Facts of the Case

Trimurti Fragrances Pvt. Ltd. and four others challenged a Demand-cum-Show Cause Notice dated 27.04.2023 issued by the Directorate General of GST Intelligence (DGGI), alleging clandestine supply of Pan Masala without payment of GST and Compensation Cess between September 2020 and December 2021. The notice sought recovery of CGST (Rs. 1,35,38,441), UPGST (Rs. 1,35,38,441), IGST (Rs. 48,90,60,658), and GST Compensation Cess (Rs. 110,60,09,016), along with smaller amounts for shortages found during a Panchnama, interest, a penalty of Rs. 17,21,916, appropriation of Rs. 51,14,925 in seized cash, and initiation of prosecution under Section 132. The petitioner alleged the notice was based on incorrect and inaccurate facts — including a mischaracterisation of trucks being loaded at the factory gate as trucks that had been 'intercepted' without documentation — and noted it had voluntarily deposited Rs. 50 crore in response.

Issues Involved

  1. Whether the High Court should intervene under Article 226 to quash a show-cause notice on the ground that its factual narrative was incorrect.
  2. Whether the petitioner should be relegated to the statutory adjudication and appellate process instead.

Petitioner's Arguments

  • The show-cause notice was issued with an oblique motive, contained numerous factual inaccuracies, and mischaracterised the loading of goods at the factory as unlawful 'interception' in transit.
  • The notice was internally inconsistent — alleging both fake invoices and undervaluation to evade duty — and did not satisfy the criteria for ascertainment of duty under Section 74.
  • The petitioner had already voluntarily deposited Rs. 50 crore in response to the notice.

Respondent's Arguments

  • The Competent Authority issued the notice only after due investigation, scrutiny of invoices and consignment notes, and verification on the GSTN portal that firms dealing with the petitioner were found to be fake/non-existent.
  • Consideration at the show-cause stage is limited to ascertaining whether tax liability has been evaded; final determination is to be made only after considering the noticee's reply, and the petitioner remained free to raise all factual objections at that stage.

Court Order / Findings

  • The Division Bench found, prima facie, that the allegations in the show-cause notice had substance, but expressly declined to go into the correctness of those allegations, since that would require fact appreciation better suited to the adjudication process.
  • It held there was no inherent lack of jurisdiction in issuing the notice, and that the argument the notice was issued with a 'premeditated mind' did not merit consideration at this stage.
  • The writ petition was dismissed, leaving the petitioner free to pursue statutory remedies (filing objections/reply and leading evidence in the adjudication proceedings), with the Court clarifying it had not adjudicated the facts and its order should not prejudice the petitioner's defence.

Important Clarification

This order does not decide whether Trimurti Fragrances actually evaded over Rs. 165 crore in GST and cess — it is a threshold ruling that a show-cause notice, even one alleging very large sums, should ordinarily be answered through the statutory reply/adjudication/appeal process rather than short-circuited by a writ petition. The 'prima facie substance' remark is a preliminary observation for the limited purpose of declining interference, not a finding of guilt or liability.

Sections Involved

  • Central Goods and Services Tax Act, 2017 — Section 74 (demand for tax not paid by reason of fraud), Section 35(6), Section 122(2)(b), Section 132 (prosecution), Section 50(1) (interest)
  • Uttar Pradesh Goods and Services Tax Act, 2017
  • Integrated Goods and Services Tax Act, 2017 — Section 20
  • GST (Compensation to States) Act, 2017

Decision – In Favour of

Disposed of in favour of the Respondents (tax department) on the threshold question — the writ was dismissed and the petitioner relegated to statutory remedies; no finding on the actual tax evasion allegations was made.

Case Details

  • Court: High Court of Judicature at Allahabad
  • Case No.: Writ Tax No. 1280 of 2023
  • Neutral Citation: 2023:AHC:217284-DB
  • Coram: Hon'ble Pritinker Diwaker, Chief Justice and Hon'ble Ashutosh Srivastava, J.
  • Date of Order: 07.11.2023

Link to Download the Order

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