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2025 (6) TMI 1067 - HC - GSTFraudulent availment of Input Tax Credit - SCN and impugned order have been passed by different authorities - consolidated SCN has been issued for multiple financial years. Fraudulent availment of Input Tax Credit - SCN and impugned order have been passed by different authorities - HELD THAT - The nature of the allegations against the Petitioner in the present case as is clear from the SCN as also the impugned order is that the Petitioner in collusion with other entities has taken substantial benefit of ITC without sale of any goods or services. This strikes at the root of the Input Tax Credit facility which is recognised in the GST regime. An appeal before the appellate authority is a full-fledged remedy provided under Section 107 of the Central Goods and Service Tax Act 2017. The contentions that the Petitioner wishes to raise can always be raised in appeal in as much as this Court has already taken a view in Mukesh Kumar Garg vs. Union of India Ors 2025 (5) TMI 922 - DELHI HIGH COURT In the said case the Court has already taken a view in this regard that where cases involving 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 usually exercised in such cases. Consolidated SCN has been issued for multiple financial years - HELD THAT - In so far as the issue pertaining to the issuance of consolidated SCN and impugned order for multiple financial years is concerned the decision in W.P. (C) 4392/2025 titled Quest Infotech Pvt. Ltd. Anr. v. Union of India 2025 (5) TMI 1357 - DELHI HIGH COURT which may be passed by this Court shall bind the future proceedings as well if the Petitioner chooses to go in appeal against the impugned order. Conclusion - i) The writ petition challenging the impugned order is dismissed for lack of exceptional circumstances and availability of statutory appeal remedy. ii) Allegations of fraudulent ITC claims require detailed factual inquiry and are not amenable to adjudication in writ jurisdiction. Petition disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this matter are: (i) Whether the writ petition filed under Article 226 of the Constitution of India challenging the impugned order under the Central Goods and Services Tax Act, 2017 (CGST Act) is maintainable, given the existence of a statutory remedy under Section 107 of the CGST Act; (ii) Whether the issuance of a consolidated Show Cause Notice (SCN) and consequent impugned order covering multiple financial years is permissible and legally valid; (iii) Whether the allegations of fraudulent availing of Input Tax Credit (ITC) by the Petitioner, as set out in the SCN and impugned order, justify interference by the High Court in writ jurisdiction; (iv) The applicability of principles of natural justice and procedural propriety in the issuance of the SCN and passing of the impugned order, especially in light of the fact that the SCN and impugned order were passed by different authorities; (v) The broader question of the scope of writ jurisdiction in cases involving complex factual matrices concerning fraudulent ITC claims under the GST regime. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Maintainability of Writ Petition under Article 226 vis-`a-vis Statutory Remedy under Section 107 of the CGST Act Legal Framework and Precedents: The Court relied heavily on the Supreme Court's ruling in a landmark case where it was held that writ petitions under Article 226 challenging orders passed under the CGST Act are maintainable only under exceptional circumstances. These exceptions include breach of fundamental rights, violation of principles of natural justice, excess of jurisdiction, or challenge to the vires of the statute or delegated legislation. The existence of an alternate statutory remedy under Section 107 (appeal to the Appellate Authority) ordinarily bars the maintainability of writ petitions. Court's Interpretation and Reasoning: The Court found that none of the exceptional circumstances were established by the Petitioner. There was no breach of fundamental rights or violation of natural justice, as proper notices were served. The Court emphasized that the assessment of facts and merits of the case are to be examined by the appellate authority and not in writ jurisdiction. The Court also referred to a similar ruling by the Allahabad High Court reinforcing that interference on merits through writ jurisdiction is inappropriate. Key Evidence and Findings: The SCN and impugned order were detailed and based on factual allegations of fraudulent ITC claims. The Petitioner had not demonstrated any procedural irregularities or fundamental legal infirmities to justify bypassing the statutory appeal mechanism. Application of Law to Facts: The Court applied the settled legal principle that writ jurisdiction is extraordinary and not a substitute for statutory remedies. Given the availability of appeal under Section 107, the writ petition was not maintainable. Treatment of Competing Arguments: The Petitioner argued procedural irregularities and multiple authorities issuing SCN and order, but the Court held that such contentions can be raised before the appellate authority. The Court rejected the Petitioner's attempt to circumvent the statutory appeal process. Conclusion: The writ petition was not maintainable as no exceptional circumstances were shown, and the Petitioner must pursue remedy through appeal under Section 107. Issue (ii): Legality of Consolidated SCN and Impugned Order Covering Multiple Financial Years Legal Framework and Precedents: This issue was noted to be under consideration by the Court in a separate writ petition. The Court did not decide this issue finally but observed that any decision