Prayagraj (UP), Sep 17 (PTI) The Allahabad High Court has observed that the GST regime was brought by the Centre for ease of doing business in the country but revenue officers are bent upon acting against its very intent.

Allowing a writ tax petition filed by Safecon Lifescience Private Limited, Justice Piyush Agrawal held that when the actual movement of goods has been proved by an assessee and the same remains unrebutted by the authority concerned, proceedings under section 74 of the Goods and Services (GST) Act, 2017 are unjustified.

Proceedings under the said provision can be initiated if an assessee has not paid or short-paid or erroneously refunded, or the input-tax credit was wrongly availed or utilised by fraud or any wilful misstatement or suppression of facts.

"When it was noticed by the government that under the garb of section 74 of the Act, various dealers were being harassed, it issued a circular dated December 13, 2023, where it had specifically stated that proceedings under section 74 of the Act could be initiated if there is a fraud or wilful misstatement or suppression of facts to evade payment of tax and not otherwise," the court said in its judgment dated September 9.

During the court proceedings, the petitioner submitted that certain transactions were done with Unimax Pharma Chem, Purana Taluka Bhiwandi, Thane, for which invoices, e-way bills and transport bills were generated.

It was submitted that all transactions were through banking channels and tax returns were filed by the other company, declaring the transactions.

However, the petitioner was issued a notice under section 74 of the GST Act for wrongfully availing input-tax credit on the ground that the registration of the other firm was cancelled. A detailed reply was filed by the petitioner and it was rejected. The appeal filed by the petitioner was also rejected.

The petitioner pleaded that the GSTR-3B of the supplier reflected that it had deposited the tax on the transaction with the petitioner. It was pleaded that all material supporting the transaction was also produced before the authorities concerned as well as the court.

The court observed that though all documents were produced before the authorities and all arguments were noted by the latter, no weightage was given to the same while passing orders.

It observed that the GSTR-3B of the supplier and the petitioner were brought on record showing the transactions and these were not denied by the department. It held that no irregularity in the transactions between the petitioner and the supplier was recorded in the material available before the authority. It further held that the material relied upon by the authority ought to have been provided to the petitioner. PTI COR RAJ RC

GST fraud threshold: proceedings require fraud or wilful misstatement; proven movement of goods rebuts section 74 action. Section 74 actions under the GST framework are limited to cases involving fraud, wilful misstatement or suppression of facts to evade tax; the December 13, 2023 circular confirms this narrow scope. Where an assessee produces unrebutted invoices, e-way bills, transport documents, banking records and supplier GSTR-3B entries showing tax deposit, these primary materials must be weighed and any adverse material relied upon by revenue must be disclosed to the taxpayer before initiating fraud-based proceedings.