Case Summary
Case Title: M/s Safecon Lifescience Private Limited vs. Additional Commissioner Grade-2 and Another
Court: High Court of Judicature at Allahabad
Petition No.: Writ Tax No. 389 of 2023
Date of Judgment: 09 September 2025
Category of Dispute: Input Tax Credit (ITC) – denial under Section 74
Relevant Sections: Section 16(2)(c), Section 74 of UPGST Act; Circular dated 13.12.2023; Section 11A of Central Excise Act (analogous)
Facts (Paras 2–6)
The petitioner, engaged in wholesale trading of medicines, purchased goods from M/s Unimax Pharma Chem, a registered dealer in Maharashtra, under valid tax invoices, e-way bills, and transport bilty, making payments through banking channels. Returns were filed by both parties, and taxes were reflected in GSTR-3B. The department, however, issued a notice under Section 74 alleging wrongful ITC on the ground that the supplier’s registration was later cancelled and some of its suppliers had not deposited tax. The petitioner’s reply, supported by movement documents, bank records, and GST returns, was rejected. Appeals also failed, with authorities holding ITC to be forged.
Questions before Court (Paras 7–10)
The issue was whether proceedings under Section 74 of the GST Act could be sustained when:
-
Purchases were genuine, supported by documents and banking channels.
-
Supplier was duly registered at the time of transaction.
-
No evidence of fraud, willful misstatement, or suppression of facts was found against the petitioner.
Observations (Paras 11–19)
The Court observed that:
-
The petitioner provided uncontroverted evidence of actual movement of goods, bank payments, and filing of returns (para 11–12).
-
The appellate authority relied solely on intelligence inputs without independent verification (para 13–14).
-
The report used against the petitioner was never provided, violating natural justice (para 14).
-
Section 74 requires fraud, willful misstatement, or suppression of facts to evade tax; mere non-payment of tax by another party is insufficient (para 15–17).
-
Citing Continental Foundation JV (2007) and Khurja Scrap Trading Company (2023), the Court reiterated that suppression and misstatement must be willful, with mens-rea, and not merely technical lapses (para 16–19).
Judgment (Para 20)
The Court quashed the orders of the Deputy Commissioner (12.01.2022) and the Additional Commissioner (20.12.2022), holding that initiation of Section 74 proceedings was unjustified in absence of fraud, willful misstatement, or suppression. The writ petition was allowed.
Cases Referred
| Case | Court | Ratio / Verdict |
|---|---|---|
| M/s Khurja Scrap Trading Co. vs. Addl. Commissioner (2023) | Allahabad HC | Section 74 can be invoked only when fraud, willful misstatement, or suppression to evade tax is established. |
| Continental Foundation JV vs. CCE (2007) 10 SCC 337 | Supreme Court | Suppression/misstatement must be willful and with intent to evade duty; mere incorrect information not sufficient. |
| Suraj Impex (India) Pvt. Ltd. | Supreme Court | Strict interpretation required for invoking extended limitation under excise laws. |
| Solvi Enterprises & R.T. Infotech | Allahabad HC | No adverse view if supplier was duly registered and filed returns at time of transaction. |
Between Fine Lines
This judgment makes it clear that taxpayers cannot be penalized for genuine purchases when transactions are properly documented and suppliers were registered at the time. ITC cannot be denied merely because the supplier’s supplier defaulted. Section 74 is applicable only in cases of fraud or willful misstatement, not for technical mismatches or subsequent registration cancellations.
Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”
