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ORISSA HIGH COURT : CUTTACK
HARISH TANDON, MURAHARI SRI RAMAN, JJ.
M/s. Manoja Kumar Nayak - Petitioner
Versus
Commissioner, Goods and Services Tax and Central Excise – Respondent
W.P.(C) No.12682 of 2025, W.P.(C) No.12686 of 2025
Decided On : 08-04-2026
Key Points: - The Court quashed the Order-in-Original and held that Section 74 cannot be invoked mechanically and requires independent evidence beyond third-party alerts. (!) (!) (!) - The petitioner had voluntarily reversed ITC due to a supplier being non-existent, and the court found no sustaining basis for demanding tax or imposing penalty, given the balanced ledger and Circular clarifications on interest. (!) (!) (!) - The decision emphasizes that extended period under Section 74 is not tenable without wilful misstatement, fraud, or suppression of facts to evade tax, citing NORTHERN OPERATING SYSTEMS and Lipi Boilers references. (!) (!) (!) - The Court notes double taxation arises where ITC already reversed is demanded again as tax, with penalty equaling the same amount, and it concludes such action is unsustainable. (!) (!) - It acknowledges that reversal before SCN and existence of surplus Electronic Credit Ledger can negate interest under Section 50 and that penalty under Section 74 should not be imposed in such circumstances. (!) (!) (!) - The petitions are allowed; the writ petitions are disposed of with no order as to costs. (!) (!)
| Table of Content |
|---|
| 1. assailing order-in-original under gst act (Para 1) |
| 2. petitioner's case background and legal standing (Para 2 , 3) |
| 3. hearing process and involvement of parties (Para 4) |
| 4. arguments and submissions regarding jurisdiction and fraudulent acts (Para 5 , 6) |
| 5. court's analysis on evidence and its implications (Para 7 , 8) |
| 6. further considerations on interest under gst provisions (Para 9) |
| 7. conclusion regarding the invalidity of the gst authority's actions (Para 10 , 11) |
| 8. final order quashing previous decisions and petitions (Para 12 , 13 , 14) |
JUDGMENT :
MURAHARI SRI RAMAN, J.
Assailing the Order-in-Original dated 03.02.2025 and Order dated 04.02.2025 under Section 74 read with Summary of the Order dated 04.02.2025 in Form DRC- 07, passed by the GST and Central Excise, Angul-I Range (Annexures-5 and 6) for the Financial Year 2017- 18 covering tax periods July, 2017 to March, 2018, whereby and whereunder not only tax equivalent to input tax credit, which had already been reversed in the subsequent returns, but also interest thereon under Section 50 is levied and penalty imposed by way of initiating proceeding under Section 74 of the Central Goods and Services Tax Act, 2017 read with Section 20 of the Integrated Goods and Services Tax Act, 2017, in connection with Summary Show Cause Notice and Demand Show Cause Notice, both dated 26.07.2024 (Annexure-3), by way of filing petition being W.P.(C) No.12682 of 2025, the petitioner craves indulgence of this Court by exercising power under Articles 226 and 227 of the Constitution of India.
1.1. Assailing the Order-in-Original dated 04.02.2025 passed under Section 74 read with Summary of the Order dated 05.02.2025 in Form DRC-07, passed by the GST and Central Excise, Angul-I Range (Annexures-6 and 7) for the Financial Year 2017-18 covering tax periods July, 2017 to March, 2018, whereby and whereunder not only tax equivalent to input tax credit, which had already been reversed in the subsequent returns, but also interest thereon under Section 50 is levied and penalty imposed by way of initiating proceeding under Section 74 of the Central Goods and Services Tax Act, 2017 read with Section 20 of the Integrated Goods and Services Tax Act, 2017, in connection with Summary Show Cause Notice and Demand Show Cause Notice, both dated 26.07.2024 (Annexure-3), by way of filing petition being W.P.(C) No.12686 of 2025, the petitioner craves indulgence of this Court by exercising power under Articles 226 and 227 of the Constitution of India.
Case of the petitioner:
2. At the outset, since it is submitted at the Bar that both the cases are identical and arises out of similar orders passed by the same authority by taking cognizance of allegation contained in Alert Notice of the DGGI, Kolkata Zonal Unit relating to self-same alleged non-existent supplier vis-a-vis input tax credit availed by both the petitioners, which was voluntarily reversed, the factual narration contained in W.P.(C) No.12682 of 2025 is taken as the lead case for convenience of adjudication of issues flagged in the cases.
3. The petitioner, registered under the provisions of the Central Goods and Services Tax Act, 2017/the Odisha Goods and Services Tax Act, 2017 (collectively be called “GST Act”) and assigned GSTIN: 21AANPN1032G2Z6, is engaged in the business of transportation and execution of works contract.
3.1. The Superintendent (Anti-Evasion), CGST and Central Excise, Rourkela Commissionerate issued a Letter dated 12.07.2024 requesting the petitioner-recipient to reverse input tax credit to the tune of Rs.4,39,970/- along with applicable interest and penalty, as M/s. Auxesia Traders, Kolkata (GSTIN: 19APGPB1744M1ZS), the supplier, was alleged to be non-existent entity which issued fake/bogus invoices. The input tax credit so availed by the petitioner was in contravention of Section 16(2) of the GST Act. Responding to said letter, the petitioner submitted a reply dated 17.07.2024 that he voluntarily reversed the input tax cr
Tax authorities must provide substantial evidence of fraud or suppression of facts before imposing penalties under Sections 74 and 50, especially when input tax credit has already been reversed volun....
Proceedings under Section 74 of the CGST Act cannot be initiated without evidence of fraud or misstatement if prior proceedings under Section 73 have been concluded.
The court ruled that inadvertent misclassification of IGST as CGST and SGST does not constitute excess credit utilization, especially when no revenue loss occurs.
Non-payment of GST does not automatically imply fraud or wilful misstatement; evidence of intention to evade tax is necessary for penalties under Section 74 of the CGST Act.
Non-payment of GST does not imply fraud unless there is evidence of intent to evade tax; penalties under Section 74 can be upheld for wilful suppression of facts.
Compliance with notification conditions for availing input tax credit is essential; failure leads to denial of benefits and imposition of penalties.
The liability of interest under Section 50 of the JGST Act cannot be raised without initiating adjudication proceedings under Section 73 or 74 if the taxpayer disputes the liability of interest.
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