HC dismisses petition against ITC fraud notice, advises pursuing appeal under relevant tax rules

The HC dismissed the petition challenging the notice for fraudulent availment of Input Tax Credit (ITC) involving non-operational or fictitious suppliers. The Court held that writ petitions are generally not maintainable in such cases, referencing prior precedent. It emphasized that the petitioner should pursue appellate remedies, as the impugned order is appealable and the issues can be addressed before the Appellate Authority. The petition was disposed of accordingly.

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ISSUES:

Whether a writ petition is maintainable challenging an order passed under the CGST Act relating to fraudulent availment of Input Tax Credit (ITC).Whether there can be duplication of notices issued by Central GST and State GST authorities for the same assessment year and period.Whether the petitioner can raise objections regarding overlapping demands and penalties in the writ jurisdiction or should seek remedy through appeal.The applicability of Section 74(9) of the CGST Act and corresponding provisions of SGST and IGST Acts in confirming demand of ITC availed fraudulently without actual receipt of supplies.The scope and exercise of writ jurisdiction under Article 226 in cases involving complex factual matrix of fraudulent ITC claims.

RULINGS / HOLDINGS:

Writ petitions challenging orders relating to fraudulent availment of ITC are ordinarily not maintainable; the petitioner is required to avail the appellate remedy since the impugned order is an appealable order under Section 107 of the CGST Act.There is no bar on issuance of notices by both Central GST and State GST authorities for the same period; however, overlapping demands can be raised and agitated before the Appellate Authority.The Court held that the factual determination of the role played by the petitioner and justification of penalties cannot be adjudicated in writ jurisdiction and must be addressed in the appellate process.The demand of ITC availed fraudulently without actual receipt of supplies is confirmed under Section 74(9) of the CGST Act, 2017 read with corresponding provisions of SGST and IGST Acts.The writ jurisdiction under Article 226 is an extraordinary remedy and should not be exercised to support unscrupulous litigants or to bypass statutory appellate remedies, especially in complex fraud cases.

RATIONALE:

The Court applied the statutory framework under the Central Goods and Services Tax Act, 2017, particularly Section 16 (Input Tax Credit), Section 74(9) (assessment in cases of fraud), and Section 107 (appeals), along with corresponding State and Integrated GST provisions.The decision reiterates the principle that the facility of Input Tax Credit is intended as a business incentive and its misuse through bogus invoicing undermines the GST regime.The Court relied on precedent emphasizing that writ jurisdiction is not appropriate for resolving complex factual disputes involving fraudulent ITC claims, which require detailed factual inquiry and appellate scrutiny.The ruling underscores the need to avoid multiplicity of litigation and contradictory findings by channeling disputes through the prescribed appellate mechanism.The Court granted an extended limitation period for filing appeal with pre-deposit till 31st August, 2025, to ensure the petitioner's right to appeal is preserved despite possible expiry of limitation.

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