2025 (8) TMI 1391 - HC - GST

Multi-year show-cause notice consolidated for fraudulent ITC over Rs 41 crore; appeal allowed under Section 107 CGST

M/s. Shree Shyam Polymers Versus Additional Commissioner, CGST, Delhi North.

M/s. Shree Shyam Polymers Versus Additional Commissioner, CGST, Delhi North. - 2025:DHC:7187 - DB ISSUES PRESENTED AND CONSIDERED 1. Whether a single Show Cause Notice (SCN) or consolidated order can be issued by tax authorities covering alleged wrongful availment or utilization of Input Tax Credit (ITC) across multiple tax periods/financial years. 2. Whether issuance of a consolidated SCN for multiple years is permissible where the allegation is fraudulent availment/utilization of ITC and whether such consolidation affects limitation and appealability of the order. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Permissibility of a single SCN/order for multiple periods Legal framework: Sections 73 and 74 of the CGST Act provide for determination of tax not paid or short paid, or ITC wrongly availed or utilised. Sub-sections 73(3), 73(4), 74(3) and 74(4) employ the language 'for any period' and 'for such periods', whereas subsections 73(10) and 74(10) refer expressly to issuance of orders within fixed periods measured from the due date for furnishing of annual return for the financial year to which the tax relates. Precedent treatment: The Court follows earlier treatment in Ambika Traders, which interpreted the statutory language to permit a notice relating to 'any period' and to allow statements/notices to cover periods other than those specified in the initial notice, subject to conditions in the statute. Interpretation and reasoning: The contrast in statutory language-use of 'period'/'periods' in certain sub-sections and 'financial year' in limitation provisions-indicates legislative intent that liability for wrongly availed ITC can be established across periods and need not be confined to a single financial year. Practical and doctrinal considerations are emphasized: fraudulent availment/utilization of ITC frequently involves transactions and connections spanning multiple tax periods (e.g., purchases in one period and supplies in another), so analysing a series of transactions across periods is often necessary to reveal a pattern of fraud or fabrication. Ratio vs. Obiter: Ratio - The interpretation that Sections 73(3), 73(4), 74(3) and 74(4) permit issuance of notice/statements covering multiple periods where grounds are the same is applied as a binding conclusion; the observation that fraudulent ITC schemes often require cross-period analysis is part of the operative reasoning (ratio) supporting permissibility. Observational background (e.g., parliamentary press releases and statistics about bogus firms) is explanatory and not essential to statutory interpretation (obiter to that extent). Conclusions: A consolidated SCN or order for multiple periods is permissible under the CGST Act where the statutory conditions are met and the grounds relied upon for additional periods (other than those in the earlier notice) are the same as mentioned in the earlier notice. Consolidation is both lawful and often necessary to uncover and establish patterns of fraudulent availment/utilisation of ITC. Issue 2 - Consolidated SCN in cases of alleged fraudulent ITC and consequences for limitation and appealability Legal framework: Sections 73 and 74 set out substantive notice and order mechanisms and separate limitation periods: three years (Section 73(10)) for non-fraud/other cases and five years (Section 74(10)) where fraud or willful misstatement/suppression is alleged. Appealability is governed by the CGST Act (appealable orders à la Section 107 referenced in the judgment). Precedent treatment: The Court applies Ambika Traders' prior analysis that consolidated notices are allowable particularly where fraud is alleged and the statutory scheme contemplates statements covering multiple periods; earlier authority is followed rather than distinguished or overruled. Interpretation and reasoning: Where fraud or wilful misstatement/suppression is alleged, the statutory scheme contemplates extended inquiry into multiple periods; consolidation does not displace separate limitation calculations applicable to the periods involved but permits the proper officer to serve statements for additional periods provided the grounds are the same (with the exception that fraud as a ground must be specifically addressed as required by the provision). The impugned consolidated order in the present case set out year-wise details within the order, making the amounts and period-specific findings decipherable, and therefore not violating the language of the provisions or principles of notice. Ratio vs. Obiter: Ratio - Consolidated SCNs in fraud cases do not per se violate statutory language or the right to intelligible notice where year-wise particulars are furnished; such consolidation is compatible with limitation rules and appealability when statutory conditions are observed. Obiter - Broader policy observations about misuse of ITC and parliamentary statistics are illustrative but not essential to the legal holding. Conclusions: In cases alleging fraudulent availment/utilisation of ITC, consolidated SCNs/orders for multiple years are permissible and may be required for effective investigation. Consolidation is valid so long as year-wise particulars and the common grounds are adequately disclosed in accordance with Sections 73/74; limitation and appeal mechanisms remain available and are not circumvented by consolidation. Ancillary procedural conclusion applied to present proceedings Where an impugned consolidated order is appealable, the Court will not entertain a writ challenging matters that are appealable under the statutory appellate mechanism if the legal issue (permissibility of consolidation in fraud cases) is settled by applicable precedent and statutory interpretation. The petitioner is granted liberty to file the statutory appeal within a stipulated period with requisite pre-deposits; if the appeal is filed within the stipulated time, the appellate authority is directed not to dismiss the appeal on limitation grounds and to decide it on merits.