Electricity Consumption Alone Cannot Prove Suppressed Purchase and Sale: Allahabad HC quashes GST S. 74 Order [Read Order]

The Allahabad High Court has held that mere electricity consumption cannot form the sole basis for alleging suppression of purchases and sales under the Goods and Services Tax (GST) Act.

M/s Eco Cement India Ltd, filed a petition challenging the orders passed under Section 74 of the GST Act.

The petitioner, Eco Cement India Ltd., a public limited company engaged in the manufacture of cement and trading in iron and steel, faced inspection on 9 January 2019. Initially, proceedings under Sections 130 and 122 of the Act were initiated but later dropped.

Subsequently, relying on the same premise, the authorities initiated fresh proceedings under Section 74, alleging suppression of purchases and sales. The adjudicating authority passed an adverse order on 20 October 2022, later partly upheld by the appellate authority on 6 June 2023.

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The company challenged these orders on the ground that the adverse inference was drawn solely from excess electricity consumption noted during inspection, without any actual physical verification or weighment of stock.

Counsel for the petitioner, Adv. Aloke Kumar argued that electricity consumption varies depending on factors such as manufacturing load, crushing operations, and other technical aspects, none of which were examined by the authorities. Moreover, detailed submissions and supporting material filed by the company were ignored.

The High Court observed that the appellate authority had sustained the demand only on the ground of electricity usage, disregarding specific pleadings and explanations filed by the assessee.

Justice Piyush Agrawal held that “consumption of electricity alone cannot be a ground for determining the suppressed purchase and sale” and that various factors influencing electricity usage must be carefully considered. The Court also noted that the State had failed to rebut the company’s detailed submissions in its counter affidavit.

Finding the orders unsustainable, the Court set them aside and remanded the matter back to the Assessing Authority for reconsideration, directing that the issue of electricity consumption be examined afresh within three months. Both parties were granted liberty to adduce further evidence in support of their claims.

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