2025 (9) TMI 1453 - HC - GST

No natural justice breach where parties knew of investigation, received SCNs, gave statements; appeal allowed with pre-deposit

The HC held there was no breach of natural justice as the petitioner and its proprietor were aware of the investigation, received SCNs and gave ... Violation of principles of natural justice - impugned order passed without a reply to the SCN, and without any personal hearing - petitioner was asked to upload the said reply on the GST portal, despite the fact that the SCN itself was not uploaded on the GST portal - Fraudulent availment of Input Tax Credit (ITC) - Time limitation - HELD THAT:- There can be no doubt that the principles of natural justice ought to be complied with in adjudication of proceedings. In this case, however, the Court notes that the proprietor i.e., Mr. Deepak Mittal has been all along aware of the entire investigation, which was going on, as also various proceedings that had been commenced against him, and related entities. SCNs were served upon the Petitioner. He had appeared in the investigation and statements have also been recorded. Thus, there was no reason why the physical copy of the reply to the SCN was not filed, and no follow up was done with the GST Department, in order to ensure that hearings are duly attended. Admittedly, the SCN was sent by email to the Petitioner and he had complete knowledge of the proceedings. Hence, it cannot be said that there is violation of the principles of the natural justice. In cases involving large scale availment of fraudulent ITC, this Court has already taken the view that exercising the writ jurisdiction would not ordinarily be permitted. In all these matters in case of availment of fraudulent ITC, there are several factual issues, which would need to be looked into, which cannot be adjudicated in a writ petition. The said legal position has also been reiterated by this Court in M/s Sheetal and Sons & Ors. v. Union of India & Anr. [2025 (5) TMI 1609 - DELHI HIGH COURT] and by the Allahabad High Court in Elesh Aggarwal v. Union of India [2023 (6) TMI 362 - ALLAHABAD HIGH COURT] wherein the Allahabad High Court has held that no ground is made for interference on merits in exercise of extra ordinary jurisdiction. Moreover, the impugned order was available to the Petitioner, way back on 4th February, 2025, through the GST portal. The Petitioner has, however, sought to challenge the same by filing the present writ petition, sometime in July 2025, i.e., after expiry of the limitation period for filing the appeal. Under these circumstances, the Petition itself could have been dismissed. However, considering that the Petitioner and similarly placed parties, who had challenged the impugned order, have already been relegated to the appellate remedy, this Court, in exercise of the writ jurisdiction, permits the Petitioner to file its appeal against the impugned order by 15th November, 2025 along with requisite pre-deposit in accordance with law - petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether service of a show cause notice (SCN) by email, without contemporaneous upload on the statutory portal, and issuance of hearing notices by postal dispatch (but not uploaded), amounts to violation of principles of natural justice sufficient to quash an adjudicatory order. 2. Whether, in a case involving large-scale alleged fraudulent availment and passage of Input Tax Credit (ITC) through fake/dummy entities, the High Court should ordinarily exercise writ jurisdiction under Article 226 where an alternate statutory appellate remedy exists. 3. Whether factual findings of extensive paper transactions, implanted transport particulars, and networked dummy entities support a conclusion of intentional fraudulent availment/passing on of ITC such that interlocutory relief or quashing is inappropriate. 4. Whether equitable relief in the form of permitting a belated appeal (despite expiry of limitation) is justified where the impugned order was available on the portal and the petitioner contends lack of opportunity to reply/hearings, and what conditions (pre-deposit, time-limit) should attach. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Natural Justice: Service by Email and Non-Upload on Portal Legal framework: Principles of natural justice require notice and opportunity to be heard before adjudicatory action; service provisions under the GST regime contemplate physical service, electronic service (email), and portal-based communications as means of notifying SCNs/hearing notices. Precedent treatment: The Court relied on general authority (as applied in prior GST jurisprudence) that alternate statutory remedies and fact-sensitive adjudications are ordinarily to be pursued before appellate authorities; jurisprudence recognizes that mere electronic service may suffice where the recipient has actual knowledge. Interpretation and reasoning: The Court found that the SCN was sent to the petitioner's registered email and that the petitioner had been aware of the investigation, had appeared before authorities and had statements recorded. Although hearing notices were not uploaded on the portal and postal dispatch receipts were being traced, the existence of DINs and other records indicated issuance. The petitioner did not follow up or seek physical filing of a reply or pursue portal upload; thus there was no demonstrable prejudice from lack of portal upload. On the facts, actual knowledge of proceedings and participation in investigations negated a viable claim of violation of natural justice. Ratio vs. Obiter: Ratio - Where a notice/SCN is served by email and the noticee has actual knowledge of proceedings (appeared and gave statements), non-uploading on the portal alone does not automatically vitiate adjudication for breach of natural justice. Obiter - Administrative lapses in portal uploads should be rectified by the department but do not per se mandate quashing absent prejudice. Conclusions: No violation of natural justice was established on these facts; lack of portal upload did not justify setting aside the order given the petitioner's actual participation and knowledge. Issue 2 - Writ Jurisdiction vs. Alternate Statutory Remedy in Large-Scale Fraud Allegations