Gujarat High Court quashes ₹43.4-crore GST demand on Amul, treating un-invoiced services to branches as nil-valued under CBIC circular

The Federation incurred common corporate expenses at its Head Office (HO) in Anand, including advertising, IT, legal and employee-related expenses, which also benefited its branches and depots.

For the disputed period, July 2017 to March 2019, it did not allocate those expenses to the branches through cross-charging or issue tax invoices for the services in question.

The GST authorities treated the HO and separately registered branches as distinct persons and, by an order dated 1 January 2025, confirmed an IGST demand of ₹43,43,12,441 under Section 74 of the CGST Act, with interest and penalty.

The Federation challenged that order by writ petition, relying, among other things, on CBIC Circulars dated 17 July 2023 and 26 June 2024.

Whether the value of services allegedly supplied by the HO to distinct branches could be assessed on a proportional cross-charge basis despite the absence of tax invoices and the CBIC circulars concerning valuation under Rule 28.

Whether the conditions for invoking the extended limitation and penalty provisions under Section 74—fraud, wilful misstatement or suppression of facts with intent to evade tax—were established.

Sections 25(4) and 25(5) of the CGST Act treat separately registered establishments as distinct persons; read with Section 7 and Entry 2 of Schedule I, supplies between distinct persons in the course or furtherance of business may be taxable even without consideration.

Rule 28 of the CGST Rules governs valuation of supplies between distinct persons. CBIC Circular No. 199/11/2023-GST, as further clarified by Circular No. 210/4/2024-GST, states that where the recipient is eligible for full ITC and the HO has not issued an invoice for a service, its value may be deemed to be nil under the second proviso to Rule 28.

Section 74 requires the statutory ingredients of fraud, wilful misstatement or suppression with intent to evade tax; their mere recitation is insufficient.

The Court applied the Supreme Court’s decision in Tata Steel Ltd. v. Union of India, 2026 (189) taxmann.com 520 (SC), on the need for foundational facts supporting those allegations.

The Court accepted that separately registered branches could be distinct persons and that supplies between them may fall within Schedule I.

However, the HO had issued no invoices for the services at issue, and the Court held that the CBIC circulars required their value to be treated as nil; the adjudicating authority had not properly addressed that valuation consequence and had instead rejected the circulars on the ground that the Federation had not shown full ITC for a particular branch.

The Court also found that the Section 74 order relied on the DGGI investigation and the alleged non-disclosure without identifying foundational facts establishing fraud, wilful misstatement or suppression with intent to evade tax.

It further considered the recorded expenditure and the prospect of corresponding ITC at the recipient branches inconsistent with inferring such intent merely from the absence of cross-charging.

It allowed the writ petition and quashed and set aside the Order-in-Original dated 1 January 2025; the Rule was made absolute.