The Gujarat High Court has continued interim protection granted to Ford India Private Limited in proceedings challenging show-cause notices and orders raising substantial Goods and Services Tax demands under Section 74 of the Central Goods and Services Tax Act, 2017.
The bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati observed, prima facie, that the orders passed against the automobile company reflected the adjudicating authority’s inability to closely analyse the delivery details, corresponding e-way bills, invoices and other supporting records furnished by the company.
Considering the complexity of the transactions and the substantial volume of invoices and e-way bills involved, the High Court issued rule in Ford India’s petitions and directed that the ad-interim relief granted on February 5, 2026, would remain in operation until the final disposal of the proceedings.
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Ford India approached the High Court through two special civil applications challenging show-cause notices and consequential orders-in-original issued under Section 74 of the CGST Act.
One proceeding involved a demand of approximately Rs. 4.57 crore, while the other involved a demand exceeding Rs. 1,936.67 crore.
The dispute arose from audit queries issued by the Director General of Audit (Central), Ahmedabad, on June 14, June 15 and August 3, 2023. The audit authorities allegedly noticed suppression of taxable value when the figures declared in the company’s returns were compared with the information appearing in its e-way bills.
Based on the audit objections, proceedings were initiated against the company for alleged wrongful availment of input tax credit and other discrepancies by invoking Section 74 of the CGST Act.
Senior Advocate Mihir Joshi, appearing for Ford India, argued that the company had provided all the relevant documents and explanations sought by the department. These details were also recorded in paragraph 15.3 of the orders-in-original.
It was submitted, however, that the adjudicating authority disregarded the material by stating that it was not possible to determine how the supplies were reflected in the relevant GST returns.
Ford India contended that the authority failed to arrive at its conclusions based on the documents placed on record. Instead, it expressed difficulty in understanding and reconciling the e-way bill data for Financial Year 2018-19 because no suitable mechanism was available to analyse it.
The company informed the Court that the records concerned approximately 4.5 lakh e-way bills and 2.5 lakh invoices.
According to Ford India, despite the volume and complexity of the records, the adjudicating authority never called upon it to submit any additional invoices, e-way bills or other supporting documents before passing the orders.
Ford India further submitted that the audit authorities had asked the jurisdictional Range Officer to examine the alleged inconsistencies and take appropriate action, wherever applicable, under Section 61 of the CGST Act.
Section 61 empowers the proper officer to scrutinise returns filed by a registered taxpayer, verify their correctness and seek an explanation regarding any discrepancy noticed during such scrutiny.
The company maintained that it supplied extensive documentary evidence to the Range Officer following the audit queries. However, instead of conducting the scrutiny contemplated under Section 61, the authorities merely informed the company that discrepancies existed.
It was argued that the prescribed procedure for scrutiny of returns was not followed before proceedings under Section 74 were initiated.
The company also challenged the department’s decision to invoke the extended limitation period available under Section 74.
Ford India argued that there was no suppression of facts or intention to evade tax. The disagreement arose only because the authorities allegedly failed to undertake a detailed reconciliation of the company’s e-way bills, invoices and GST returns.
It was further contended that the show-cause notices did not contain any specific allegation that tax liability disclosed in the e-way bills generated by the company had been evaded.
The company claimed that the large number of e-way bills and invoices voluntarily furnished to the authorities itself demonstrated the absence of any intention to conceal transactions or evade GST.
Opposing the petitions, the Union government argued that Ford India had been given sufficient opportunity to provide the relevant information but failed to furnish complete details concerning the invoices and e-way bills.
The department submitted that the records produced by the company revealed discrepancies when they were closely examined.
Reliance was placed on Section 155 of the CGST Act, which provides that where a person claims eligibility for input tax credit, the burden of proving such eligibility rests upon that person.
The government also contended that compliance with the scrutiny procedure under Section 61, read with Rule 99 of the CGST Rules, was not a mandatory prerequisite for initiating proceedings under Section 74.
After hearing both sides, the High Court found that the petitions required consideration.
The bench referred to the observations contained in paragraph 15.11 of the orders-in-original. While examining invoice details submitted by Ford India in Microsoft Excel format, the adjudicating authority recorded that the data contained more than 2,000 entries for Financial Year 2018-19 alone.
The authority stated that it was not possible to determine which particular invoices were affected by the alleged error and how those invoices were subsequently reconciled in the relevant returns.
A similar inability was expressed regarding the reconciliation of supporting documents forming part of the company’s books of account, including its purchase registers.
The High Court observed that the orders-in-original prima facie demonstrated the adjudicating authority’s inability to closely analyse the details relating to delivery channels, corresponding e-way bills and invoices.
The Court noted that Ford India was never asked by the adjudicating authority to furnish any additional material before the demands were confirmed.
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