2025 (6) TMI 425 - HC - GST

Maintainability of petition - availability of alternative remedy - Fraudulent availment of ITC - HELD THAT - As held by the Supreme Court Assistant Commissioner of State Tax and Ors. v. M/s Commercial Steel Limited 2021 (9) TMI 480 - SUPREME COURT a writ petition can be entertained under exceptional circumstances only which are set out in the said judgment held that There was in fact no violation of the principles of natural justice since a notice was served on the person in charge of the conveyance. In this backdrop it was not appropriate for the High Court to entertain a writ petition. The assessment of facts would have to be carried out by the appellate authority. As a matter of fact the High Court has while doing this exercise proceeded on the basis of surmises. However since we are inclined to relegate the respondent to the pursuit of the alternate statutory remedy under Section 107 this Court makes no observation on the merits of the case of the respondent. 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. This Court is not inclined to entertain the present writ petition - Petition disposed off.

Summary

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

1. Whether the writ petition under Article 226 of the Constitution of India is maintainable against the impugned order passed by the tax authorities, given the existence of an alternate statutory remedy under Section 107 of the Central Goods and Services Tax (CGST) Act, 2017.

2. Whether the issuance of a consolidated Show Cause Notice (SCN) and consequent impugned order covering multiple financial years is legally permissible.

3. Whether the allegations of fraudulent availment of Input Tax Credit (ITC) by the Petitioner warrant interference by the Court in writ jurisdiction, or whether such matters require detailed factual adjudication by the appellate authorities.

Issue 1: Maintainability of Writ Petition under Article 226 vis-`a-vis Alternate 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 which clarified that writ petitions under Article 226 are maintainable only under exceptional circumstances such as breach of fundamental rights, violation of natural justice principles, excess of jurisdiction, or challenge to the vires of a statute or delegated legislation. The existence of an alternate statutory remedy is not an absolute bar but ordinarily precludes writ jurisdiction unless such exceptions are met.

Court's Interpretation and Reasoning: The Court found no exceptional circumstances in the present case. There was no breach of fundamental rights or violation of natural justice, as the Petitioner had been duly served with notice. The impugned order arose from a Show Cause Notice and was appealable under Section 107 of the CGST Act. The Court emphasized that factual assessments and merits of the case must be examined by the appellate authorities rather than through writ jurisdiction.

Key Evidence and Findings: The SCN and impugned order detailed allegations of fraudulent ITC availment amounting to Rs. 2,38,062/-. The Petitioner had access to the statutory remedy of appeal, which had not been exhausted. The Court noted that the High Court below had proceeded on surmises rather than evidence.

Application of Law to Facts: The Court applied the principle that writ jurisdiction is extraordinary and not a substitute for statutory remedies. The Petitioner's grievances were to be ventilated through the appeal mechanism under the CGST Act.

Treatment of Competing Arguments: The Petitioner argued for writ relief on grounds including procedural irregularities and consolidated SCN issuance; however, the Court held that these did not amount to exceptional circumstances warranting writ interference.

Conclusion: The writ petition was not maintainable and was dismissed, with liberty to pursue statutory remedies.

Issue 2: Legality of Issuing Consolidated Show Cause Notice and Impugned Order for Multiple Financial Years

Legal Framework and Precedents: The Court acknowledged that the issue of consolidated SCNs covering multiple financial years was under judicial consideration in a related writ petition pending before the same Court. No definitive ruling was made in the present case, but the Court indicated that the outcome of that 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 and impugned orders spanning multiple years, deferring to the pending case.

Key Evidence and Findings: The Petitioner raised this as a ground of challenge, but the Court noted the issue was sub judice and reserved for separate adjudication.

Application of Law to Facts: The Court suggested that the Petitioner may raise this issue in appeal, and the decision in the pending writ petition would guide the appellate authority and future proceedings.

Treatment of Competing Arguments: The Petitioner's contention was acknowledged but not adjudicated upon.

Conclusion: No interference was made; the issue remains open for determination in the pending related case and on appeal.

Issue 3: Allegations of Fraudulent Availment of Input Tax Credit and Appropriateness of Writ Jurisdiction

Legal Framework and Precedents: The Court extensively referred to its earlier judgment in a similar case involving fraudulent ITC claims, emphasizing the importance of protecting the GST regime from misuse. Section 16 of the CGST Act, which governs ITC, was highlighted as a critical provision intended to facilitate ease of doing business by allowing credit only on valid inputs.

Court's Interpretation and Reasoning: The Court underscored that fraudulent availment of ITC strikes at the root of the GST framework and imposes a significant burden on the exchequer. It observed that such matters require detailed factual inquiry and cannot be resolved in writ jurisdiction, which is not designed for adjudicating complex factual disputes or assessing evidence.

Key Evidence and Findings: The impugned order detailed a complex web of transactions involving non-existent firms and collusion to claim ITC without actual supply of goods or services. The Petitioner and related parties were alleged to have orchestrated these transactions to wrongfully avail ITC benefits.

Application of Law to Facts: The Court applied the principle that writ jurisdiction should not be exercised to shield unscrupulous litigants or to circumvent the statutory appeal process. The Petitioner's contentions on merits and penalties were to be addressed in appeal.

Treatment of Competing Arguments: While the Petitioner argued against the allegations and penalties, the Court held that such factual disputes must be resolved by the appellate authority and not through writ petitions.

Conclusion: The Court declined to interfere in writ jurisdiction given the serious nature of allegations and the availability of a full-fledged statutory appeal remedy.

Significant Holdings and Core Principles Established:

"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."

"Such misuse, if permitted to continue, would create an enormous dent in the GST regime itself."

"The exercise of writ jurisdiction ought not be exercised by the Court to support unscrupulous litigants."

"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 persons involved in such transactions cannot be allowed to try different remedies before different forums, as it would result in multiplicity of litigation and contradictory findings."

Final Determinations:

- The writ petition challenging the impugned order was dismissed for lack of exceptional circumstances and availability of statutory appeal remedy.

- The issue of consolidated SCNs and impugned orders for multiple financial years remains open and is to be decided in a pending related case and on appeal.

- Allegations of fraudulent ITC availment require detailed factual adjudication by the appellate authorities and are not amenable to writ jurisdiction interference.

- The Petitioner is entitled to pursue statutory remedies under Section 107 of the CGST Act without prejudice to the observations made by the Court.