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TaxTMI 
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2025 (8) TMI 315
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....form DRC-07 dated 4th February, 2025 issued along with the impugned order. I. Facts 3. The Petitioner is stated to be a firm dealing in metal scrap. It is stated to be a sole proprietorship of Mr. Gaurav Gupta and was registered under the erstwhile VAT regime. Thereafter, it migrated to the GST regime with GST No. 07AIAPG0187ElZQ. 4. On 3rd August, 2021, a search operation was carried out at the residential premises of the proprietor of the Petitioner as also at its sales office. Various records/files were resumed by the GST Department (hereinafter, 'the Department') from the said premises. The proprietor of the Petitioner, i.e. Mr. Gaurav Gupta was, thereafter, arrested on 4th August, 2021 by the Directorate General of GST Intelligence (hereinafter, 'DGGI'), Meerut Zonal Unit. Mr. Gaurav Gupta was released on regular bail on 22nd October 2021. 5. A Show Cause Notice (hereinafter, 'SCN') was issued to the Petitioner on 29th May, 2023 along with form DRC-01 by the DGGI, Ghaziabad Regional Unit for the financial years 2017-2018, 2018-2019, 2019-2020, 2020-2021 and 2021-2022. Vide the said SCN, a demand of Rs. 83,76,32,528/- was raised against the Petitioner on the ground ....
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....erson and issue an order." 11. Ld. Counsel for the Petitioner has placed reliance upon a Circular bearing no. 171/03/2022-GST dated 6th July, 2022 issued by the Central Board of Indirect Taxes and Customs, to show that if no goods were procured or supplied by any entity, such an entity would not be liable to pay any tax in terms of Sections 73 or 74 of the CGST Act. It is further submitted by the ld. Counsel that, in such circumstances, only imposition of penalty under Sections 122(1)(i), 122(1)(ii), and 122(1)(vii) of the CGST Act could have been invoked, which has admittedly not been done in the present case. It is also the case of the Petitioner that the said circular shall have a binding effect on the Adjudicating Authority in terms of Section 168(1) of the CGST Act. 12. Further, it is submitted by the ld. Counsel for the Petitioner that the grounds which can be taken in the impugned order raising demands of tax or penalty would have to be only those grounds which were mentioned in the SCN in terms of Section 75(7) of the CGST Act. The relevant provision reads as under: "75. General provisions relating to determination of tax.- XXXX (7) The amou....
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....the SCN (Para 14.5 of SCN refers). (iii) You did not appear on any of PH scheduled for 12.11.2024, 28.11.2024 and 12.12.2024, thus failed to submit even any Oral submission before the undersigned." 15. It is the submission of the ld. Counsel for the Petitioner that no prejudice would have been caused to the Respondent, if the opportunity of cross examination would have been provided to the Petitioner. The Petitioner relies upon the decisions of HIM Logistics Pvt. Ltd. v. The Principal Commissioner of Customs, 2016 SCC OnLine Del 1236 and Flevel International v. Central Excise, 2015 SCC OnLine Del 12173 to contend that the denial of the opportunity for cross-examination is violative of the settled legal position and is, therefore, unsustainable in law. The relevant extracts of the said decisions, relied upon by the Petitioner, reads as under: • HIM Logistics Pvt. Ltd. v. The Principal Commissioner of Customs, 2016 SCC OnLine Del 1236 "16. In the present case, it is an admitted fact that the Respondent Department is placing considerable reliance on the statements of Mr. Shyam Lal and Ms. Preeti, the partners of the importer, in support of the case ma....
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....he suppliers has been denied by the Respondent. According to the Petitioner, if the suppliers were found to be non-existent by the Respondent, then as per paragraph 3 of the Circular bearing no. 171/03/2022-GST dated 6th July, 2022, neither the Petitioner could avail or utilise the ITC nor any demand of tax on outward supplies could be fastened on the Petitioner whether under Section 73 or 74 of the CGST Act. 17. Ld. Counsel for the Petitioner has also pointed out that no purpose would be served to the Petitioner in availing the appellate remedy under Section 107 of the CGST Act as the Appellate Authority cannot perform functions of Adjudicating Authority. Moreover, it is submitted on behalf of the Petitioner that under Section 107 (11) of the CGST Act, the Appellate Authority cannot remand back the matter to Adjudicating Authority, hence, this Court shall be the appropriate forum to remand back the matter to the Adjudicating Authority for proper adjudication. Section 107(11) of the CGST Act reads as under: "(11) The Appellate Authority shall, after making such further inquiry as may be necessary, pass such order, as it thinks just and proper, confirming, modifying or a....
