2025 (11) TMI 240 - HC - GST

Writ denied in complex GST fraud case; petitioner directed to pursue statutory appeal under Section 107 CGST with pre-deposit deadline

The HC refused to entertain the writ challenging alleged fraudulent availment of Input Tax Credit and held that writ jurisdiction is ordinarily ... Maintainability of petiiton - availability of alternative remedy - Violation of principles of natural justice - no personal hearing was granted to the Petitioner - fraudulent availment of Input Tax Credit - HELD THAT:- This Court has consistently taken the view that in cases involving fraudulent availment of ITC, ordinarily, the Court would not be inclined to exercise its writ jurisdiction. It is routinely seen in such cases that there are complex transactions involved which require factual analysis and consideration of voluminous evidence, as also the detailed orders passed after investigation by the Department. In such cases, it would be necessary to consider the burden on the exchequer as also the nature of impact on the GST regime, and balance the same against the interest of the Petitioners, which is secured by availing the right to statutory appeal. The Supreme Court in the context of Central Goods and Service Tax Act, 2017, has, in The Assistant Commissioner of State Tax & Ors. v. M/s Commercial Steel Limited [2021 (9) TMI 480 - SUPREME COURT], has held that 'There was, in fact, no violation of the principles of natural justice since a notice was served on the person in charge of the conveyance. In this backdrop, it was not appropriate for the High Court to entertain a writ petition. The assessment of facts would have to be carried out by the appellate authority. As a matter of fact, the High Court has while doing this exercise proceeded on the basis of surmises. However, since we are inclined to relegate the respondent to the pursuit of the alternate statutory remedy under Section 107, this Court makes no observation on the merits of the case of the respondent.'. The Court is not inclined to entertain the present writ petition. The Petitioner was well aware of several notices, which were issued and the reply was duly filed by the Petitioner. Even in reply, the only ground taken is that the RUDs have not been supplied and there is no stand taken by the Petitioner on merits - the Court is inclined to relegate the Petitioner to avail of appellate remedy under Section 107 of the Central Goods and Service Tax Act, 2017. The appeal may be filed by the Petitioner by 30th November, 2025 along with the requisite pre-deposit. If the same is filed by the said date, the appeal shall be entertained on merits and shall not be dismissed being barred by limitation. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether a writ under Article 226 is maintainable against an appealable order under the CGST regime where an alternate statutory remedy under Section 107 is available. 2. Whether denial of personal hearing prior to issuance of the impugned demand order constitutes a violation of principles of natural justice sufficient to justify exercise of writ jurisdiction. 3. Whether allegations of fraudulent availment of Input Tax Credit (ITC) involving complex, multi-party transactions and suspected non-existent firms are amenable to adjudication in writ jurisdiction or require remand to appellate/tribunal fora for factual determination. 4. Whether, if writ jurisdiction is declined, the Court should grant indulgence by extending time and/or protecting appellants from limitation where an appeal under Section 107 is instituted. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Maintainability of Writ vs Alternate Remedy under Section 107 Legal framework: Article 226 confers extraordinary writ jurisdiction; the CGST scheme provides an alternate remedy of appeal under Section 107 against adjudication orders. Precedent treatment: The Court follows the principle that existence of an alternate remedy does not absolutely bar writ jurisdiction, but relief under Article 226 is confined to exceptional circumstances (examples: breach of fundamental rights, violation of natural justice, excess of jurisdiction, vires challenges). Interpretation and reasoning: Given the impugned order is appealable, and absent exceptional grounds, the Court will not exercise writ jurisdiction. The decision places weight on statutory appellate mechanism and the need for appellate authorities to undertake detailed fact-finding in specialized fiscal matters. Ratio vs. Obiter: Ratio - where an appealable order exists and no exceptional circumstance is shown, writ relief should be declined and the statutory appeal under Section 107 availed. Obiter - none beyond illustrations of exceptional circumstances. Conclusion: The petitioner is relegated to the statutory remedy under Section 107; writ jurisdiction is not exercised on merits. Issue 2 - Alleged Violation of Natural Justice (No Personal Hearing) Legal framework: Principles