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2025 (5) TMI 561 - HC - GSTMaintainability of petition - availability of alternative remedy - Invocation of Section 74 of the Central Goods and Service Tax Act 2017 - fraudulent availment of input tax credit (ITC) based on transactions with non-existent firms - HELD THAT - In a case of present nature wherein the allegations pertain to fraudulent availment of ITC i.e. based on supply from non-existent firms and without receiving any actual supply the plea would always fall within the parameters of Section 74 of the Act as the same would be input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts . The very fact that the input tax credit was availed based on fake supplies to claim that the said fake supplies were disclosed and therefore Section 74 of the Act would not apply is totally baseless. All the pleas raised and reply to the show cause notice having been dealt with by the adjudicating authority and the challenge laid to the said finding is only factual and does not fall in any of the parameters laid down by the Hon ble Supreme Court wherein petitions under Article 226 of the Constitution of India can be entertained. Reference can be made to Jaipur Vidyut Vitran Nigam Limited and others vs. MB Power (Madhya Pradesh) Limited and others 2024 (1) TMI 1459 - SUPREME COURT . In the case of Ecom Gill Coffee Trading 2023 (3) TMI 533 - SUPREME COURT it has inter alia been laid down by Hon ble Supreme Court that ITC would be available to any dealer only after he discharges burden to establish actual receipt of goods. Mere production of invoices and payment to selling dealer by account payee cheque is not sufficient. Similar is the view expressed by a Single Judge of this Court in the case of Shiv Trading 2023 (11) TMI 1157 - ALLAHABAD HIGH COURT . There are no reason to entertain the present writ petition bypassing the availability of alternative remedy. The alternative prayer made for exempting the mandatory deposit cannot be countenanced which prayer is contrary to the statute. Conclusion - Fraudulent availment of ITC through non-existent firms attracts the provisions of Section 74 and mere documentary evidence without actual receipt of goods is insufficient to claim ITC. The statutory procedure for appeals and mandatory deposits must be followed and writ petitions are not a substitute for appeals in such matters. Petition dismissed.
Issues Presented and Considered
The core legal questions considered by the Court in this matter include:
Issue-wise Detailed Analysis 1. Justification for Invocation of Section 74 of the CGST Act Legal Framework and Precedents: Section 74 of the CGST Act pertains to cases where input tax credit has been wrongly availed or utilised by reason of fraud, wilful misstatement, or suppression of facts. The Supreme Court in State of Karnataka vs. Ecom Gill Coffee Trading Pvt. Ltd. (2023) clarified that ITC is available only after the dealer discharges the burden of proving actual receipt of goods; mere invoices and payments through account payee cheques are insufficient. Court's Interpretation and Reasoning: The Court observed that the allegations related to the petitioner's involvement in circular trading and wrongful availment of ITC through eight firms which were found to be non-existent on physical verification. The petitioner's transactions were routed through banking channels with invoices and e-way bills, but the absence of actual supply was evidenced by the non-traceability of transporters and withdrawal of funds transferred by the petitioner. The Court held that such facts squarely fall within the ambit of Section 74 as fraudulent availment of ITC. Key Evidence and Findings: The Revenue's investigation revealed that the firms from which the petitioner claimed ITC did not exist at their declared places of business. Statements from some transporters and other entities implicated the petitioner, while major transporters were untraceable. The petitioner's denial and request for cross-examination were rejected by the adjudicating authority. Application of Law to Facts: The Court applied the principle that ITC cannot be claimed without actual receipt of goods, and the evidence indicated suppression of facts and creation of fake firms to wrongfully avail ITC. The petitioner's claim that the transactions were disclosed and thus Section 74 would not apply was rejected as baseless. Treatment of Competing Arguments: The petitioner contended that the entire evidence was already with the Revenue and that the findings were erroneous. The Court noted that these were factual disputes which did not warrant interference under Article 226, especially when the adjudicating authority had dealt with the petitioner's submissions. Conclusion: Invocation of Section 74 was justified as the petitioner was involved in fraudulent availment of ITC through non-existent firms, and the factual findings of the adjudicating authority were upheld. 2. Right to Cross-examination of Witnesses Legal Framework: The right to cross-examination is a procedural safeguard in quasi-judicial proceedings. However, the adjudicating authority may refuse cross-examination if it appears to be a dilatory tactic or if the statements are not crucial to the case. Court's Reasoning: The adjudicating authority had indicated that the persons whose cross-examination was sought were not relied upon by the Department. The Court agreed that the petitioner's attempt to seek cross-examination was an attempt to delay proceedings. Conclusion: The petitioner was not entitled to cross-examination in the circumstances, and the rejection of this request was proper. 3. Waiver of Mandatory Deposit under Section 107(6)(b) of the CGST Act Legal Framework: Section 107(6)(b) mandates a deposit of 10% of the disputed tax amount at the time of filing an appeal against an order passed under the CGST Act. Court's Reasoning: The petitioner sought waiver of this mandatory deposit on grounds of hardship. The Court held that such a waiver is contrary to the statutory mandate and cannot be granted. Conclusion: The prayer for waiver of the mandatory deposit was rejected. 4. Maintainability of Writ Petition Without Availing Alternative Remedy Legal Framework: It is a settled principle that writ petitions under Article 226 challenging orders passed under the CGST Act are not maintainable if an alternative statutory remedy of appeal is available. Court's Reasoning: The Court noted that the petitioner had not availed the alternative remedy of appeal before the appropriate appellate authority. The factual nature of the challenge did not justify bypassing the statutory appellate mechanism. Conclusion: The writ petition was not maintainable and was dismissed accordingly. Significant Holdings "In a case of present nature wherein the allegations pertain to fraudulent availment of ITC i.e. based on supply from non-existent firms and without receiving any actual supply, the plea would always fall within the parameters of Section 74 of the Act, as the same would be 'input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts'." "The very fact that the input tax credit was availed based on fake supplies, to claim that the said fake supplies were disclosed and, therefore, Section 74 of the Act would not apply, is totally baseless." "ITC would be available to any dealer only after he discharges burden to establish actual receipt of goods. Mere production of invoices and payment to selling dealer by account payee cheque is not sufficient." "The alternative prayer made for exempting the mandatory deposit, cannot be countenanced, which prayer is contrary to the statute." "The challenge laid to the said finding is only factual and does not fall in any of the parameters laid down by the Hon'ble Supreme Court wherein petitions under Article 226 of the Constitution of India can be entertained." The Court established the core principle that fraudulent availment of ITC through non-existent firms attracts the provisions of Section 74 and that mere documentary evidence without actual receipt of goods is insufficient to claim ITC. The statutory procedure for appeals and mandatory deposits must be followed, and writ petitions are not a substitute for appeals in such matters. Accordingly, the Court dismissed the petition, leaving the petitioner free to pursue statutory remedies.
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