2025 (6) TMI 513 - HC - GST

Fraudulent availment of ITC - SCN which led to the passing of the consequent impugned order was not received by the Petitioner and hence no reply was filed to the SCN - HELD THAT - This Court while deciding the above stated matter being Mukesh Kumar Garg 2025 (5) TMI 922 - DELHI HIGH COURT has already taken a view in this regard that where cases involving allegations of fraudulent availment of ITC are concerned considering the burden on the exchequer and the nature of impact on the GST regime writ jurisdiction ought not to be exercised in such cases. However the Petitioner is at liberty to avail of the appellate remedy under Section 107 of the Central Goods and Service Tax Act 2017. Accordingly the Petitioner is permitted to file an appeal by 15th July 2025 along with the necessary pre-deposit mandated under Section 107 of the Central Goods and Service Tax Act 2017. If the appeal is filed within the said time period the appeal shall be adjudicated on merits and shall not be dismissed on the ground of limitation. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter include:

• Whether the writ petition filed under Articles 226 and 227 of the Constitution of India is maintainable in a case involving allegations of fraudulent availment of Input Tax Credit (ITC) under the Central Goods and Services Tax Act, 2017 (CGST Act).
• Whether the petitioner's contention that the show cause notice (SCN) was not received and that no personal hearing notice was issued constitutes a violation of principles of natural justice warranting interference by the Court under writ jurisdiction.
• The scope and limits of writ jurisdiction in the context of GST proceedings involving allegations of fraud and the appropriate forum for adjudication of such disputes.
• The applicability of statutory appellate remedies under Section 107 of the CGST Act and whether the petitioner should be relegated to such remedies instead of invoking writ jurisdiction.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Maintainability of Writ Petition in Cases of Alleged Fraudulent Availment of ITC

Relevant Legal Framework and Precedents: The Court referred extensively to its prior rulings, particularly the decision in Mukesh Kumar Garg v. Union of India & Ors., and the Supreme Court judgment in The Assistant Commissioner of State Tax vs. M/s Commercial Steel Limited. The CGST Act, 2017, particularly Section 16 (Input Tax Credit provisions) and Section 107 (appeal mechanism), form the statutory basis.

Court's Interpretation and Reasoning: The Court emphasized that allegations of fraudulent availment of ITC strike at the core of the GST regime's integrity. Section 16 of the CGST Act provides for ITC as a business-friendly incentive to avoid cascading taxation, but misuse of this provision through non-existent entities or sham transactions damages the exchequer and the GST framework.

The Court reiterated its established position that writ jurisdiction is an extraordinary remedy and should not be exercised to circumvent statutory mechanisms, especially in complex factual scenarios involving fraud. The Court held that such matters require detailed factual scrutiny which is unsuitable for adjudication under writ jurisdiction.

Key Evidence and Findings: The impugned order was passed against 428 parties, indicating a widespread and complex network of alleged fraudulent transactions. The petitioner and related parties were alleged to have floated multiple firms solely to avail ITC without actual supply of goods or services.

Application of Law to Facts: Given the serious and complex nature of the allegations, the Court found that the writ petition was not the appropriate forum. The petitioner was directed to avail statutory remedies under Section 107 of the CGST Act, which provides for appeals to the Appellate Authority.

Treatment of Competing Arguments: The petitioner argued non-receipt of SCN and absence of personal hearing notice as violations. However, the Court noted that in similar cases, writ jurisdiction was declined to avoid misuse of judicial process by unscrupulous litigants and to prevent multiplicity of litigation.

Conclusions: The Court concluded that writ jurisdiction should not be exercised in cases involving allegations of fraudulent ITC availment and that the petitioner must pursue appellate remedies.

Issue 2: Alleged Non-Receipt of Show Cause Notice and Violation of Natural Justice

Relevant Legal Framework and Precedents: Principles of natural justice, including the right to be heard and to receive notice, are fundamental. The Supreme Court judgment in Commercial Steel Limited clarified that writ jurisdiction can be invoked under exceptional circumstances such as breach of fundamental rights or violation of natural justice.

