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2025 (5) TMI 1609 - HC - GSTMaintainability of a writ petition - statutory remedy available u/s 107 - Show Cause Notice issued under Section 74 and 122 of the CGST Act - fraudulently availed Input Tax Credit -fake invoices without supply of goods or services - No opportunity of personal hearing - Violation of principles of natural justice - HELD THAT - Considering the nature of the transactions and the statement made by the Petitioner before the Department this Court is of the opinion that exercising writ jurisdiction in this case is completely unwarranted. The network of firms which were being operated the question whether any actual supplies were made or not and whether ITC was fraudulently availed would be factual issues that require deeper examination of evidence and documents. There is no reason to disbelieve the Department that the personal hearing notice was issued when admittedly the Show Cause Notice and the RUDs have also been issued. Moreover Paragraph No. 8.1 of the impugned order records that the personal hearing notices have been issued. The Petitioners have been all along aware of the proceedings in the SCN. Considering the allegation of fraudulent availment of the ITC and the fact that the Petitioner in his statement states that he does not know as to where the goods were delivered and the same were given to one Mr. Gopal Sharma it is clear that there are factual issues that are required to be looked into. There is no argument of lack of jurisdiction or arbitrary exercise of power. The Supreme Court in the decision in The Assistant Commissioner of State Tax Ors. v. M/s Commercial Steel Limited 2021 (9) TMI 480 - SUPREME COURT discussed the maintainability of a writ petition under Article 226. In the said decision the Supreme Court reiterated the position that existence of an alternative remedy is not absolute bar to the maintainability of a writ petition however a writ petition under Article 226 can only be filed under exceptional circumstances. Thus the impugned order is an appealable order and the principles laid down in the abovementioned decision i.e. The Assistant Commissioner of State Tax Ors. (Supra) the Petitioners are relegated to avail of the appellate remedy. The Petitioner shall approach the Appellate Authority under Section 107 of the CGST Act along with the requisite pre-deposit by 15th July 2025. The petition is disposed of in above terms.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this matter include:
2. ISSUE-WISE DETAILED ANALYSIS Opportunity of Personal Hearing and Principles of Natural Justice Relevant legal framework and precedents: The CGST Act mandates issuance of a Show Cause Notice (SCN) and an opportunity for personal hearing before any order imposing demand and penalty is passed. The principles of natural justice require that the affected party be given a fair chance to present their case. Court's interpretation and reasoning: The impugned order records multiple dates on which personal hearings were scheduled and notes that some Noticees appeared and made oral and written submissions, while others did not. Paragraphs 8.1 and 8.2 of the impugned order explicitly state that personal hearing notices were issued and that the adjudicating authority proceeded ex-parte only due to non-cooperation by certain Noticees. Key evidence and findings: The Show Cause Notice and all Relied Upon Documents (RUDs) were served upon the Petitioners at the confirmed e-mail address [email protected]. The Petitioners did not file any reply to the SCN or appear for personal hearings despite notices being issued. Application of law to facts: The Court found no reason to disbelieve the Department's record that personal hearing notices were issued. The Petitioners' contention that no personal hearing was granted was not supported by the record. The Court held that the basic requirements of natural justice had been complied with and that the Petitioners had failed to avail themselves of the opportunity. Treatment of competing arguments: While the Petitioners disputed the issuance of personal hearing notices, the Court relied on the impugned order's clear recording of such notices and the evidence of service of SCN and RUDs. The Court found the Petitioners' argument unsubstantiated. Conclusions: The Court concluded that there was no violation of the principles of natural justice and that the adjudicating authority had duly complied with procedural requirements. Fraudulent Availment of Input Tax Credit through Fake Invoices Relevant legal framework and precedents: Sections 74 and 122 of the CGST Act deal with recovery of tax and imposition of penalties in cases of fraudulent availment of ITC. The Department's investigation under the Directorate General of GST Intelligence (DGGI) targeted firms allegedly involved in generating fake invoices without actual supply of goods. Court's interpretation and reasoning: The Court noted the statement of the Petitioner, Mr. Sunny Jagga, who admitted issuing invoices to firms which were later found to be fake or non-existent and that he did not know the locations where goods were delivered. He also