2025 (8) TMI 858 - HC - GST

Writ Petition Challenging Fraudulent ITC Demand of Rs 8.83 Crores Not Maintainable; Appeal Process Advised

The HC held that the writ petition challenging the demand for fraudulent availment of Input Tax Credit (ITC) involving non-existent firms and goods-less ... Maintainability of petition - availability of alternative remedy - Fraudulent availment of Input Tax Credit (ITC) by several parties - Non-existing forms - applicability of Circular No. 31/05/2018-GST - HELD THAT:- A perusal of the impugned orders show that there are several non-existing firms, which have claimed to have raised goods-less invoices and passed on credit to 176 noticees. The total amount, which is sought to be demanded from various parties, is to the tune of Rs. 8.83 crores for financial year 2017-18. In addition, penalties have also been imposed on the noticees. Considering that these are cases of fraudulent availment of ITC and there are a large number of noticees involved in the alleged transactions, this Court is of the opinion that the Petitioner ought to be relegated to avail of its appellate remedy, rather than entertaining a writ petition - Insofar as the non-consideration of the reply filed by Petitioner is concerned, the Petitioner is free to file an appeal raising the said contentions, along with any other documents it relies upon in support of its appeal. Considering that the availment of ITC is through different networks in both these SCNs, obviously, a consolidated SCN could not have been issued by the Department as the facts could not have been captured sufficiently in one. This Court does not deem it appropriate to delve into the facts of this case under writ jurisdiction as the concept of ITC by itself involves a series of transactions, which would have to be analyzed and, thereafter, the decision is to be taken - The Court is not inclined to entertain the present writ petition - Petition disposed off. 1. ISSUES PRESENTED and CONSIDERED 1. Whether the replies filed by the petitioner to the Show Cause Notices (SCNs) were duly considered by the adjudicating authority before passing the impugned orders. 2. Whether the petitioner was afforded personal hearing as mandated by the principles of natural justice and whether such hearings were recorded in the impugned orders. 3. Whether the impugned orders were passed within the prescribed limitation period under the GST law, considering the date of issuance and date of uploading on the GST portal. 4. Whether the petitioner's plea regarding limitation and non-consideration of replies warrants interference under writ jurisdiction. 5. Whether multiple SCNs and orders relating to similar issues within the same financial year ought to be consolidated into a single order as per Circular No. 31/05/2018-GST. 6. Whether the allegations of fraudulent availment of Input Tax Credit (ITC) through goods-less invoices by non-existent firms and the consequent demands and penalties imposed are sustainable without adjudication on merits. 7. Whether the writ jurisdiction is the appropriate forum for adjudication of disputes involving complex factual and legal issues relating to fraudulent ITC claims under the GST regime. 8. Whether the petitioner should be relegated to avail the statutory appellate remedy under Section 107 of the CGST Act instead of seeking relief by way of writ petition. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Consideration of Reply and Personal Hearing - Legal Framework: Principles of natural justice require that the party against whom adverse orders are passed must be given an opportunity to be heard, including personal hearing and consideration of written submissions. - Court's Reasoning: The impugned order dated 9th February, 2025 records that personal hearings were granted on multiple dates and that replies were received from some noticees. However, it notes that the petitioner neither appeared for personal hearing nor submitted written reply that was considered. - Key Findings: The petitioner's counsel contended that a reply dated 30th August, 2024 was filed and bears a faint departmental stamp indicating receipt. The Court observed that the record is unclear whether the reply was actually dispatched to or considered by the adjudicating authority. - Treatment of Arguments: The Court emphasized that the petitioner had the opportunity to participate in the proceedings and that failure to appear or submit relevant replies leads to forfeiture of claims related to violation of natural justice. - Conclusion: The Court found that the principles of natural justice and adjudication were followed as per the record and that the petitioner's claim of non-consideration of reply is not sufficient to warrant interference at this stage. Issue 3 & 4: Limitation and Date of Passing Orders - Legal Framework: GST law prescribes limitation periods within which demand orders must be passed. The date of passing the order is critical, not the date of uploading on the portal. - Court's Reasoning: The impugned orders are dated 1st February, 2025, whereas the DRC-07 forms were uploaded on 9th February, 2025. The Department explained the delay in uploading as a technical glitch. - Precedents: The Court referred to prior decisions holding that the date of signing the order is the operative date for limitation, not the date of uploading on the GST portal. - Conclusion: The Court held that the impugned orders were passed within the prescribed limitation period and the petitioner's contention of delay in uploading does not invalidate the orders. Issue 5: Consolidation of Orders under Circular No. 31/05/2018-GST - Legal Framework: The Circular mandates that where multiple SCNs on similar issues are issued within the same Commissionerate and financial year, adjudication should be by the authority competent to decide the highest amount involved, preferably by a single order. - Court's Reasoning: The Court noted that the two SCNs relate to different networks and distinct factual matrices involving different sets of noticees and fraudulent ITC claims. - Application of Law: The Court observed that consolidation was not feasible as the facts and parties involved differed significantly, making separate SCNs and orders necessary to cover all aspects adequately. - Conclusion: The petitioner's contention that only one order should have been passed was rejected as not applicable to the facts of the present case. Issue 6: Allegations of Fraudulent Availment of ITC and Demand Orders - Legal Framework: Section 74 of the CGST Act provides for recovery of tax where suppression of facts or fraud is involved. Penalties under Section 122(1)(ii) are also attracted in cases of fraudulent ITC claims. - Court's Reasoning: The impugned orders detail the involvement of several non-existent firms issuing goods-less invoices, leading to wrongful availment of ITC by 176 noticees including the petitioner. - Evidence: The record includes audit observations, data from the GST portal, and investigations revealing the network of fake firms and transactions. - Treatment of Petitioner's Submissions: The petitioner submitted case laws and point-wise replies denying fraud and suppression, but the adjudicating authority found these submissions not tenable and inconsistent with available evidence. - Conclusion: The Court recognized that the allegations are serious and involve complex factual issues requiring detailed adjudication, which cannot be resolved in writ proceedings. Issue 7 & 8: Appropriateness of Writ Jurisdiction and Relegation to Appellate Remedy - Legal Framework: The Supreme Court has held that writ petitions under Article 226 challenging GST orders are maintainable only in exceptional circumstances such as breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to vires of statute. - Court's Reasoning: The present case involves disputed facts of fraudulent ITC claims and demands, which require detailed adjudication and cannot be effectively resolved in writ jurisdiction. - Precedents: The Court relied on the Supreme Court's decision and consistent High Court rulings holding that alternate statutory remedies under Section 107 of the CGST Act must be availed. - Application of Law: The Court observed that the petitioner has the statutory right to appeal and file requisite pre-deposit, and that the writ petition is not the appropriate forum to examine complex factual disputes. - Conclusion: The Court relegated the petitioner to pursue the appellate remedy and declined to entertain the writ petition, leaving all rights and contentions open for consideration at the appellate stage. Additional Observations - The Court clarified that if the petitioner files an appeal along with the mandatory pre-deposit by the stipulated date, the appeal shall not be dismissed on limitation grounds and shall be decided on merits. - The Court dismissed the writ petition and all pending applications accordingly.