2025 (11) TMI 664 - HC - GST

Writ petition on alleged fraudulent Input Tax Credit denied; urged to pursue statutory GST appeal with required pre-deposit

HC declined to exercise writ jurisdiction in a petition challenging assessment for fraudulent availment of Input Tax Credit, holding such matters involve ... Maintainability of petition - exercise of writ jurisdiction - fraudulent availment of Input Tax Credit (ITC) - confirmation of tax demand alongwith interest and penalty on goods cleared clandestinely - HELD THAT:- This Court has consistently taken the view thatin 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. In cases involving large scale availment of ITC or evasion of payment of GST, the Court has not entertained writ petitions and has relegated the parties to the appellate remedy. Against this very impugned order, in the above writ petitions, the parties have been permitted to file appeals. 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 30th November, 2025 along with requisite pre-deposit in accordance with law. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether a writ petition under Article 226 is maintainable against an appealable order assessing demand and imposing penalties in proceedings alleging fraudulent availment of Input Tax Credit (ITC), when an alternate statutory remedy under Section 107 (appeal) is available. 2. Whether the Court should exercise writ jurisdiction in matters involving complex fact-finding regarding alleged bogus suppliers/non-existent firms and large-scale fraudulent availment of ITC, having regard to the burden on the exchequer and the integrity of the GST regime. 3. Whether relief by way of indulgence (extension of time to file appeal and protection from limitation-bar) is appropriate where co-noticees have been relegated to statutory appellate remedy and the impugned order is an appealable order. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Maintainability of writ against an appealable order under Article 226 where Section 107 remedy exists Legal framework: Article 226 extraordinary writ jurisdiction; Section 107 (statutory appeal) under the CGST/SGST/IGST regime. Established principle: existence of alternate statutory remedy is not absolute bar to writ, but writs are entertainable only in exceptional circumstances (breach of fundamental rights, violation of natural justice, excess of jurisdiction, challenge to vires). Precedent Treatment: The Court follows the Supreme Court's approach (Commercial Steel) that relegates parties to statutory appeal where none of the exceptional circumstances are established. Delhi High Court precedents (several reported decisions) applying the same principle in fraudulent-ITC contexts are followed. Interpretation and reasoning: The impugned order is appealable under Section 107. The allegations relate to fraudulent availment of ITC and involvement of non-existent firms. No pleaded or established breach of fundamental rights, no demonstrated violation of principles of natural justice, no clear excess of jurisdiction or challenge to the vires of the statute in the pleadings. The availability of a full appellate forum with fact-finding powers militates against entertaining extraordinary writ jurisdiction. Ratio vs. Obiter: Ratio - where an appealable order arises from detailed investigation into alleged fraudulent availment of ITC and no exceptional circumstance is made out, Article 226 jurisdiction ought not to be exercised and the remedy is to pursue the statutory appeal. Observations referencing policy considerations and the GST regime's integrity are ratio insofar as they inform the non-exercise of writ jurisdiction; ancillary comments about misuse of Section 16 are explanatory/obiter but supportive of the ratio. Conclusions: The Court will not entertain writ petitions challenging appealable orders in the absence of exceptional circumstances; petitioners must pursue the statutory appellate remedy under Section 107. Issue 2 - Appropriateness of writ jurisdiction in cases involving complex factual matrix, alleged bogus suppliers and national/exchequer interest Legal framework: Principles of judicial restraint in exercise of writ jurisdiction where detailed factual enquiry is required; statutory appellate hierarchy designed to adjudicate tax demands and penalties; Sections 16, 50, 74, 122 (relevant substantive provisions governing ITC denial, interest, demand and penalties). Precedent Treatment: The Court consistently follows prior High Court decisions and the Supreme Court decision emphasizing deference to the appellate process in complex GST investigations involving alleged fraud and large-scale ITC evasion. Interpretation and reasoning: Allegations disclose a complex 'maze' of transactions involving non-existent firms used to facilitate fraudulent ITC. Such matters necessitate voluminous factual analysis and documentary evidence, and assessment of the burden on the exchequer and systemic impact on GST. Writ jurisdiction is ill-suited to undertake such fact-intensive determinations; allowing writ relief risks multiplicity of litigation and inconsistent outcomes. The Court notes that writ relief would improperly substitute its fact-finding for that of the appellate authority. Ratio vs. Obiter: Ratio - where complex fact-intensive issues affecting revenue and involving systemic GST integrity are present, writ jurisdiction should ordinarily be declined and the statutory appeal route be followed. Observations about potential misuse of Section 16 and the broader policy impact are explanatory and form context for the ratio. Conclusions: The Court declines to exercise writ jurisdiction on merits; the appropriate course is to pursue appeal, so as to enable the appellate authority to conduct fact-based adjudication and safeguard the exchequer and GST regime. Issue 3 - Granting limited relief: extension of time and protection from limitation for filing appeal with requisite pre-deposit Legal framework: Powers of the Court to grant equitable relief, extend time and protect litigants from limitation bar where interlocutory relief is warranted; statutory requirement of pre-deposit for filing appeal under Section 107 and appellate admissibility rules. Precedent Treatment: The Court relies on its own and higher court practice of permitting filing of statutory appeals within an extended time and treating such filing as not barred by limitation where justified; prior orders in similar matters granted liberty to appeal and extended timelines (including matters carried to Supreme Court where time extensions were permitted). Interpretation and reasoning: Recognizing that co-noticees have been permitted to file appeals and given the serious consequences of denying appellate access, the Court exercises its discretionary power to grant limited indulgence: petitioners are permitted to file the statutory appeal by a specified date with requisite pre-deposit; if done, the appeal shall be adjudicated on merits and shall not be dismissed on the ground of limitation. This preserves appellate rights while not undermining the principle of relegation to the statutory forum. Ratio vs. Obiter: Ratio - where writ jurisdiction is declined, the Court may, as a matter of discretion and equity, permit filing of appeal within an extended timeframe and provide protection against dismissal on limitation grounds, subject to statutory pre-deposit. Ancillary observations that Court's comments will not affect appellate adjudication are procedural clarifications (obiter-adjacent but practical). Conclusions: The Court grants liberty to file appeal within the stipulated extended time with requisite pre-deposit; such appeal will be heard on merits and will not be dismissed as time-barred. The Court's decision declining writ relief does not prejudice the appellate authority's ultimate adjudication. Cross-references and Practical Outcomes 1. The Court's refusal to exercise writ jurisdiction in such matters is grounded in the combination of (a) availability of an efficacious statutory appeal, (b) absence of exceptional circumstances, and (c) the complex, fact-intensive nature of alleged fraudulent ITC schemes which implicate the exchequer and GST regime integrity. 2. The Court follows and applies binding and persuasive precedents that direct relegation to statutory appeal in the absence of the recognized exceptions to writ jurisdiction; those precedents have been consistently applied in co-noticee matters. 3. Where equitable relief is appropriate to preserve access to appellate remedy, the Court may extend time and protect appeals from limitation-based dismissal, subject to compliance with statutory pre-deposit requirements; such relief is interlocutory and does not adjudicate merits.