2025 (12) TMI 867 - HC - GST

Writ relief denied in alleged fraudulent ITC case; remedy lies in CGST appeal despite expired limitation period

HC declined to exercise writ jurisdiction in a dispute involving alleged fraudulent availment of ITC, holding that such matters require detailed factual ... Violation of principles of natural justice - no personal hearing notice was served upon the Petitioner during the course of adjudication proceedings prior to passing of the impugned order - delay in uploading of the SCN - availment of fake 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 CGST Act, has, in The Assistant Commissioner of State Tax & Ors. v. M/s Commercial Steel Limited [2021 (9) TMI 480 - SUPREME COURT], 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 Petitioner is free to take all the contentions which he wishes to raise before the Appellate Authority. The time for filing the appeal assailing the impugned order has already lapsed but since it is contended by the Petitioner that no personal hearing was granted and SCN was uploaded on the portal beyond the period of limitation, the said issues deserve to be looked into by the appellate authority. Thus, the Court is inclined to give the opportunity to the Petitioner to file an appeal. Accordingly, if the appeal is filed by the Petitioner along with the requisite pre-deposit by 15th January, 2026, the same shall not be dismissed on the ground of limitation and shall be adjudicated on merits - petition disposed off. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the writ petition under Article 226 challenging the GST demand order alleging fraudulent availment of Input Tax Credit is maintainable in view of the availability of an alternative statutory appellate remedy under Section 107 of the CGST Act. 1.2 Whether the alleged denial of personal hearing and delayed uploading of the show cause notice warrant interference in writ jurisdiction or justify only a limited relief in relation to the appellate remedy and limitation. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Maintainability of writ petition in presence of statutory appeal in a case of alleged fraudulent ITC Legal framework (as discussed) 2.1 The Court referred to Article 226 of the Constitution and Section 107 of the CGST Act dealing with the statutory appellate remedy against adjudication orders. 2.2 The Court relied on the principles laid down by the Supreme Court in 'The Assistant Commissioner of State Tax & Ors. v. M/s Commercial Steel Limited', wherein it was held that existence of an alternative remedy is not an absolute bar, but writ jurisdiction is ordinarily not to be exercised except in cases of (i) breach of fundamental rights, (ii) violation of principles of natural justice, (iii) excess of jurisdiction, or (iv) challenge to vires of statute/delegated legislation. 2.3 The Court also referred to its earlier decisions in matters concerning fraudulent availment of ITC, including those where it had declined to exercise writ jurisdiction and relegated assessees to the appellate remedy, particularly emphasizing Section 16 of the CGST Act, the nature and misuse of Input Tax Credit, and Section 107 as the appropriate remedy. Interpretation and reasoning 2.4 The impugned order arose from an investigation by DGGI, Rohtak into a network of fake firms allegedly created for the sole purpose of obtaining ITC, involving 18 fake firms and 374 purchasing entities, including the petitioner. 2.5 The Court noted that allegations concern fraudulent availment of ITC and involve a 'complex maze of transactions', voluminous records, and detailed factual findings, which are unsuitable for adjudication in writ jurisdiction. 2.6 The Court reiterated its consistent view that in cases of fraudulent ITC, given the impact on the exchequer and the GST regime, and the need for detailed factual appreciation, writ jurisdiction under Article 226 ought not ordinarily to be exercised when a statutory appeal is available. 2.7 The Court applied the ratio of the Supreme Court in 'Commercial Steel' and its own previous judgments (including those where petitioners alleging fraudulent ITC were relegated to appeal) to conclude that the existence of an efficacious appellate remedy under Section 107 should be respected. 2.8 The Court emphasized that the statutory scheme under the CGST Act envisages determination of such disputes, including examination of evidence and role of the assessee, through the appellate hierarchy rather than in writ proceedings. Conclusions 2.9 The writ petition was held not maintainable in the facts of a case involving alleged fraudulent availment of ITC, in view of the specific, efficacious appellate remedy under Section 107 of the CGST Act. 2.10 The Court declined to exercise its extraordinary writ jurisdiction to examine the merits of the demand or the factual matrix underlying the alleged fraudulent transactions and relegated the petitioner to avail the appellate remedy. Issue 2: Effect of alleged denial of personal hearing and delayed uploading of SCN; relief regarding limitation for appeal Legal framework (as discussed) 2.11 The Court referred to the principles in 'Commercial Steel' regarding when violation of natural justice can justify bypassing an alternative remedy, and to its own prior practice of relegating parties to appeal while permitting delayed filing to enable adjudication on merits. Interpretation and reasoning 2.12 The petitioner contended that: (i) no personal hearing notice was served or personal hearing granted prior to passing the impugned order; and (ii) the show cause notice dated 23 July 2024 was uploaded on the portal only on 27 August 2024, after the expiry of limitation on 5 August 2024. 2.13 While maintaining that the writ petition itself would not be entertained on merits, the Court considered that these contentions-relating to natural justice and limitation-are matters that deserve examination by the appellate authority. 2.14 Recognizing that the statutory period for filing appeal had lapsed, and to ensure that the petitioner is not deprived of the appellate remedy in respect of such contentions, the Court deemed it appropriate to grant a limited protective direction concerning the period of limitation for filing the appeal. Conclusions 2.15 The Court did not adjudicate on whether there was in fact a violation of principles of natural justice or illegality in delayed uploading of the SCN, leaving these issues expressly open for consideration by the appellate authority. 2.16 The Court granted liberty to the petitioner to file an appeal under Section 107 of the CGST Act against the impugned order, along with the requisite pre-deposit, on or before 15 January 2026. 2.17 It was directed that if such appeal is filed within the stipulated time with requisite pre-deposit, it shall not be dismissed on the ground of limitation and shall be adjudicated on merits. 2.18 The benefit of this extension and protection from dismissal on limitation was confined exclusively to the petitioner and not extended to any co-noticees. 2.19 All substantive rights and contentions of the parties were left open for adjudication by the appellate authority, and the writ petition along with pending applications was disposed of accordingly.