Writ relief denied in GST ITC dispute; taxpayer directed to pursue Section 107 CGST appeal, delay condoned.

HC declined to exercise writ jurisdiction in a GST dispute involving alleged fraudulent availment of ITC, holding that such matters typically require factual adjudication through the statutory appellate mechanism. Although the Petitioner alleged violation of natural justice and error in DRC-07 due to non-service of SCN, the Court found that an email intimation was received and any defect in DRC-07 was merely inadvertent and not fatal. Treating the grievance as one fit for appeal under Section 107 CGST Act, HC permitted the Petitioner to file an appeal against the order and DRC-07 by 15 January 2026, directing that it be entertained on merits without being rejected as time-barred.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the writ petition under Article 226 challenging a demand order relating to alleged fraudulent availment of Input Tax Credit is maintainable in the presence of an alternative statutory appellate remedy under Section 107 of the Central Goods and Services Tax Act, 2017.

1.2 Whether the alleged non-issuance / non-service of a show cause notice upon the petitioner and the incorrect mention of the financial year in Form DRC-07 render the adjudication order and demand unsustainable for violation of principles of natural justice or for being legally invalid.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Maintainability of writ petition in presence of statutory appellate remedy under Section 107 of the CGST Act in cases of alleged fraudulent ITC

Legal framework

2.1 The Court referred to Section 107 of the CGST Act providing a statutory remedy of appeal against adjudication orders and to the principles laid down by the Supreme Court in relation to maintainability of writ petitions under Article 226 where an alternative remedy exists, particularly in the context of tax proceedings.

2.2 The Court relied upon the decision of the Supreme Court which held that although availability of an alternative remedy is not an absolute bar, writ jurisdiction should be exercised only in exceptional circumstances, namely: (i) breach of fundamental rights; (ii) violation of principles of natural justice; (iii) excess of jurisdiction; or (iv) challenge to the vires of the statute or delegated legislation, and that factual assessment is to be undertaken by the appellate authority.

2.3 The Court also relied upon its own earlier decisions in matters involving fraudulent availment of ITC, where it consistently declined to exercise writ jurisdiction and relegated parties to the appellate remedy under Section 107 of the CGST Act, keeping in view the nature of allegations, complexity of transactions, burden on the exchequer, and impact on the GST regime.

Interpretation and reasoning

2.4 The Court noted that the allegations relate to fraudulent availment of ITC from non-existent firms, involving complex transactions and a detailed investigation culminating in a speaking adjudication order and corresponding demand, including in respect of several entities.

2.5 The Court reiterated its consistent approach that cases of fraudulent ITC, which generally involve a "complex maze of transactions" and detailed fact-finding, are unsuitable for adjudication under writ jurisdiction, as the factual matrix, the role of the assessee, the correctness and proportionality of penalties, and the appreciation of evidence fall within the province of the statutory appellate authority.

2.6 The Court emphasized that the GST Input Tax Credit regime under Section 16 of the CGST Act is a key, business-friendly feature of the GST framework and that its misuse through fictitious or non-existent suppliers, without actual supply of goods or services or deposit of output tax, poses a serious threat to the GST regime and the public exchequer, which justifies reluctance in entertaining writ petitions in such matters.

2.7 The Court followed its earlier pronouncements that writ jurisdiction should not be exercised to aid "unscrupulous litigants" in such fraudulent ITC cases and that permitting parties to pursue parallel or alternative forums in such matters leads to multiplicity of proceedings and a risk of contradictory findings.

2.8 The Court noted that the impugned order is appealable under Section 107 of the CGST Act, and that in similar circumstances, in earlier matters, the Court had declined to entertain writ petitions and granted liberty to file appeals, with extended time where warranted; such an approach had also been upheld or recognized by the Supreme Court, which had in some cases only extended time for filing the statutory appeal.

Conclusions

2.9 The Court held that no exceptional circumstance was established to justify exercise of writ jurisdiction under Article 226 in the face of the available statutory appellate remedy under Section 107 of the CGST Act.

2.10 The Court therefore declined to entertain the writ petition on merits and relegated the petitioner to avail the appellate remedy, while granting liberty to file an appeal against the adjudication order and the DRC-07 and directing that, if filed by the stipulated extended date with the requisite pre-deposit, the appeal shall be decided on merits and not dismissed on limitation.

Issue 2 - Effect of alleged non-service of show cause notice and incorrect financial year in DRC-07 on validity of adjudication and demand; plea of violation of natural justice

Legal framework

2.11 The petitioner relied upon Section 73 of the CGST Act read with Rule 142(1A) of the CGST Rules and emphasized the mandatory nature of the requirement of issuance of show cause notice by referring to the use of the word "shall".

Interpretation and reasoning

2.12 The petitioner's principal contention was that no show cause notice had been issued to it prior to passing of the adjudication order, thereby rendering the order void for lack of notice and violation of principles of natural justice; the petitioner also pointed out that the DRC-07 mentioned the wrong financial year.

2.13 On behalf of the department, it was submitted, with supporting documents, that a common show cause notice had in fact been issued on 1 August 2024 to all noticees, including the petitioner, and that the notice was sent to the registered email address of the petitioner and uploaded on the GST portal; it was further clarified that the DRC-07's reference to financial year 2017-18 was an inadvertent error, whereas the show cause notice and the proceedings related to FY 2023-24.

2.14 The Court examined the email dated 1 August 2024, noting that it was addressed from the department's email and showed the petitioner's registered email ID as one of the recipients. The Court observed that there was no categorical disclosure in the writ petition that the email was not received; nor was a proper rebuttal placed on record regarding non-receipt. At the hearing, a copy of the petitioner's reply dated 10 August 2024 was produced, which indicated that the petitioner had responded to the proceedings.

2.15 In light of the material produced, the Court held that it was not in dispute that the email dated 1 August 2024 was received by the petitioner and that the petitioner was under a duty to appear and participate fully in the adjudication proceedings, which undermined the plea of absence of show cause notice or violation of natural justice.

2.16 As regards the incorrect mention of the financial year as 2017-18 in DRC-07, the Court treated this as an "inadvertent error", especially since the show cause notice and substantive proceedings related to FY 2023-24. The Court found that such a mistake in DRC-07 could not be characterized as a "fatal error" vitiating the entire adjudication or demand.

Conclusions

2.17 The Court concluded that the requirement of issuance and service of a show cause notice had been substantially complied with, that the petitioner had notice of the proceedings and an opportunity to respond, and that no violation of principles of natural justice was made out on that ground.

2.18 The Court further concluded that the misdescription of the financial year in DRC-07 was a non-fatal, inadvertent error which did not, by itself, invalidate the adjudication order or the demand, and that such issues could appropriately be raised and examined in the statutory appeal.

2.19 On the combined effect of these findings, the Court held that neither the plea of absence of show cause notice nor the clerical error in DRC-07 constituted a ground to set aside the impugned order in writ proceedings, and that the petitioner's remedy lay in filing an appeal under Section 107 of the CGST Act within the extended time granted.

---