GST UPDATE

Hon’ble Court: MADRAS HIGH COURT
Case Title: KPR Enterprises vs The State Tax Officer
Petition No. & Citation: W.P.Nos.35453 of 2024

Hon’ble Judge(s)	JUSTICE C. SARAVANAN
Date of Order	12.06.2026
Outcome	In favour of the Department

Brief Facts of the Case

The petitioner, KPR Enterprises, challenged three assessment orders issued under Section 74 of the GST enactments for FY 2018-19, 2019-20 and 2020-21. The proceedings originated from an inspection conducted by the department, following which DRC-01A intimations and DRC-01 show cause notices were issued alleging suppression of turnover. The department relied upon the seigniorage fee paid by the petitioner to estimate the quantity of boulders extracted and supplied and concluded that the value of outward supplies declared in GSTR-1 returns was substantially lower than the actual supplies made. Based on the same, the department determined the escaped turnover and confirmed GST demands for the respective tax periods. the allegations of fraud, wilful misstatement and suppression were not substantiated, therefore challenged the validity of the proceedings initiated under Section 74

Relevant Section

Section 74 of the CGST Act, 2017

Question before Hon’ble Court

Whether the department was justified in invoking Section 74 and the extended period of limitation on the basis of turnover suppression inferred from seigniorage fee payments and estimated extraction of minerals?

Brief Arguments by Petitioner

No incriminating material was discovered during inspection and therefore proceedings under Section 74 were unjustified.
The impugned orders did not contain any specific findings regarding fraud, wilful misstatement or suppression of facts.
The orders were passed without granting an effective opportunity of personal hearing, thereby violating principles of natural justice.
The contractor who extracted and sold the boulders had already discharged the applicable GST liability and therefore there was no loss of revenue to the Government.

Brief Arguments by Respondent

The petitioner had substantially suppressed the value of outward supplies as reflected from the quantity of minerals extracted based on seigniorage fee records.
There were sufficient foundational facts available to invoke Section 74 as the discrepancy between declared turnover and actual extraction established suppression of turnover.
The impugned orders were detailed and passed after considering the replies submitted by the petitioner therefore these Writ Petitions are liable to be dismissed

Cases Relied Upon

Case Laws	Citation
Turbo Energy Private Limited	W.P.Nos.2142 of 2026
Fastenex Private Limited	W.P.Nos.35967 of 2024
Ispahani Estates	W.P.Nos.14487 of 2025

Findings and Judgement

Inspection Conducted Prior to Issuance of Information

The Court observed that the inspection in the present case had been conducted prior to the issuance of notice.

Estimation of Escaped Turnover Based on National Standard Method

The Court noted that the escaped turnover was estimated based on the National Standard Method to determine the value of supplies short declared by the petitioner. The Court further observed that it was highly improbable for the petitioner to have paid substantial amounts towards seigniorage fees while extracting and supplying a lesser quantity of minerals during the relevant tax periods. Accordingly, the demand was confirmed on the basis of such estimation.

Sufficient Foundational Facts Existed for Issuance of Notice under Section 74

The Court held that the substantial seigniorage fee paid by the petitioner coupled with under-declaration of outward supplies constituted a prima facie basis for invocation of the extended period of limitation under Section 74. The Court further emphasized that both Sections 73 and 74 use the expression “Where it appears”, and therefore the existence of prima facie material was sufficient for initiation of proceedings under the said provisions.

No Procedural Irregularity Warranting Interference

The Court held that it was unable to find any procedural irregularity committed by the respondent while passing the impugned orders and therefore found no ground to interfere with the same under writ jurisdiction.
Accordingly, the writ petitions were dismissed. However, liberty was granted to the petitioner to file a statutory appeal within 30 days from receipt of the order.

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GST update /2026-27/0044

GST UPDATE

Brief Facts of the Case

Relevant Section

Question before Hon’ble Court

Brief Arguments by Petitioner

Brief Arguments by Respondent

Cases Relied Upon

Findings and Judgement

Opinion

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