Legal framework: Article 226 writ jurisdiction is discretionary and exceptional; where an efficacious alternate statutory remedy exists (appeal under the GST scheme), writ relief is ordinarily withheld except in specified exceptional circumstances (breach of fundamental rights, violation of natural justice, excess of jurisdiction, challenge to vires). Precedent treatment: The Court applied the Supreme Court's criteria (as reiterated in GST-related precedents) that writ petitions in tax matters with alternate appeal remedies should not generally be entertained and that factual assessments are better suited to appellate adjudication. Interpretation and reasoning: Given the complexity and multiplicity of factual issues (network of dummy firms, fabricated invoices, implanted transport particulars, flow of ITC to exporters who encashed refunds), the Court held these are matters requiring factual investigation and appellate scrutiny. The petitioner failed to demonstrate any exceptional circumstance warranting interference under Article 226. Ratio vs. Obiter: Ratio - High Court will not ordinarily exercise writ jurisdiction to reappraise complex factual determinations in cases of large-scale alleged fraudulent ITC where an alternate appeal exists; petitioners should pursue statutory appellate remedy unless exceptional circumstances are shown. Obiter - The Court observed that several similarly placed matters had been relegated to appeal. Conclusions: Writ relief was inappropriate on merits; the petitioner was relegated to the appellate remedy provided under the statute. Issue 3 - Factual Findings: Intentional Fraudulent Availment/Pass-on of ITC Legal framework: Determination of dishonest/fraudulent availment of ITC depends on factual matrix: existence of suppliers/consignees, evidence of physical movement/transport, congruence with returns and transport documentation, and patterns indicative of paper transactions designed to create and circulate bogus ITC. Precedent treatment: Courts treat extensive documentary and investigative material (e.g., transporter denials, SIFY software records, lack of GSTR-3B filings by alleged suppliers, mismatched e-way bills) as relevant to infer an organised scheme of fraud. Interpretation and reasoning: The impugned order contains detailed findings: multiple suppliers/consignees proved fake or non-existent; GSTR/SIFY data did not corroborate outward sales; transporters denied movements and vehicle numbers appeared planted; large sums of ITC were passed to fake/dummy entities and to exporters who obtained refunds. Repeated failure to appear for summons (followed by litigation tactics) and certain admissions in recorded statements further supported an inference of intentional misuse and a networked scheme to encash illicit ITC. Ratio vs. Obiter: Ratio - On the material recorded, the Department had a tenable basis to conclude a deliberate scheme to avail and pass on fraudulent ITC through dummy entities and fabricated transport particulars. Obiter - The Court did not finally adjudicate guilt but treated the factual findings as weighty reasons for relegating to appeal rather than interference by writ. Conclusions: The factual record substantiates a prima facie case of organized fraudulent ITC manipulation; therefore, interlocutory quashing or relief in writ jurisdiction was unsuitable. Issue 4 - Limitation and Granting Leave to File Belated Appeal with Conditions Legal framework: Appealability and limitation under the CGST appellate regime; courts may exercise remedial discretion in exceptional cases to permit delayed prosecution of statutory remedies subject to conditions (time-bound filing, pre-deposit in accordance with law), without prejudicing merits adjudication. Precedent treatment: Courts have allowed belated invocation of statutory remedies where equities justify extending time, while preserving departmental rights and not adjudicating merits prematurely. Interpretation and reasoning: Although the impugned order was available on the portal in February 2025 and the appeal period had expired by the time the writ was filed, the Court exercised restrained discretion to permit the petitioner - and similarly placed parties - to file the statutory appeal by a specified date (15 November 2025) with requisite pre-deposit; deposits already made during investigation to be credited. The Court emphasized that permitting the belated appeal would not amount to adjudication on merits and would not prejudice final adjudication by the Appellate Authority; limitation would not be a bar where the appeal is filed within the prescribed extended time ordered by the Court. Ratio vs. Obiter: Ratio - The Court may, in exercise of writ jurisdiction, allow a limited, time-bound opportunity to file a belated statutory appeal with requisite pre-deposit where appropriate, without deciding merits; such allowance does not preclude departmental defences nor adjudication on limitation by the appellate forum in accordance with the Court's direction. Obiter - This relief is exceptional and not a precedent for routine extension where no equitable justification exists. Conclusions: Petitioner permitted to file appeal by 15 November 2025 with requisite pre-deposit; any pre-existing deposits to be credited; appeal will not be dismissed on limitation ground if filed within that period; final adjudication to occur before the Appellate Authority. Cross-References and Final Observations 1. Issues 1 and 3 are interlinked: absence of portal upload did not constitute breach of natural justice where the noticee had actual knowledge and the factual record demonstrates substantial engagement with investigative processes. 2. Issue 2 governs relief in Issue 4: because the matter involves complex factual findings of large-scale fraud, writ relief was declined and petitioner was relegated to the statutory appeal, albeit given a one-time opportunity to file a belated appeal subject to conditions. 3. The Court's order is procedural and remedial in nature: it declines to quash the adjudicatory findings on merits, emphasizes appellate remedy, and grants a limited procedural concession (extension for filing appeal with pre-deposit), without affecting final adjudication by the Appellate Authority.