The Allahabad High Court, Lucknow Bench, has stayed a show cause notice seeking Goods and Services Tax on District Mineral Foundation (DMF) expenses after the taxpayer argued that the expenses had already been disclosed in Form GSTR-9C and accompanying documents.
The Bench of Justice Shekhar B. Saraf and Justice Amitabh Kumar Rai found that the petitioner had established a prima facie case and that the balance of convenience lay in its favour.
Buy Now: All 200+ GSTAT Judgements Till November 2026 | Comprehensive E-Magazine
The Court stayed the notice dated August 5, 2026, until the decision in the writ petition. The order grants interim protection; it does not finally determine the validity of the notice or the GST liability on DMF contributions.
The petitioner/assessee challenged the demand-cum-show cause notice issued under Section 74(1) of the Central Goods and Services Tax Act, 2017, in Form GST DRC-01.
The petitioner questioned the jurisdiction to invoke Section 74, contending that the notice did not disclose fraud, wilful misstatement or suppression of facts with intent to evade payment of tax.
On this basis, the petitioner sought quashing of the notice, arguing that the conditions necessary for initiating proceedings under Section 74 had not been satisfied.
The petitioner submitted that the DMF expenses forming the subject matter of the notice had already been disclosed in Form GSTR-9C. Details of those expenses had also been annexed to the uploaded document.
The petitioner consequently maintained that there had been no misstatement or suppression of material facts and that the ingredients for invoking Section 74 were absent.
This submission was recorded by the Bench before granting interim relief. However, the Court did not make a final finding that the disclosures conclusively invalidated the notice.
The petitioner also sought a direction restraining the authorities from proceeding under the impugned notice or initiating proceedings on the same cause of action for financial years 2021-22 and 2022-23.
The request rested on the petitioner’s contention that the limitation period prescribed under Section 73 of the CGST Act had already expired.
The interim order does not adjudicate this limitation objection. It remains a contention raised in the pending writ proceedings.
As an alternative, the petitioner sought a stay of the notice and all consequential proceedings, including adjudication, enforcement and recovery of GST on DMF contribution computed on royalty, together with interest and penalty.
The prayer referred to pending proceedings in Writ Tax No. 475 of 2021 and connected matters, Supreme Court proceedings concerning GST on royalty, and an earlier High Court order dated May 14, 2025, in Writ Tax No. 2159 of 2025.
These references formed part of the relief sought by the petitioner. The present order does not settle the substantive question of whether GST is payable on royalty or DMF contributions.
After hearing the parties, the Bench held that a prima facie case had been made out and that the balance of convenience and inconvenience favoured the petitioner.
It accordingly directed “the impugned show cause notice dated 05.08.2026 is stayed until the decision in the present writ petition.”
The notice therefore remains stayed while the writ petition is pending. It has not been finally quashed.
The Court granted the respondents six weeks to file counter affidavits. The petitioner may file a rejoinder affidavit within two weeks thereafter.
The matter has been directed to be listed on January 4, 2027.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
