Fake input tax credit fraud worth Rs. 350 crores: petition challenging territorial jurisdiction dismissed under Section 70 CGST Act

Delhi HC dismissed petition challenging territorial jurisdiction in CGST proceedings involving fake input tax credit fraud worth Rs. 350 crores across 200 firms. Court held that constitutional courts should not interfere at show cause notice/summons stage. Summons under Section 70 CGST Act do not constitute criminal proceedings as prosecution has not commenced. HC declined to exercise jurisdiction under Section 482 CrPC, finding no material warranting intervention at summons stage. Petitioner's defense required evidence evaluation inappropriate for Section 482 proceedings. Investigation at nascent stage with specific allegations from bank official against petitioner regarding fraudulent account openings without verification.

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Issues Involved:
1. Quashing of the action by Respondent No. 3 due to alleged jurisdictional overreach.
2. Transfer of inquiry/investigation to Delhi jurisdiction.
3. Territorial jurisdiction over the proceedings.
4. Quashing of summons issued against the petitioner.
5. Directions for audio/video recording of proceedings in the presence of the petitioner’s lawyer.

Issue-wise Detailed Analysis:

1. Quashing of the Action by Respondent No. 3 Due to Alleged Jurisdictional Overreach:
The petitioner sought to quash the actions of Respondent No. 3, alleging that the inquiry was beyond its zonal jurisdiction. The court noted that the allegations against the petitioner involved the creation of numerous fake firms and fraudulent Input Tax Credit (ITC) claims amounting to Rs. 350 crores. The court found that the investigation was at a nascent stage and involved multiple jurisdictions, including Ghaziabad and Noida. The court held that the jurisdictional challenge was baseless and without merit, emphasizing that the investigation's complexity justified the involvement of multiple jurisdictions.

2. Transfer of Inquiry/Investigation to Delhi Jurisdiction:
The petitioner alternatively requested the transfer of the investigation to Delhi. The court observed that the firms involved were not solely based in Delhi but also in Ghaziabad and Noida. It was noted that the petitioner's factory was situated in Ghaziabad, which provided a valid basis for the jurisdiction of Respondent No. 3. The court held that the transfer of the investigation was unwarranted, given the multi-jurisdictional nature of the case.

3. Territorial Jurisdiction Over the Proceedings:
The petitioner argued that the territorial jurisdiction for the proceedings should be vested with the courts at Delhi. The court referred to the Notification No. 14/2017, which conferred all-India jurisdiction on officers of the Directorate General of GST Intelligence (DGGI). The court concluded that the territorial jurisdiction of the proceedings being carried out by Respondent No. 3 at the Ghaziabad Regional Unit was valid and found no flaw or infirmity in this regard.

4. Quashing of Summons Issued Against the Petitioner:
The petitioner sought to quash the summons dated 02.02.2022 and 07.02.2022, alleging malice and lack of substantive evidence. The court noted that the investigation was ongoing and that the summons were part of the inquiry process. It was emphasized that the court could not interfere with the investigation at this stage by granting protection to the petitioner. The court held that the issuance of summons under Section 70 of the CGST Act was justified and did not warrant quashing.

5. Directions for Audio/Video Recording of Proceedings in the Presence of the Petitioner’s Lawyer:
The petitioner requested that all proceedings, including the recording of statements, be audio/video-graphed in the presence of the petitioner’s lawyer at a visible distance. The court referred to precedents where such relief was granted under special circumstances where there was a real and live apprehension of coercion. In this case, the court found no reasonable basis for the petitioner’s apprehension of coercion by the respondents. It was held that the relief sought was untenable in law and could not be granted as a matter of right.

Conclusion:
The petition was dismissed, and no grounds were found for quashing the actions of the respondents or the summons issued against the petitioner. The court upheld the territorial jurisdiction of the proceedings at the Ghaziabad Regional Unit and denied the request for audio/video recording of the proceedings in the presence of the petitioner’s lawyer. The court emphasized that the investigation was at a nascent stage and involved serious allegations of fraud, justifying the ongoing inquiry and the actions taken by the respondents.

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