No Evidence of Tax Evasion: Gujarat HC Quashes Rs 43.43-Crore IGST Demand Against Amul

Ahmedabad: The Gujarat High Court has quashed an IGST demand of Rs 43.43 crore, along with interest and penalties, against the Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF), which owns the Amul brand. The court held that tax authorities had failed to establish fraud, wilful misstatement or suppression of facts necessary to invoke Section 74 of the CGST Act.

The dispute concerned the period from July 2017 to March 2019. The GST department alleged that GCMMF’s headquarters in Anand incurred common expenses, including advertising, IT infrastructure, legal fees, annual maintenance costs and employee salaries, for the benefit of its branches and depots across India without implementing a cross-charging mechanism under Section 25 of the CGST Act.

Following an inquiry, the authorities issued a show-cause notice on August 31, 2022, invoking the extended limitation period under Section 74 and alleging deliberate tax evasion. On January 1, 2025, an order confirmed the demand of Rs 43.43 crore.

Setting aside the demand, a bench of Justices AS Supehia and Vaibhavi Nanavati observed that even if GCMMF had cross-charged the services to its branches, the tax liability could have been paid using the input tax credit (ITC) available at the head office. The branches and depots, in turn, would have been eligible to claim the corresponding amount as ITC.

The arrangement would therefore have been revenue-neutral, the court observed, adding that the failure to cross-charge expenses, by itself, could not be treated as suppression of facts, wilful misstatement or fraud intended to evade tax.

The bench further noted that the mere allegation of failure to cross-charge internally generated services was insufficient to establish deliberate tax evasion. Since the essential conditions for invoking Section 74 had not been met, the authorities’ action reflected a clear non-application of mind, the court said while quashing the demand notice and the order confirming the tax liability. DeshGujarat