Supreme Court Dismisses SLP Since Section 74 Demands Fail Without Specific Findings Of Fraud

Supreme Court Dismisses SLP Since Section 74 Demands Fail Without Specific Findings Of Fraud

• The Revenue issued a Show Cause Notice under Section 74 to the assessee seeking to deny ITC claimed via GSTR-3B on purchases from a supplier whose registration was subsequently cancelled.
• The assessee filed a detailed reply establishing the actual movement of goods, tax payment made through banking channels, and return filings reflected in GSTR-3B for both parties.
• The adjudicating authority and first appellate authority rejected the assessee’s reply and appeal, alleging forged ITC based on GSTR-2A mismatches.
• The High Court set aside the demand orders, holding that the assessee provided unrebutted proof of goods movement and banking payments, and no findings of fraud, willful misstatement, or suppression were recorded.
• The Revenue filed a Special Leave Petition (SLP) before the Supreme Court challenging the High Court’s order.

• The Supreme Court found no valid grounds to entertain the Revenue’s petition.
• The SLP was dismissed, ruling entirely in favor of the assessee.

• Section 74 cannot be invoked without explicit, recorded findings of fraud, willful misstatement, or suppression of facts.
• Where a buyer produces concrete evidence of actual physical receipt of goods and payment through banking channels, ITC cannot be denied solely due to a supplier’s subsequent registration cancellation or GSTR-2A mismatches.
• Reassessment and demand proceedings initiated under fraud provisions without supporting material evidence are legally unsustainable.