The Gujarat High Court has recently quashed an IGST demand of ₹43.43 crore against Gujarat Co-operative Milk Marketing Federation Limited, popularly known as Amul. The court held that failure to allocate common expenses to branches through cross-charging does not, by itself, establish fraud or suppression of facts to evade GST.
A Division Bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati ruled that the tax authorities had failed to establish the conditions required to invoke Section 74 of the Central Goods and Services Tax (CGST) Act, 2017.
The court observed, "Thus, mere allegation that the petitioner failed to adopt cross-charging in respect of internally generated services provided by the Head Office to its branch offices cannot ipso facto lead to the conclusion that the petitioner wilfully or fraudulently evaded payment of tax or suppressed material facts with such intent.”
Amul is a farmers' cooperative federation that markets dairy products manufactured by milk cooperatives in Gujarat. Its Head Office is in Anand, where it manages the Federation's corporate activities.
The dispute concerned common expenses incurred between July 2017 and March 2019. These included advertising, IT infrastructure, maintenance services, audit charges, legal fees and litigation expenses. The expenses benefited the Head Office as well as its branches and depots but were not allocated through cross-charging.
The GST authorities alleged that these expenses, including salaries paid to Head Office employees, were attributable to services supplied to branches holding separate GST registrations. They invoked Section 74, alleging that the Federation had deliberately failed to disclose the expenditure and pay the applicable tax.
In January 2025, the Additional Commissioner of CGST confirmed an IGST demand of ₹43,43,12,441, along with interest and penalty.
The Federation argued that the expenditure was recorded in its books of account, ledgers and balance sheets. It contended that the absence of cross-charging did not establish tax evasion and that the conditions for invoking Section 74 were not met.
The Revenue argued that the Federation had deliberately avoided allocating expenses to its branches. It also pointed out that the Federation began allocating expenses and paying tax from April 1, 2019.
The court examined CBIC circulars clarifying the valuation of services between related or distinct persons. Under the clarification concerning Rule 28 of the CGST Rules, services for which the Head Office has not issued an invoice may be valued at nil where the recipient is eligible for full input tax credit (ITC).
The court noted that no tax invoices had been issued to the branches and depots for the services in question. It held that their value had to be treated as nil, leaving no tax liability in the present case.
The bench also found that the adjudicating authority had not properly examined the effect of the circulars. It ruled that the authorities could not determine the value of services by proportionately allocating expenses merely because cross-charging had not been adopted.
The court held that the adjudicating authority had mechanically invoked Section 74 on the basis of the Directorate General of GST Intelligence investigation. It had not recorded specific findings establishing fraud, wilful misstatement, or suppression of facts with intent to evade tax.
The court observed that the tax position would have been revenue-neutral because tax paid through cross-charging could have been claimed as ITC by the recipient branches and depots. It also noted that the expenditure had been recorded in the Federation's books of account.
Allowing the petition, the court quashed the order confirming the ₹43.43 crore IGST demand.
For Petitioner: Amal Paresh Dave and Paresh M. Dave, Advocates
For Respondents: Hetvi H. Sancheti, Senior Standing Counsel