Writ petition dismissed for fraudulent Input Tax Credit on fake invoices, petitioner directed to appeal
The Delhi HC dismissed a writ petition challenging an order regarding fraudulent Input Tax Credit availment based on goods-less invoices from fake supplier firms. The petitioner argued violation of natural justice due to absence of show cause notice and personal hearing, and claimed the order was passed beyond the limitation period. The HC held that following precedent in Mukesh Kumar Garg vs. Union of India, writ jurisdiction should not ordinarily be exercised in cases involving fraudulent ITC availment considering the burden on exchequer and impact on GST regime. The limitation argument was rejected as the order dated 27th January 2025 was within the prescribed deadline of 5th February 2025 for FY 2017-18. The petitioner was directed to file appeal before the Appellate Authority within one month with requisite pre-deposit.
ISSUES:
Whether a writ petition under Article 226 of the Constitution of India is maintainable in cases involving fraudulent availment of Input Tax Credit (ITC) through fake or non-existent supplier firms.Whether the principles of natural justice, including issuance of Show Cause Notice and opportunity for personal hearing, were complied with before passing the impugned order.Whether the impugned order was passed within the prescribed limitation period under the relevant GST provisions.Whether a party can be permitted to file an appeal beyond the statutory limitation period in GST adjudication proceedings.
RULINGS / HOLDINGS:
Writ jurisdiction under Article 226 is not ordinarily exercisable in cases involving fraudulent availment of ITC, especially where complex factual determinations are required, as such jurisdiction "ought not to be exercised by the Court to support the unscrupulous litigants."The impugned order demonstrates compliance with the "basic requirement of Principles of Natural Justice" through issuance of Show Cause Notices and multiple opportunities for personal hearings, and the case was decided ex parte only for non-responsive parties.The impugned order dated 27th January, 2025 was passed within the limitation period, as the last date for passing the order for the relevant financial year was 5th February, 2025.The petitioner is permitted to file an appeal before the Appellate Authority within one month along with the requisite pre-deposit, and such appeal shall not be dismissed on the ground of limitation if filed within this extended period.
RATIONALE:
The Court relied on the statutory framework of the Central Goods and Services Tax (CGST) Act, particularly Section 16 governing Input Tax Credit and Sections 122(1) and 122(3) relating to penalties for fraudulent availment of ITC.The Court referred to precedent emphasizing that the facility of ITC is "a major feature of the GST regime" intended to facilitate ease of doing business, but misuse through fake invoices and non-existent firms threatens the integrity of the tax system.The Court noted that adjudication of such complex factual issues involving multiple entities and alleged fraudulent transactions is unsuitable for writ jurisdiction and is better suited to statutory appellate and adjudicatory forums established under the CGST Act.The Court underscored the importance of adherence to procedural safeguards, confirming that Show Cause Notices and personal hearings were provided, and non-cooperation by the parties justified ex parte decisions.The Court exercised discretion to allow filing of a belated appeal with pre-deposit to prevent multiplicity of litigation and ensure adjudication on merits within the statutory framework.
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