2025 (7) TMI 1610 - HC - GST

Maintainability of petition - Appealable order - availability of alternative remedy - Reversal of ITC - HELD THAT - In the opinion of the Court since the present matter relates to fraudulent availment of ITC and the impugned order is an appealable order the Petitioner Firm should avail of its appellate remedy. The said view is also supported by the decision of this Court in Mukesh Kumar Garg vs. Union of India Ors. 2025 (5) TMI 922 - DELHI HIGH COURT wherein in respect of exercise of writ jurisdiction under Article 226 of the Constitution of India qua cases involving fraudulent availment of ITC the Court had held that Moreover when such transactions are entered into a factual analysis would be required to be undertaken and the same cannot be decided in writ jurisdiction. 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 Petitioner Firm is relegated to avail its appellate remedy before the Appellate Authority against the impugned order. Considering the two facts i.e. that appeal against order dated 7th January 2025 has already been filed and the reversal of ineligible ITC has been done by the Petitioner Firm let the appeal against the impugned order be filed manually within a period of one month from the date of this order with an application for waiver of the pre-deposit - Since the limitation period for filing the appeal against the impugned order has already expired if the appeal is filed within a period of one month from the date of this order the same shall not be disposed of on the ground of limitation and shall be decided on merits. Petition disposed off.

Summary

ISSUES:

Whether the impugned order demanding reversal of Input Tax Credit (ITC) on account of supplier's GST registration cancellation is sustainable.Whether there is an overlap between demands raised in two separate orders relating to IGST and CGST/SGST respectively.Whether writ jurisdiction under Article 226 of the Constitution can be exercised in cases involving fraudulent availment of ITC.Whether the petitioner is entitled to waiver of pre-deposit for filing appeal against the impugned order.Whether limitation period can be condoned for filing appeal against the impugned order.

RULINGS / HOLDINGS:

The impugned order demanding reversal of ITC is an appealable order and the petitioner should avail the appellate remedy rather than seeking relief under writ jurisdiction.The Court held that there is no overlap between the two orders as the earlier order relates to IGST demand and the impugned order relates to CGST & SGST demands.The Court reaffirmed that writ jurisdiction under Article 226 is an extraordinary jurisdiction and should not be exercised to support unscrupulous litigants involved in fraudulent availment of ITC.The petitioner is permitted to file appeal with an application for waiver of pre-deposit, which the Appellate Authority will decide after considering the reversal of ineligible ITC already done by the petitioner.The limitation for filing appeal is condoned if the appeal is filed within one month from the date of the Court's order and such appeal shall be decided on merits without rejection on limitation grounds.

RATIONALE:

The Court relied on the statutory framework under Section 16 and Section 107 of the Central Goods and Services Tax (CGST) Act, which governs the entitlement to ITC and the appeal mechanism against orders passed by tax authorities.The Court emphasized the purpose of ITC under Section 16 of the CGST Act as a business-friendly incentive to avoid double taxation, which is susceptible to misuse through fraudulent transactions involving non-existent firms.The Court referred to precedent holding that writ jurisdiction is not appropriate for adjudicating complex factual disputes involving fraudulent availment of ITC and penalty imposition, which require detailed factual analysis and are better suited for appellate forums.The Court noted the risk of multiplicity of litigation and contradictory findings if parties attempt to pursue different remedies before different forums simultaneously.The Court exercised discretion to condone limitation and permit filing of appeal with a waiver of pre-deposit application, balancing the need for procedural compliance with substantive justice given the reversal of ITC already undertaken by the petitioner.