Raghuvansh Agro Farms Ltd. vs State Of Uttar Pradesh & Ors [ WP 3829 Of 2025] Delivered On 17 December 2025

GST authorities must act within the framework of law, respect jurisdictional boundaries, and avoid arbitrary demands that go beyond statutory provisions.

BRIEF FACTS OF THE CASE

• The Petitioner, engaged in supply of agricultural goods, was subjected to proceedings under Section 74 of the CGST Act by State GST authorities, alleging circular trading, wrongful availment of input tax credit, and non-production of toll plaza receipts.
• The State GST authorities had initiated proceedings without recording any specific finding of fraud, willful misstatement, or suppression of fact.
• The Petitioner challenged the jurisdiction of State GST authorities, arguing absence of crossempowerment notification and that the Petitioner falls under Central GST jurisdiction.
• The Petitioner also claimed that all transactions were duly disclosed in books of accounts and GST returns, the payments were made through banking channels, and submitted tax invoices, e-way bills, bilty, and bank statements as supporting documents.

KEY OBSERVATIONS OF THE HON'BLE BOMBAY HIGH COURT

• The Court relied upon its earlier decisions in the case of M/s Safecon Lifescience Pvt. Ltd. vs. Additional Commissioner Grade 2 and another [2025-VIL-971-ALH] and M/s Khurja Scrap Trading Company vs. Additional Commissioner Grade 2 (Appeal) and Another [2025-VIL-926- ALH] and observed that proceedings under Section 74 require a specific, categorical finding of fraud, willful misstatement, or suppression of fact to evade tax. And in the absence of such finding, the proceedings against the Petitioner are vitiated and without jurisdiction.
• The Court also observed that once the proceedings against the supplier of the petitioner itself had been dropped, no adverse inference can be drawn against the Petitioner on that basis. Accordingly, the allegation made by the revenue that the Petitioner is engaged in circular trading was insufficient.
• The Court also remarked that the authorities had failed to point out any defect in the tax returns furnished, and supporting documents produced by the petitioner, and the adverse inference drawn by the authorities against the Petitioner for non-production of toll plaza receipts was patently perverse and without any basis.
• The Court also supported the petitioner's specific objection to the lack of jurisdiction of the State GST authorities and plea regarding no recommendation of GST Council for issuing notification of cross-empowerment and observed that the State GST lacked jurisdiction without a cross-empowerment notification as no material was brought on record to justify them acquiring jurisdiction upon the Petitioner.

AURTUS COMMENTS

• This judgment highlights several important aspects of GST adjudication that are often not given due importance. First, it makes clear that tax authorities must strictly follow statutory requirements when invoking Section 74 of the CGST Act, and that proceedings under section 74 cannot continue without a clear finding of fraud, willful misstatement, or suppression of facts intended to evade tax.
• The judgment also addresses the issue of extraneous requirement of tax authorities from the taxpayers to prove compliance. The Court maintained that authorities cannot insist on documents that are not required under the GST law, such as toll plaza receipts, to prove movement of goods. The decision aligns with the principle that no adverse inference should be drawn in the absence of material evidence or statutory requirement.
• The Court also criticized the continuation of proceedings against the petitioner even after similar proceedings were resolved in favor of its suppliers, thereby emphasizing the need for consistency and fairness in enforcement actions.
• Lastly, the decision draws attention to the aspect that jurisdictional limits must be based on law, not on administrative convenience. The Court noted that cross-empowerment notifications have not been recommended by the GST Council so far, except in cases related to GST refunds, and the State GST authorities lacked jurisdiction in its absence.
• However, it is to be noted that the GST Policy Wing had previously clarified this matter through Circular F. No. CBEC-20/10/07/2019-GST dated 22.06.2020, issued in response to a communication from the DGGI regarding cross-empowerment of officers. The circular affirmed that the concept of cross-empowerment is inherently provided under Section 6(1) of the CGST Act and the corresponding provisions of the SGST Acts, and therefore, no separate notification is required for its implementation. Further, a notification under Section 6(1) constitutes subordinate legislation, which does not create new powers for officers under the Act but merely stipulates conditions or restrictions on the powers already conferred by statute. In the absence of any such conditions, the authority of cross-empowerment under Section 6(1) remains absolute and unconditional.
• This interpretation has been upheld by the Hon'ble High Court of Jammu & Kashmir and Ladakh in a recent batch of petitions – R.K. Ispat Ltd. vs UOI & Others [2025-VIL-1019-J&K]. Additionally, the Hon'ble Madras High Court in Writ Appeal 1805 of 2024 has stayed the operation of a Single Judge's order in batch petitions involving TVL Vardhan Infrastructure vs. The Special Secretary and Ors [2024-VIL-272-MAD] that had earlier ruled cross-empowerment impermissible without a specific notification. In view of the above, the relief granted in this judgement on the above limited point may not sustain and is prone to appeal by the Respondents.

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