stated that the invoices were issued on directions of a third party, Mr. Gopal Sharma, whom he now believes cheated him. Key evidence and findings: The investigation revealed that substantial ITC amounts were availed by the firms without actual supply. The Petitioner's own statement indicated lack of knowledge about the recipients of invoices and the delivery locations, and acceptance of possible fraud by a third party. The Petitioners failed to file any substantive reply or evidence to rebut the allegations or prove genuine supply. Application of law to facts: The Court found that these factual issues required detailed examination by the adjudicating and appellate authorities. The Petitioner's admission and failure to demonstrate genuine transactions supported the Department's case of fraudulent ITC claim. Treatment of competing arguments: The Petitioners argued against the findings and procedural aspects, but the Court emphasized the factual nature of the dispute and the necessity of further inquiry by the appropriate authorities rather than interference through writ jurisdiction. Conclusions: The Court held that the allegations of fraudulent ITC availment were serious and factual in nature, requiring adjudication through the statutory process. Maintainability of Writ Petition under Article 226 Relevant legal framework and precedents: The Court relied on the Supreme Court's decision in a recent case which clarified that writ petitions under Article 226 challenging orders passed under the CGST Act are maintainable only in exceptional circumstances such as breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to the vires of the statute. Court's interpretation and reasoning: The Court observed that none of the exceptional circumstances were present in the instant case. The Petitioners had a statutory remedy under Section 107 of the CGST Act to challenge the impugned order. The Court noted that the High Court should not entertain writ petitions that seek to re-assess factual issues which are better suited for appellate authorities. Key evidence and findings: The existence of an appealable order and the absence of any fundamental rights violation or procedural illegality were established from the record. Application of law to facts: The Court relegated the Petitioners to avail the statutory appellate remedy and directed them to approach the Appellate Authority with requisite pre-deposit by a specified date. Treatment of competing arguments: The Petitioners' contention that the writ petition was maintainable was rejected on the basis of the established legal principles and the factual matrix of the case. Conclusions: The writ petitions were held to be not maintainable and the Petitioners were directed to pursue the remedy under the CGST Act. Allegation Regarding Incorrect Date of Uploading the Order Relevant legal framework and precedents: Procedural correctness in issuance and uploading of orders is important but generally does not vitiate the order unless it causes prejudice. Court's interpretation and reasoning: The Court noted the Petitioners' allegation but observed that such an issue is procedural and can be raised in the statutory appeal. Key evidence and findings: No substantive evidence was brought to demonstrate prejudice or illegality due to the alleged incorrect date. Application of law to facts: The Court declined to entertain this issue at the writ stage and left it open for consideration in the appeal. Conclusions: The issue regarding the date of uploading the order was held to be appropriate for appellate consideration. 3. SIGNIFICANT HOLDINGS The Court established the following core principles and final determinations: "It is evident that the conduct of the Noticees is evasive. In my opinion, no purpose will be served to keep the adjudication proceedings pending in view of the non-cooperation from the Notices in the matter. I observe that even though the basic requirement of Principles of Natural Justice has been legally and dutifully complied with, the Noticees have failed to avail the opportunity. I accordingly proceed further to decide the case on merits." "The network of firms which were being operated, the question whether any actual supplies were made or not and whether ITC was fraudulently availed would be factual issues that require deeper examination of evidence and documents." "The existence of an alternate remedy is not an absolute bar to the maintainability of a writ petition under Article 226 of the Constitution. But a writ petition can be entertained in exceptional circumstances where there is: (i) a breach of fundamental rights; (ii) a violation of the principles of natural justice; (iii) an excess of jurisdiction; or (iv) a challenge to the vires of the statute or delegated legislation. In the present case, none of the above exceptions was established." "The Petitioners are relegated to avail of the appellate remedy under Section 107 of the CGST Act along with the requisite pre-deposit by 15th July, 2025. The Appellate Authority shall adjudicate the appeal on merits and not dismiss the same on the ground of limitation."
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