Allahabad High Court quashes GST demand under Section 73 where authorities misconstrued outward sale as inward purchase and ignored contemporaneous evidence.

Case: M/s Subhash Chand and Company v. State of U.P. & Others
Citation: Writ Tax No. 513 of 2022 (with Writ Tax No. 556 of 2022)
Court/Bench: Allahabad High Court (Court No. 7)
Coram: Hon’ble Piyush Agrawal, J.
Date of Decision: 01-09-2025

Whether proceedings under Section 73 CGST/UPGST, based on an assumption of bogus inward supply from a non-existent firm, can sustain when the assessee demonstrates it was an outward sale and furnishes supporting records.

Petitioner sold sugar in December 2018 to M/s Shiv Trading Company, Delhi.

Department initiated Section 73 proceedings alleging petitioner took inward supply from the said (non-existing) firm.

Petitioner produced tax invoice, e-way bill, bank statements and related documents showing outward supply and tax payment.

Assessing authority levied tax and equal penalty; first appeal dismissed without addressing core contention.

Petitioner sold sugar in December 2018 to M/s Shiv Trading Company, Delhi.

Department initiated Section 73 proceedings alleging petitioner took inward supply from the said (non-existing) firm.

Petitioner produced tax invoice, e-way bill, bank statements and related documents showing outward supply and tax payment.

Assessing authority levied tax and equal penalty; first appeal dismissed without addressing core contention.

Demands under Section 73 must rest on proper verification and reasoned consideration of evidence; overlooking material records and mischaracterizing transactions vitiates the order.

Maintain and present complete outward-supply documentation (invoices, e-way bills, banking trail). Where demands rely on “non-existent” counterparty findings, insist on verification of your records and a reasoned order. Review any equal-amount penalties proposed under Section 73 for statutory conformity and contest unsupported levies.