2025 (11) TMI 247 - HC - GST

Writ relief under Article 226 declined for alleged fraudulent Input Tax Credit; statutory appeal preferred over writs

M/s. R Gupta Metal Store (Through Its Proprietor Sh. Mahesh Chand Gupta) Versus Central Goods And Services Tax Delhi North (Through Its Commissioner).

HC declined to exercise writ jurisdiction under Article 226 in a case of alleged fraudulent availment of Input Tax Credit, holding such matters generally ... Maintainability of writ jurisdiction under Article 226 of the Constitution - fraudulent availment of Input Tax Credit (ITC) - 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. Since this Court has already considered the same very issue involving fraudulent availment of ITC, in several matters including Giftco Exports [2025 (10) TMI 592 - DELHI HIGH COURT], the Court is not inclined to entertain the present writ petition. Insofar as reply filed by the Petitioner is concerned, the reply was filed on 14th October, 2024, along with various relied upon documents.The said documents are permitted to be relied upon by the Petitioner as there is no detailed discussion in the impugned order in respect thereof. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether writ jurisdiction under Article 226 is maintainable in cases involving alleged fraudulent availment of Input Tax Credit (ITC) where an appeal under the CGST Act is available. 2. Whether the Court should exercise writ jurisdiction where the impugned order is an appealable order under Section 107 of the CGST Act and the matters entail complex factual and evidentiary inquiries relating to fabricated supplies and bogus suppliers. 3. Whether failure to give detailed consideration to a petitioner's reply to the Show Cause Notice (SCN) warrants exercise of writ jurisdiction (i.e., whether there is violation of principles of natural justice or other exceptional circumstances). 4. Whether, and on what terms, the petitioner should be relegated to statutory appellate remedy and whether time for filing appeal/pre-deposit should be extended or condoned. ISSUE-WISE DETAILED ANALYSIS Issue 1: Maintainability of writ jurisdiction in cases of alleged fraudulent availment of ITC when alternate statutory remedy exists Legal framework: Article 226 extraordinary writ jurisdiction; Section 107 (appeal) under the CGST Act providing statutory remedy against orders of the adjudicating authority. Precedent treatment: The Court follows Supreme Court and its own precedents holding that existence of alternate remedy is not an absolute bar but writs are to be entertained only in exceptional circumstances (e.g., breach of fundamental rights, violation of natural justice, excess of jurisdiction, challenge to vires). Interpretation and reasoning: The Court observes that alleged fraudulent availment of ITC raises extremely serious allegations and complex transactional webs involving non-existent firms and fabricated invoices, requiring detailed factual and evidentiary analysis. Given the potential burden on the exchequer and the systemic impact on the GST regime, such cases are generally unsuitable for adjudication in writ jurisdiction. The Court emphasizes that factual assessment and detailed scrutiny are matters for the adjudicatory and appellate fora established under the CGST Act. Ratio vs. Obiter: Ratio - In matters of alleged fraudulent ITC availment where appeal is available, writ jurisdiction ordinarily should not be exercised and petitioners should be relegated to statutory appeal. Obiter - Observations on the nature and misuse of Section 16 ITC facility and its policy implications, while persuasive, are ancillary to the jurisdictional conclusion. Conclusions: The Court declines to exercise writ jurisdiction in the present facts and relegates the petitioner to the statutory appellate remedy under Section 107 of the CGST Act. Issue 2: Appropriateness of writ relief where the impugned order is appealable and involves complex factual inquiries Legal framework: Principles of judicial restraint in writ jurisdiction; statutory appellate mechanism under Section 107; requirements of factual adjudication under tax statutes. Precedent treatment: The Court relies on earlier decisions which refused writ relief in comparable cases and which required petitioners to pursue appellate remedies; the Court also notes that similar matters have been remitted or time-extended by higher courts when appeals are pursued. Interpretation and reasoning: The Court reasons that matters involving a 'complex maze of transactions' among many entities and the need to examine voluminous documentary evidence cannot be resolved by writs, which are unsuitable for detailed factfinding. The existence of an appeal with the capacity to consider evidence and adjudicate on merits means the balance favours relegation to the statutory remedy to avoid multiplicity of litigation and conflicting findings. Ratio vs. Obiter: Ratio - Appellate remedy should be preferred where detailed factual and evidentiary determination is required; writ forum is inappropriate for resolving complex tax fraud allegations. Obiter - Illustrations regarding multiplicity of litigation and potential for contradictory findings are supportive but not foundational to the jurisdictional holding. Conclusions: The Court holds the impugned order is appealable and directs the petitioner to file an appeal; the writ petition is not entertained on merits. Issue 3: Whether inadequacy of consideration of petitioner's reply to the SCN constitutes an exceptional circumstance justifying writ relief Legal framework: Principles of natural justice (audi alteram partem) and judicial review for procedural fairness; requirement that adjudicating authority consider representations made in response to SCN. Precedent treatment: Courts have entertained writs where there is demonstrable violation of natural justice or where the reply was not considered at all; however, absence of detailed discussion in the impugned order does not automatically vitiate the order if the statutory appellate route remains available. Interpretation and reasoning: The Court notes the petitioner filed a reply and produced documentary material, and finds that those documents are permitted to be relied upon before the Appellate Authority because the impugned order lacks detailed discussion of them. Nonetheless, the Court does not find that the procedural defect rises to the level of an exception justifying exercise of writ jurisdiction in the face of serious fraud allegations and an available appeal. Ratio vs. Obiter: Ratio - Mere absence of detailed discussion of all documents in the impugned order does not, per se, permit bypassing the appellate remedy where no clear breach of natural justice or jurisdictional excess is established. Obiter - The Court's permission to rely on the reply documents in appeal is a discretionary accommodation and not a substantive finding on merits. Conclusions: Petitioner's reply and documents are allowed to be relied upon in the appellate proceedings, but this procedural consideration does not warrant entertaining the writ petition; petitioner must pursue the appeal. Issue 4: Relief by way of relegation to appeal - time-limits, pre-deposit and extension of limitation Legal framework: Statutory time-limits and pre-deposit requirements for filing appeals under the CGST Act; judicial powers to extend time/relieve from limitation where equities exist. Precedent treatment: The Court refers to prior orders granting limited extensions for filing appeals and conditioning adjudication on merits where appeals are filed within court-granted timelines; higher court practice has sometimes extended time periods in similar contexts. Interpretation and reasoning: Balancing the interest of the revenue and the petitioner's right to appellate adjudication, the Court grants a specified period to file the appeal with requisite pre-deposit and directs that any appeal filed within that period will be adjudicated on merits and not dismissed on limitation grounds. The Court also permits reliance on the record and replies before the appellate forum and underscores that its observations shall not prejudice the appellate authority's final adjudication. Ratio vs. Obiter: Ratio - Court may grant limited time and protect appeals from limitation where writ is declined, and such appeals will be adjudicated on merits provided pre-deposit and timelines directed by the Court are met. Obiter - Specific timelines granted in other matters or to co-noticees are illustrative and not binding beyond the present order. Conclusions: The petitioner is permitted to file the appeal within the period directed by the Court (with requisite pre-deposit), the appeal shall be adjudicated on merits and will not be dismissed as time-barred if filed within the stipulated period; the writ petition is disposed of accordingly.