State GST Officer submits Adverse Report on Bogus Firm before ITC Fraud: Allahabad HC Quashes Suspension Order [Read Order]

The Allahabad High Court has quashed the suspension of a State Tax Officer, who was accused of delay in submitting a verification report against a fraudulent GST ( Goods and Services Tax )registrant.

The Court held that the officer had already discharged his duty by submitting an adverse report identifying the firm as bogus, and that the subsequent failure to suspend the registration lay with the Assistant Commissioner.

The case arose when M/s B.K. Traders, located at Leela Road, Ekta Colony, Etawah, applied for GST registration on 13 October 2024. As per the circular dated 14 November 2018, GST registration applications are subject to verification by tax authorities, but if no action is taken within three days, deemed registration is automatically granted. In this case, deemed registration was accorded after three days.

On 3 December 2024, while posted as State Tax Officer, Malikhan Singh conducted a physical verification of the firm and submitted his report the same day, stating that the firm was bogus.

The report was transmitted to the Assistant Commissioner, who, on 5 December 2024, issued a show cause notice to the firm. However, the registration was not suspended, and on 13 January 2025 the firm fraudulently claimed ITC amounting to ₹3,01,15,690, causing loss to the state exchequer.

The Commissioner of State Tax, Uttar Pradesh, later suspended Singh on 23 August 2025 under the U.P. Government Servant (Discipline and Appeal) Rules, 1999, alleging misconduct and delay in submission of the verification report.

Singh challenged the suspension before the High Court, arguing that he had fulfilled his duty by submitting the adverse report and that responsibility for preventing the fraudulent ITC claim lay with the Assistant Commissioner.

The Counsel for the petitioner asserted that the officer’s report was timely in the context of deemed registration and was acted upon by the Assistant Commissioner, who failed to suspend the registration despite clear findings. It was argued that suspension was unwarranted, as no major penalty could be imposed for a delay that did not directly cause the fraud.

The Standing Counsel for the State conceded that the adverse report was indeed submitted on 3 December 2024 and was acted upon in issuing the show cause notice. He nevertheless contended that Singh had exceeded the 15‑day period prescribed by the circular and suggested that while suspension could be set aside, a departmental inquiry should be conducted.

The bench of Justice Vikas Budhwar, after hearing both sides, held that the suspension order could not be sustained. The Court noted that the officer’s adverse report had been submitted and acted upon before the ITC claim, and therefore prima facie no misconduct was established to justify suspension.

The Court disposed of the writ petition by setting aside the suspension order dated 23 August 2025, while clarifying that departmental inquiry could proceed and must be concluded within four months.

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