GST Act Does Not Require Toll Plaza Receipts To Prove Movement Of Goods: Allahabad High Court

The Allahabad High Court has held that the GST law does not require an assessee (taxpayer) to produce toll plaza receipts to prove the physical movement of goods and that allegations of circular trading cannot be sustained on that basis.

A bench of Justice Piyush Agrawal set aside tax proceedings initiated against a registered supplier of agricultural goods and areca nuts, noting that the tax department was unable to point to any provision under the GST Act or Rules that mandates production of toll receipts..

"The revenue has failed to bring on record any provision or rule under the GST Act as well as the rules, which compel the assessee to file toll plaza receipts in support of actual physical movement of the goods. On the contrary, e-way bill, bilty and tax invoice was produced and payments made to the transporter through banking channel and due ledger of the transporter has also been brought on record but without pointing out any defect therein, the impugned order cannot be justified in the eyes of law," the court said.

The case followed a survey at the assessee-trader's premises, after which a show cause notice was issued under Section 74 of the GST Act, a provision meant for cases involving fraud, willful misstatement, or suppression of facts.

Despite the assessee filing replies supported by invoices, e-way bills, bilty documents and bank statements, the authorities concluded that the transactions were circular in nature and passed an adverse order, which was later upheld in appeal.

Before the High Court, the taxpayer argued that there was no fraud or suppression of facts, that all purchases and sales were reflected in GST returns, and that payments to suppliers and transporters were routed through banking channels.

It was also explained that goods were at times transported in smaller vehicles over multiple trips due to logistical constraints, and that the GST law does not prescribe toll plaza receipts as proof of transport. The assessee further complained that the order was passed without granting a personal hearing.

Rejecting the department's approach, the Court said the GST Act does not mandate production of toll plaza receipts to establish movement of goods. It also stressed that proceedings under Section 74 cannot be initiated mechanically.

It said, “For initiation of the proceedings under Section 74 of the Act, the authorities are duty bound to show the reason of fraud, willful misstatement, suppression of fact for availment of input tax credit wrongly or excessive claim of input tax credit.”

Finding that the show cause notice did not contain any specific allegation or finding of fraud or suppression and that there was no evidence to support the charge of circular trading, the court held that the entire proceedings were vitiated.

The writ petition was allowed, and the tax demand was quashed.

Case Title: Raghuvansh Agro Farms Ltd. Versus State of U.P. and 2 others 

Citation: 2026 LLBiz HC (ALL) 4

Case Number: WRIT TAX No. - 3829 of 2025

For Petitioner: Advocate Aditya Pandey