of natural justice require an opportunity of being heard before adverse administrative action; statutory processes and service of notices factor into compliance. Precedent treatment: The Court applies authorities holding that a breach of natural justice may constitute an exceptional circumstance permitting writ jurisdiction; however, mere procedural non-compliance must be established on facts. Interpretation and reasoning: The petitioner alleged no personal hearing was granted. The record, however, shows awareness of multiple notices and filing of replies; the petitioner did not demonstrate that lack of a personal hearing amounted to a material breach warranting extraordinary relief in the face of an appealable order. Ratio vs. Obiter: Ratio - absence of an established, substantive breach of principles of natural justice (as opposed to mere procedural complaint without material prejudice) will not justify bypassing statutory appeal. Obiter - factual sufficiency required to establish the breach. Conclusion: No exceptional natural justice violation was found to justify writ relief; the petitioner must pursue the appellate remedy. Issue 3 - Complexity of ITC Fraud Allegations and Appropriateness of Writ Jurisdiction Legal framework: CGST scheme, Section 16 (ITC entitlement), provisions dealing with demand and penalty (including Sections 122(1) and 122(3) considerations inferred), and the role of investigative and adjudicatory authorities. Precedent treatment: The Court consistently follows prior High Court and Supreme Court pronouncements that complex fiscal investigations involving inter-connected entities and extensive documentary/forensic material require adjudication by designated statutory fora; writ courts should avoid detailed factual inquiries in such matters. Interpretation and reasoning: The impugned order arises from an extensive departmental probe alleging fraudulent networks of non-existent firms and large scale ITC transfers. The Court emphasises the need to protect the exchequer and the GST regime from misuse of ITC and notes that factual reconstruction, apportionment of liability, and penalty determination are matters for the adjudicatory and appellate authorities equipped for such fact-heavy exercises. Ratio vs. Obiter: Ratio - where allegations involve complex, voluminous transactions and potential systemic harm to the revenue and GST scheme, writ jurisdiction is inappropriate; factual and evidentiary disputes must be resolved in the statutory appeal/tribunal process. Obiter - comments on the potential impact of misuse of Section 16 on the GST regime. Conclusion: The writ petition is unsuitable for adjudication; the petitioner must litigate issues of fact, causation, and penalty before the appellate authority under Section 107. Issue 4 - Relief by Way of Time Extension / Protection from Limitation for Filing Appeal Legal framework: Section 107 prescribes appellate remedy and pre-deposit requirements; courts may, in appropriate cases, grant time extensions or protect appellants from limitation where writ jurisdiction is declined but relief by way of indulgence is warranted. Precedent treatment: The Court follows its practice in similar matters of permitting appellants limited time to file appeals and prescribing that appeals so filed shall be entertained on merits and not dismissed on limitation grounds, provided pre-deposit conditions are met. Interpretation and reasoning: Recognising that the matter ought to be determined in the appellate forum but also considering procedural equities (awareness of notices and replies filed), the Court affords the petitioner a date by which the appellate remedy must be instituted along with the requisite pre-deposit; if complied with, the appeal will be adjudicated on merits and not dismissed as time-barred. Ratio vs. Obiter: Ratio - when relegating parties to appellate remedy, the Court may (and in similar cases has) grant limited relief by extending time and protecting appeals from dismissal on limitation, subject to compliance with pre-deposit conditions. Obiter - none beyond procedural guidance. Conclusion: The petitioner is permitted to file an appeal under Section 107 within the timeframe fixed by the Court with the required pre-deposit; the appeal will be entertained on merits and limitation will not be a ground for dismissal if conditions are met. Overall Disposition and Practical Directions Legal effect: Writ jurisdiction declined; petitioner relegated to statutory appellate remedy. The Court reiterates that exercise of writ jurisdiction to prevent enforcement of appealable revenue orders in complex ITC fraud cases is disfavoured absent exceptional circumstances. Practical outcome: The petition is disposed of with liberty to file the statutory appeal within the time allowed and to comply with pre-deposit requirements; appellate authority to decide on merits; any observations by this Court do not bind the appellate authority.