Court's Interpretation and Reasoning: The Court observed that the petitioner's claim of non-receipt of SCN and lack of personal hearing notice was not substantiated to the extent that it would amount to violation of natural justice. The Supreme Court has held that the existence of alternate statutory remedies generally precludes writ petitions unless exceptional circumstances are shown.

Key Evidence and Findings: The record indicated that notices were served appropriately, including on persons in charge of conveyance. No exceptional circumstances were demonstrated.

Application of Law to Facts: The Court found no breach of natural justice that would justify entertaining the writ petition. The petitioner was expected to utilize the statutory appellate remedy.

Treatment of Competing Arguments: While the petitioner stressed procedural lapses, the Court relied on precedent to emphasize that such issues are to be addressed in the appellate forum rather than through writ jurisdiction.

Conclusions: No violation of natural justice was established; hence, writ jurisdiction was not invoked on this ground.

Issue 3: Role of Statutory Appellate Remedy under Section 107 of the CGST Act

Relevant Legal Framework and Precedents: Section 107 of the CGST Act provides for appeals against orders passed by GST authorities. The Supreme Court has underscored the importance of pursuing these remedies before approaching courts under writ jurisdiction.

Court's Interpretation and Reasoning: The Court reiterated that the petitioner is entitled to file an appeal under Section 107 and that such appeal would be adjudicated on merits without dismissal on limitation grounds if filed within the prescribed period.

Key Evidence and Findings: One co-noticee had already preferred an appeal before the Appellate Authority, underscoring the availability and appropriateness of this remedy.

Application of Law to Facts: The Court granted liberty to the petitioner to file an appeal by a specified date with the necessary pre-deposit, emphasizing the statutory appellate mechanism as the proper forum.

Treatment of Competing Arguments: The petitioner's attempt to bypass the appellate remedy by invoking writ jurisdiction was rejected in light of the statutory scheme and judicial precedent.

Conclusions: The petitioner was directed to pursue the statutory appellate remedy under Section 107 of the CGST Act.

3. SIGNIFICANT HOLDINGS

The Court held:

"The allegations against the Petitioner in the impugned order are extremely serious in nature. They reveal the complex maze of transactions, which are alleged to have been carried out between various non-existent firms for the sake of enabling fraudulent availment of the ITC."

"The entire concept of Input Tax Credit, as recognized under Section 16 of the CGST Act is for enabling businesses to get input tax on the goods and services which are manufactured/supplied by them in the chain of business transactions... Such misuse, if permitted to continue, would create an enormous dent in the GST regime itself."

"It is the settled position that this jurisdiction ought not to be exercised by the Court to support the unscrupulous litigants."

"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."

"The petitioner is permitted to file an appeal by 15th July, 2025, along with the necessary pre-deposit mandated under Section 107 of the Central Goods and Service Tax Act, 2017. If the appeal is filed within the said time period, the appeal shall be adjudicated on merits and shall not be dismissed on the ground of limitation."

Core principles established include:

• Writ jurisdiction is an extraordinary remedy and should not be exercised in cases involving complex factual disputes of fraudulent ITC availment, where statutory appellate remedies are available.
• Allegations of fraudulent ITC availment must be examined through the statutory appellate process to protect the integrity of the GST regime and prevent multiplicity of litigation.
• Non-receipt of notices or procedural lapses must be substantiated to constitute violation of natural justice warranting writ intervention; mere allegations are insufficient.
• The statutory appellate remedy under Section 107 of the CGST Act is the appropriate forum for challenging orders passed by GST authorities and must be exhausted before approaching writ jurisdiction.

Final determinations on each issue were that the writ petition was not maintainable and was dismissed, with liberty granted to the petitioner to file an appeal under Section 107 of the CGST Act within the stipulated time frame, and that any observations made by the Court would not prejudice the appellate authority's final adjudication.