loss to Government as applicable taxes have been paid are all record. All facts totally ignored and adverse orders passed keeping revenue as the sole objective.
3. Even the Additional Commissioner (Appeal) ignores instructions of top bosses in CBIC who have instructed not to invoke 74 where the same is not applicable.
4. The adjudication officer as well as First Appellate Authority have not gained anything as both the orders have been quashed by the Allahabad High Court.
5. The officers have not only wasted their own time by passing the above orders which do not have any leg to stand, but also put the taxpayer in to difficulties. Above all, precious time of the High Court is also wasted on procedural issues rather than on interpretation of a legal provision.
6. Is it not the right time for the GST Council as well as CBIC to stop passing of such orders which are most likely to be quashed subsequently by the GSTAT, which is already operationalized as on date.