Sec 74 GST action against traders unjustified if goods movement proven by assessee: HC

Prayagraj: Expressing concern over harassment of dealers in the garb of the GST Act, Allahabad high court has ruled that when the actual movement of goods has been proved by the assessee and the same remains unrebutted by the authority, proceedings under Section 74 of Goods and Service Tax Act are unjustified.Allowing a writ tax filed by M/S Safecon Lifescience Private Limited, Justice Piyush Agrawal in his Sept 9 judgment said the proceedings under Section 74 of GST Act can be initiated if an assessee has not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by fraud or any willful- misstatement or suppression of facts.The GST regime was brought by the central govt for ease of business in the country but the revenue officers are bent upon to act against the very theme/ intend of it, the bench said.

When it was noticed by the govt that various dealers were being harassed under Section 74 of the Act, it issued a circular in Dec 2023 specifying that proceedings under the said Section could be initiated if there is a fraud or willful misstatement or suppression of fact to evade payment of tax and not otherwise, the court pointed out.During the court proceedings, the petitioner submitted that certain transactions were done with M/s Unimax Pharma Chem, Purana Taluka Bhiwandi, Thane for which invoices, e-way bills, and transport bilty were generated. It was submitted that all transactions were done through banking channels and tax returns were filed by the other company declaring the transactions.The petitioner was issued a notice under Section 74 of GST Act for wrongfully availing ITC on grounds that the registration of another firm had been cancelled. 

A detailed reply was filed by the petitioner, which was rejected. The appeal filed by the petitioner was also rejected.The petitioner pleaded that the GSTR-3B of the supplier reflected that he 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 as well as the court.The court observed that though all documents were produced before the authorities and all arguments were noted by the authorities, no weightage was given to the same while passing orders. It observed that 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 transaction 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.