The Allahabad High Court has quashed a GST demand order passed under Section 74(9) of the Uttar Pradesh Goods and Services Tax Act, 2017, holding that an order invoking the fraud-based provision must disclose the circumstances and material on the basis of which the tax authority arrived at the requisite satisfaction. 

The bench of Justice Jaspreet Singh has set aside the appellate order that had rejected the taxpayer’s appeal as time-barred.

The petitioner/assessee challenged an order dated April 29, 2024, passed by the competent GST authority while exercising powers under Section 74(9) of the GST Act, 2017. The order had determined a deficiency in tax and also imposed interest and penalty.

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The taxpayer also challenged a subsequent order dated May 27, 2026, by which the appellate authority dismissed the appeal on the ground of limitation.

The central controversy before the High Court was therefore not merely the correctness of the tax demand, but whether the original authority had legally justified its decision to invoke the stringent provisions of Section 74, and whether an allegedly jurisdictionally defective order could stand merely because the taxpayer’s appeal was subsequently held to be beyond limitation.

The petitioner argued that proceedings under Section 74 had been initiated against the firm, but the order dated April 29, 2024 contained no reason or explanation showing how or why Section 74 was attracted.

The taxpayer specifically pointed out that Sections 73 and 74 operate in different circumstances. According to the petitioner’s submission, Section 74 can be invoked only when the tax authority arrives at the requisite subjective satisfaction that there has been non-payment or short payment of tax, or erroneous refund or wrongful availment/utilisation of input tax credit, involving fraud, wilful misstatement or suppression of facts.

The petitioner contended that the order did not disclose the material available before the authority which led it to invoke Section 74 in the first place.

This omission, according to the taxpayer, went to the very jurisdiction of the authority. The petitioner further submitted that no effective opportunity of hearing had been granted before the original order was passed.

Appearing for the State Revenue, Additional Chief Standing Counsel Vikram Soni attempted to defend the impugned orders.

However, the State could not dispute the fundamental proposition advanced by the taxpayer—that invocation of Section 74 required subjective satisfaction on the part of the authority and that the order itself had to disclose the circumstances and material on which such satisfaction was founded.

The Court therefore examined the validity of the original order from the perspective of whether it disclosed a legally sustainable basis for invoking Section 74.

The High Court found the deficiency in the original order to be fundamental.

Justice Jaspreet Singh observed that, for invoking Section 74, the authority was required to record the necessary subjective satisfaction and the order had to disclose under what circumstances and on what material the authority proceeded to determine the tax deficiency and impose interest and penalty.

The Court found that the order dated April 29, 2024 was “per se without jurisdiction, non speaking and non reason.”Because of this foundational defect, the Court held that the defective order could not prevent the exercise of the High Court’s writ jurisdiction under Article 226 of the Constitution.

This finding was particularly significant because the taxpayer’s statutory appeal had already been dismissed as barred by limitation. The High Court nevertheless entertained the writ petition because the defect in the original order went beyond an ordinary error on merits.

The State’s appellate order dated May 27, 2026 had rejected the taxpayer’s appeal on limitation grounds. Ordinarily, a statutory remedy dismissed as time-barred can create a significant hurdle for a taxpayer seeking writ relief.

In the present case, however, the High Court found that the original Section 74 order itself suffered from a jurisdictional and procedural defect. The Court therefore did not treat the limitation finding in the appellate proceedings as a bar to examining the legality of the original order.

The decision reinforces the distinction between a case where a taxpayer merely seeks reconsideration of the merits of a valid order and one where the foundational order itself is alleged—and found—to be legally unsustainable.

Having found the original order to be without jurisdiction, non-speaking and lacking reasons, the High Court quashed and set aside both the April 29, 2024 order and the May 27, 2026 appellate order.

The matter was remitted to the original authority. The Court directed the petitioner to appear before the authority, which must thereafter provide an opportunity of hearing and reconsider the matter in accordance with law.

The writ petition was accordingly allowed, with the Court directing that there would be no order as to costs.

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