1. Presence of Fraud is Mandatory to Invoke Section 74 (CGST)

BP Oil Mills Ltd. vs Additional Commissioner Grade-2 & Another

Allahabad High Court | Writ Tax No. 1843/2024, 1841/2024, 1844/2024
Date: 17 November 2025

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Case Background

• Petitioner: BP Oil Mills Ltd., registered manufacturer and trader of mustard oil.
• Transactions with M/s Vijay Traders (Rajasthan) supported by:
  • Tax invoices
  • E-way bills
  • Transport/KUMS documents
  • Ledger records
  • Bank payments
• Vijay Traders’ GST registration was:
  • Active at time of transaction
  • Later cancelled
  • Subsequently restored by appellate authority

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Issue

Whether initiation of proceedings under Section 74 was valid in absence of:

• fraud,
• wilful misstatement, or
• suppression of facts with intent to evade tax.

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Legal Provisions & Circular

• Section 74 (CGST Act)
  Demand can be raised only in cases involving fraud/suppression.
• CBIC Circular dated 13.12.2023
  Clarifies Section 74 applies only where there is evidence of intentional evasion.

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Court’s Findings

1. No material evidence was produced by the department to support allegation of fraud.
2. Documentary evidence furnished by the Petitioner established:
   • physical movement of goods,
   • receipt of goods,
   • payment through banking channels.
3. Authorities ignored the restored registration, which defeats the allegation of supply from a non-existent firm.
4. Mandatory finding of intent to evade tax was absent.
5. Reliance placed on the binding circular restricting use of Section 74.

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Decision

• Orders issued under Section 74 were quashed.
• Writ petitions were allowed.

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Key Principle

To initiate proceedings under Section 74, there must be clear findings of fraud or suppression with intent to evade tax. Mere suspicion or technical discrepancies are not enough.

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2. Provisional Attachment Cannot Exceed One Year

A1 Adil Traders vs Union of India

Telangana High Court | W.P. No. 3871/2025
Date: 17 November 2025

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Background

• Petitioner challenged three provisional attachment orders (Form DRC-22) on bank accounts:
  • HDFC Bank
  • Gayatri Bank
  • Axis Bank
• Attachments were made on 11.11.2024 under Section 83(1).
• One attachment had already been vacated; two remained.

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Issue

Whether the remaining attachments could legally continue beyond one year.

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Legal Framework

• Section 83(1), (2) CGST Act:
  Provisional attachment ceases after one year from the date of order.
• Rule 159 CGST Rules:
  Procedure for provisional attachment.

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Court’s Findings

1. Attachment orders had outlived the statutory one-year period.
2. Revenue could not confirm withdrawal of attachments.
3. Continued attachment is contrary to Section 83(2).

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Decision

• Attachment orders on HDFC and Gayatri Bank accounts were quashed.
• Writ petition allowed; no order as to costs.

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Key Principle

Provisional attachment is a time-bound measure. It automatically ceases after one year unless lawfully extended.

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3. Delay in Filing Appeal Can Be Condoned Due to Consultant’s Illness

National Printing Works & Another vs Additional Commissioner (State Tax)

Calcutta High Court | WPA 10826/2025
Date: 10 November 2025

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Background

• Appeal under Section 107 was dismissed as time-barred.
• Appellate Authority calculated delay as six months.
• Petitioner explained delay due to serious illness of tax consultant supported by medical certificate.

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Issues

1. What is the actual delay?
2. Whether 93-day delay can be condoned?

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Court’s Findings

1. Actual delay = 93 days, not six months
   (statutorily permitted three months excluded).
2. Explanation based on consultant’s illness was plausible.
3. Routine GST compliance on portal does not negate dependence on consultant for appeal.
4. No gross negligence or deliberate delay.

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Decision

• Delay of 93 days condoned.
• Impugned order set aside.
• Matter remanded for decision on merits.

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Key Principle

Where delay is marginal and justified by reasonable cause, appeal must be heard on merits. Procedural delay should not defeat substantive justice.

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4. Final Demand Cannot Exceed SCN Amount

Kisan Brick Field, Para Saray vs State of U.P.

Allahabad High Court | Writ Tax No. 1284/2025
Date: 12 November 2025

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Background

• SCN dated 11.11.2024 proposed tax/penalty/interest of ₹2,34,626.52.
• Final demand order dated 16.02.2025 demanded ₹6,52,259.04.
• Petitioner challenged excess demand and absence of personal hearing.

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Legal Provision

• Section 75(7) CGST Act:
  Final order cannot exceed the amount specified in SCN or rely on new grounds.

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Court’s Findings

1. Final demand far exceeded SCN proposal.
2. Violation of Section 75(7).
3. Violation of principles of natural justice due to lack of hearing.

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Decision

• Demand order and appellate order quashed.
• Matter remanded:
  Petitioner to file reply → personal hearing → fresh order as per law.

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Key Principle

The final demand must strictly follow the SCN. Any excess amount or additional grounds render the order invalid.

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5. Pre-Notice Tax Payment Allows 15% Penalty Closure

Delhi Sales Corporation vs Principal Commissioner of Central Tax & Others

Delhi High Court | W.P.(C) 15646/2025
Date: 21 November 2025

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Background

• SCN dated 07.06.2024.
• Petitioner had already paid entire tax and interest in August 2022.
• Payment acknowledged in impugned order.

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Legal Provisions

• Section 74(5):
  If tax + interest + 15% penalty paid before SCN, proceedings concluded.
• Section 74(8):
  If paid within 30 days of SCN, penalty = 25%.

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Court’s Findings

1. Payment made well before SCN.
2. Petitioner eligible under Section 74(5).
3. No need to compel appellate remedy which causes delay.

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Decision

• If 15% penalty paid within 4 weeks, SCN deemed concluded.
• Order quashed insofar as petitioner.

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Key Principle

Pre-notice voluntary payment entitles taxpayer to closure of proceedings with 15% penalty under Section 74(5).

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Conclusion (Common Legal Themes)

Across all cases, the High Courts emphasise:

• Strict interpretation of Section 74 (penal provision)
• Time-bound nature of provisional attachment
• Natural justice and fairness in demand proceedings
• Right to appeal and condonation of genuine delays
• Encouragement of voluntary compliance