SC dismisses SLP on issue of SCNs issued for Multiple Financial Years in fraudulent ITC Claim

The Hon’ble Supreme Court of India in Ambika Traders Versus Additional Commissioner.  - 2025 (9) TMI 1338 - SC Order upheld the decision of Delhi High Court in the matter Ambika Traders Through Proprietor Gaurav Gupta Versus Additional Commissioner, Adjudication DGGSTI, CGST Delhi North. - 2025 (8) TMI 315 - DELHI HIGH COURTwherein the High Court affirmed that Section 74(3) and (4), Central Goods & Service Tax Act, 2017(“the CGST Act”) permit notices “for any period” or “such periods,” unlike Section 74(10)CGST Act which uses the term “financial year.” Fraudulent Input Tax Credit (“ITC”) often span multiple years, and a consolidated Show Cause Notice (“SCN”) is permissible. The High Court was also of the opinion that Writ Petition is not the appropriate remedy for the discussion on non-granting of Cross Examination to the Petitioner, if remedy of appeal is still not exhausted. 

Facts:

M/s Ambika Traders (“the Petitioner”), engaged in scrap trading, was alleged to have availed fraudulent Input Tax Credit (ITC) between Financial Year 2017–18 and 2021–22. The department discovered that ITC was claimed against invoices issued by non-existent suppliers without any actual supply of goods.

Directorate General of GST Intelligence/ the Department (“the Respondent”) issued a Show Cause Notice (SCN) under Sections 74, read with 122 of the CGST Act, covering multiple years. The Order-in-Original (“OIO”) confirmed the demand, denied ITC, and imposed an equivalent penalty under Section 74 of CGST Act, along with penalties on the proprietor under Section 122(3) of CGST Act

Aggrieved by the order, Petitioner files Writ Petition under Articles 226 and 227 of the Constitution of India. The Hon’ble Delhi High Court dismissed the Writ Petition affirming the validity of Consolidated SCNs for multiple years to uncover the fraudulent practice involved in claiming ITC.

Aggrieved by the order, Petitioner files Special Leave Petition under Article 136 of the Constitution of India.

Issues:

1. Whether a consolidated SCN covering multiple financial years was permissible under Section 74, CGST Act?
2. Whether denial of cross-examination of witnesses and officers violated principles of natural justice?

Held:

The Hon’ble Apex Court dismissed the Ambika Traders Versus Additional Commissioner.  - 2025 (9) TMI 1338 - SC Order upholding the findings of the Delhi High Court in W.P.(C) 4853 of 2025 which held as under:

• Relied on, M/s. VALLABH TEXTILES THROUGH ITS Versus ADDITIONAL / JOINT COMMISSIONER, CGST DELHI EAST COMMISSIONERATE AND ORS. - 2024 (10) TMI 1719 - DELHI HIGH COURT, Sections 73(3), 73(4), 74(3), 74(4) of CGST Act allow notices “for any period” or “for such periods” and are in contrast with Section 73(10) and 74(10) of CGST Act, which talks about “financial year”.
• Noted that, consolidated SCNs covering multiple financial years are permissible. Fraudulent ITC typically spans several years; thus, stratified SCN for each instance is a hefty task to do, prolonging the period of detection and adjudication. Hence, multi-year SCNs in fraudulent ITC matters are lawful and practical.
• Relied on, findings of the Hon’ble Supreme Court of India in SHAMSHAD AHMAD & ORS. Versus TILAK RAJ BAJAJ (DECEASED) THROUGH LRs. & ORS - 2008 (9) TMI 957 - Supreme Courtwhich stated that the interference with factual findings recorded by the competent authorities is outside the Jurisdictional purview of the High Court in a Writ petition.
• Observed that, rejection of Cross-Examination is a point of reappreciation of evidence, which is out of the purview of Writ Petition when there exists already a non-availed remedy of appeal.
• Relied also upon, UNION OF INDIA Versus TR. VARMA - 1957 (9) TMI 41 - Supreme Court where Apex Court opined that special jurisdiction of the High Court to issue writ is not destined for adjudication of disputes where there still exists alternative and equally efficacious remedy for the litigant.

Our Comments:

The Ambika Traders (Supra) affirms the judiciary’s uncompromising stance against fraudulent ITC availment which is consistent with the Court’s earlier rulings in M/s Vallabh Textiles (Supra) where the High Court stated that multi-year SCNs are permissible where fraudulent patterns span multiple tax periods.

The upholding of the stand of the Delhi High Court in the matter narrows down the scope of the others matters like Him Logistics Pvt. Ltd. Versus The Principal Commissioner of Customs  - 2016 (3) TMI 432 - DELHI HIGH COURT and Flevel International Versus Commissioner of Central Excise - 2015 (9) TMI 1151 - DELHI HIGH COURT, which stated that not providing opportunity of Cross- Examination defeats the Principles of Natural Justice and were decided by a Writ Petition.

The tapered ends arising out of the cases namely Ambika Traders (Supra) and HIM Logistics Pvt. Ltd needs special attention to address the issue of Cross-Examination or anything of such nature as the blurred lines of Jurisdiction of Courts in Writ Petition and Powers of Executive Authorities to deny significant right of the taxpayer is crucial for the Rule of law to prevail.

 (Author can be reached at [email protected])