No bogus demands under 73, 74 as well as 74A please.

In order to demonstrate all connected with GST all over India on how bogus and frivolous demands are raised by field formation even without proper application of mind resulting in wastage of time, efforts as well as energy of hardcore tax professionals   in unproductive manner, I take up a live case anonymously.

A show cause notice was issued in India on 28/09/2025 by invoking section 74 covering five financial years in a single SCN by the learned Joint Commissioner Audit. The case was heard on 11/11/2025 and orders were passed by the learned jurisdictional additional commissioner  on 20/01/2026. Though there are 12 independent allegations in the SCN, for the purpose of propagation, I take up para 3.7 involving GST demand on account that supplier has not paid GST to Government by taking recourse under section 16 (2) (c) of the CGST Act 2017.

The main allegation is that taxpayer made certain purchases during 2019-20  and it was detected at the premises of the taxpayer during September 2025 in the course of audit that the supplier’s registration got cancelled subsequently. The taxpayer has suppressed this fact and the audit team has detected this fact at the premises of the taxpayer during September 2025, as the last date for issuing SCN under section 74 stood on 30/09/2025 for the relevant financial year.

The case was properly represented before the learned additional commissioner who has passed orders on 20/01/2026 as follows:

The additional commissioner confirmed GST, interest as well as penalty as SCN was invoked under section 74 by simply quoting that the taxpayer has contravened section 16 (2) (c) of the CGST Act.

However, it was established before audit itself that movement of goods were reflected in stock, payment with applicable GST made well within 180 days as well as the fact that the buyer do not have any mechanism to check payment by supplier where the vendor base is huge and the Annual Turnover during 2019-20 was in 100’s of Crores.

The same arguments were placed before Additional Commissioner as well as the learned additional commissioner has even recorded our submissions in the OIO dated 20/01/2026 as:  

1. Possession of valid tax invoice
2. Receipt of goods/services
3. Invoices reflected in its auto populated statement GSTR 2
4. Timely payment to the invoice.

The major observations on the above OIO dated 20/10/2026 are furnished below for wide spread sharing of these kind of orders passed even in 2026 after the setting up of GSTAT.

1. None of the requirements specified either under section 74 such as intention to evade payment or suppression facts were established while issuing the SCN. Hence it was brought to the notice of the learned additional commissioner that this is in gross violation of CBIC Instructions dated 13/12/2023 and even the copy of the instruction was furnished in reply which was not considered without quoting any valid reasons for such non consideration.
2. The ITC was wrongfully denied against the verdict of the division bench of the High Court of Tripura rendered on 06/01/2026 in the matter of Sahil Enterprises Vs Union of India  reported in M/s. Sahil Enterprises Versus Union of India, through its Secretary, Government of India, Ministry of Finance, Department of Revenue, New Delhi., Commissioner, Central Goods & Services Tax, Tripura Assistant Commissioner, Tripura M/s. Sentu Dey, Represented by its Proprietor Sri Sentu Dey, Bairagi Bazar, Jumerdhepha - 2026 (1) TMI 385 - TRIPURA HIGH COURT which the learned additional commissioner while passing the OIO on 20/01/2026 was reasonably expended to adhere.
3. The sum and substance of the above order is that “Though Section 16(2) (c) of CGST is not violative of Constitution of India, it should be read down and applied only where transaction is found to be not bona fide or is a collusive or fraudulent; where transaction between purchasing dealer and supplier was bona fide and purchasing dealer paid GST to supplier but supplier failed to deposit same with Government, ITC could not be denied to purchasing dealer”.
4. Even as on 03/12/2025 itself the Allahabad High Court also ruled placing reliance on Apex Court in the matter of M/s. Saniya Traders Versus Additional Commissioner Grade-2 And Another. - 2025 (12) TMI 441 - ALLAHABAD HIGH COURT wherein the high court ruled in para 15 as Further, the Apex Court recently in the case of Shakti Karan India Ltd. on 9th October, 2025 has categorically held that on the date of transaction the selling dealer was registered. Neither the transaction

nor the invoice in question can be doubted and ITC should have been granted. Similarly, in the case of M/s Safecon Lifescience Private Limited Versus Additional Commissioner Grade 2 And Another - 2025 (9) TMI 919 - ALLAHABAD HIGH COURT this Court has taken the similar view. Further the judgment relied upon by the revenue is not of any aid as the case in hand, all the documents were on record. Moreover, the payment of tax made by the petitioner to its selling dealer have already been deposited with the revenue and the same has not been disputed at any stage. At the end, the order denying ITC due to subsequent cancellation of registration was quashed by the High court.

Even if a learned and highly experienced Additional Commissioner does not listen to CBIC Instructions as well as High Court orders, the only option available to me to stop this practice is to continue to write till such time some change takes place.

The most unfortunate thing to note here is that the Additional Commissioner is aware that this demand on supplier default in a bona fide case is going to be quashed when the taxpayer moves to the competent court.