The court ruled that failing to cross-charge shared head-office costs to branches did not, by itself, establish fraud or tax evasion under GST law.
The Gujarat High Court has quashed a ₹43.43 crore goods and services tax demand against Gujarat Co-operative Milk Marketing Federation, the company behind the Amul brand, ruling that the absence of cross-charging by a head office does not by itself prove fraud or tax evasion.
The case arose from common corporate costs incurred by the federation’s head office in Anand between July 2017 and March 2019, including advertising, information technology systems, maintenance contracts, legal work and staff salaries. Tax officials said those expenses should have been allocated to branches and depots that are treated as separate persons under the GST law, and they accused the federation of suppressing the transaction to avoid tax. The company challenged the demand after a show-cause notice, arguing that the amounts were already recorded in its books and that the legal framework and later Central Board of Indirect Taxes and Customs clarifications supported its position.
According to reports on the judgment, the court found that the department had not established the conditions needed to invoke the harsher fraud provisions under Section 74 of the Central Goods and Services Tax Act. It also accepted the argument that where input tax credit is available to the recipient entity, the disputed head office services may be valued at nil under the applicable clarification. On that basis, the bench concluded that simply failing to adopt a cross-charging mechanism was not enough to justify the demand.
The ruling is significant because it narrows one of the revenue authorities’ more aggressive approaches to inter-company and inter-branch GST allocations. For large businesses with multiple registrations, the decision suggests that the tax treatment of shared overheads will depend not just on the absence of invoices between establishments, but also on the wider statutory scheme, the availability of input tax credit and whether the department can prove deliberate concealment. For Amul, the judgment removes a substantial liability that had been confirmed by an order issued on 1 January 2025.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