in the related case would be binding on future proceedings. Court's Interpretation and Reasoning: The Court refrained from expressing any conclusive view on the validity of consolidated SCNs spanning multiple years, leaving the matter open for adjudication in the pending case. Key Evidence and Findings: The Petitioner raised this issue as a ground of challenge, but the Court deferred it to the related pending proceedings. Application of Law to Facts: No direct application was made as the issue was reserved for future adjudication. Treatment of Competing Arguments: The Court acknowledged the Petitioner's contention but did not entertain it at this stage. Conclusion: The issue remains pending and will be governed by the outcome of the related writ petition. Issue (iii): Allegations of Fraudulent Availment of ITC and Suitability of Writ Jurisdiction Legal Framework and Precedents: The Court extensively referred to its prior decision in a similar case involving fraudulent ITC claims. The CGST Act's Section 16 governs ITC entitlement, which is a key feature of the GST regime designed to avoid cascading taxes. Fraudulent claims undermine the GST system and cause substantial loss to the exchequer. Court's Interpretation and Reasoning: The Court observed that the allegations reveal a complex network of transactions involving non-existent firms to fraudulently avail ITC. The Court noted the serious nature of such allegations and the potential impact on the GST regime. It held that writ jurisdiction is not the appropriate forum to adjudicate complex factual disputes involving fraud and that such matters require detailed factual inquiry by the appellate authority. Key Evidence and Findings: The impugned order detailed the Department's findings that the Petitioner colluded with other entities to claim ITC without actual supply of goods or services. The quantum involved was substantial (over Rs. 20 lakhs). Application of Law to Facts: The Court applied the principle that the CGST Act provides a full-fledged appeal mechanism for such disputes and that writ jurisdiction should not be exercised to support unscrupulous litigants or to interfere with factual assessments. Treatment of Competing Arguments: While the Petitioner sought to challenge the factual basis of the order, the Court held that such challenges are to be addressed in appeal and not in writ jurisdiction. The Court also emphasized the need to avoid multiplicity of litigation and contradictory findings. Conclusion: The writ petition is not the proper forum to challenge allegations of fraudulent ITC claims; the Petitioner must avail the statutory appeal remedy. Issue (iv): Procedural Validity Regarding Different Authorities Issuing SCN and Impugned Order Legal Framework and Precedents: The principles of natural justice and procedural fairness require that the person affected has an opportunity to be heard and that the authority issuing the order has jurisdiction. Court's Interpretation and Reasoning: The Court noted that the Petitioner's complaint that the SCN and impugned order were issued by different authorities did not amount to a violation of natural justice or jurisdictional excess. Proper notice was served, and the Petitioner had an opportunity to respond. Key Evidence and Findings: The record showed that notices were duly served, and the Petitioner participated in the proceedings. Application of Law to Facts: The Court found no procedural infirmity warranting interference in writ jurisdiction. Treatment of Competing Arguments: The Petitioner's contention was rejected as insufficient to invoke writ jurisdiction. Conclusion: No procedural violation was established; the matter is to be addressed in appeal. 3. SIGNIFICANT HOLDINGS "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 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. The said facility is a major feature of the GST regime, which is business friendly and is meant to enable ease of doing business." "It is observed by this Court in a large number of writ petitions that this facility under Section 16 of the CGST Act has been misused by various individuals, firms, entities and companies to avail of ITC even when the output tax is not deposited or when the entities or individuals who had to deposit the output tax are themselves found to be not existent. Such misuse, if permitted to continue, would create an enormous dent in the GST regime itself." "The Court, in exercise of its writ jurisdiction, cannot adjudicate upon or ascertain the factual aspects pertaining to what was the role played by the Petitioner, whether the penalty imposed is justified or not, whether the same requires to be reduced proportionately in terms of the invoices raised by the Petitioner under his firm or whether penalty is liable to be imposed under Section 122(1) and Section 122(3) of the CGST Act." "The persons, who are involved in such transactions, cannot be allowed to try different remedies before different forums, inasmuch as the same would also result in multiplicity of litigation and could also lead to contradictory findings of different Forums, Tribunals and Courts." Final determinations: - The writ petition challenging the impugned order is dismissed for lack of exceptional circumstances and availability of statutory appeal remedy. - Allegations of fraudulent ITC claims require detailed factual inquiry and are not amenable to adjudication in writ jurisdiction. - Procedural objections regarding different authorities issuing SCN and order are insufficient to invoke writ jurisdiction. - The issue of consolidated SCN for multiple years remains pending and will be governed by the outcome of related proceedings.
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