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....he above five firms were investigated by the DGGI and were found to be non-traceable. Since the registration under the GST regime, no business activity had been conducted at the registered addresses of these firms. 22. Mr. Gaurav Gupta was summoned and his statements were recorded on 3rd August 2021 and 4th August 2021 respectively, in the office of DGGI. 23. Thus, from the initial investigation, it was observed that a substantial amount of ITC to the tune of over Rs.22.49 Crores were availed from the abovementioned five firms. In addition, from the statements of Mr. Gaurav Gupta it was also revealed that there were other firms from whom ITC was availed by the Petitioner. 24. Upon summons being issued to the abovementioned five firms, except one person i.e. Mr. Anuj Kumar, proprietor of M/s Metals Scrap & Alloys, none appeared before the Department. Further, there were 20 firms from whom ITC was availed by the Petitioner, however, upon investigation it was revealed that most of these firms never existed or their registered addresses were either vague or incomplete. During the investigation it was also noticed that the GST registrations of few of the suppliers of the Petiti....
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....red that M/s Ambika Traders never received any supplies (goods or services or both) from these twenty non-existent/fake suppliers and they fraudulently got possession of the transport documents and forged them. Many-a-inward supplies, as claimed by M/s Ambika Traders, turned out to be the outward supplies; this is duly collaborated by the depositions of the transporters. Bereft of supplies, M/s Ambika Traders availed and utilized ITC fraudulently." 27. The SCN further notes the provisions of the CGST Act which are alleged to have been contravened by the Petitioner. The relevant portion of the SCN reads as under: "9. Statutory Provisions: 9.1 In view of the foregoing, M/s Ambika Traders and its aforesaid non-operational/ fake twenty supplier firms have contravened the following provisions of the CGST Act, 2017 and the Rules made thereunder:- i. Section 16, of the CGST Act, 2017, in as much as, they failed to fulfill the following conditions of Section 16(2), (a) failed to receive underlying goods shown in the invoices, (b) the tax charged in respect of supply has not been actually paid by the supplier; (c) the supplier failed ....
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....dance with the provisions of sub-section (1) of section 51, or deducts an amount which is less than the amount required to be deducted under the said sub-section, or where he fails to pay to the Government under sub-section (2) thereof, the amount deducted as tax; (vi) fails to collect tax in accordance with the provisions of sub-section (1) of section 52, or collects an amount which is less than the amount required to be collected under the said sub-section or where he fails to pay to the Government the amount collected as tax under sub-section (3) of section 52; (vii) takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder; (viii) fraudulently obtains refund of tax under this Act; (ix) takes or distributes input tax credit in contravention of section 20, or the rules made thereunder: (x) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax due under this Act; (xi) is liable to be r....
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....due from such person, whichever is higher. (3) Any person who - (a) aids or abets any of the offences specified in clauses (i) to (xxi) of sub-section (1); (b) acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder; (c) receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder; (d) fails to appear before the officer of central tax, when issued with a summon for appearance to give evidence or produce a document in an inquiry; (e) fails to issue invoice in accordance with the provisions of this Act or the rules made thereunder or fails to account for an invoice in his books of account, shall be liable to a penalty which may extend to twenty-five thousand rupees ix. Section 137 of the CGST Act, 2017:- Off....
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....CN are as under: i. Fraudulently availed ITC in contravention of Section 16 of CGST Act amounting to Rs. 83,76,32,528/-. ii. Demand of fraudulently utilized ITC of Rs. 83,76,32,528/- under Section 74 of the CGST Act/Delhi Goods and Service Tax Act, 2017 (hereinafter, 'DGST Act') read with Section 20 of the Integrated Goods and Services Tax Act, 2017 (hereinafter, 'IGST Act'). iii. Interest under Section 50 of the CGST Act/ DGST Act read with Section 20 of the IGST Act. iv. Penalty under Section 74 of the CGST Act/ DGST Act read with Section 20 of the IGST Act. v. Penalty Section 122(1)(x)(xvi)(xvii) of the CGST Act/DGST Act. vi. Penalty under Section 122(3) of the CGST Act/DGST Act read with Section 20 of the IGST Act. vii. Penalty under Section 122(3)(a)(d)(e) and Section 137 of the CGST Act read with provisions of DGST and IGST against Mr. Gaurav Gupta. 29. Notices were issued to all the 20 alleged fake non-existent firms. 30. The Petitioner submitted a detailed reply to the SCN on 19th December, 2024, wherein responses to various factual assertions were provided and certain objections were raised. Subsequently,....
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....unities provided to them against the allegations leveled on them vide the said communications and they are escaping the department from appearing before the same, furnishing any defense in their support and deposit any liability due to them. Had there been any genuineness in their act of availment of the impugned ITC amount, they would have at least once tried to provide explanation of their dubious act as informed to them vide the above said communications. Hence, I hold that it has been proved beyond the doubt they were involved in the conspiracy to defraud the Government exchequer and hence, they have wrongly availed the ITC in contravention to the provisions of the CGST/ DGST Act, and thus the same is ineligible to them and therefore the same is recoverable from them along with the applicable interest and penalty. In this regard, I find that it has been established that Supplier firms were non-existent/fake firms and they have neither received any goods physically nor supplied any goods physically. The firms were not engaged in any actual business activity and have been created only for the purpose of issuance of fake invoices without actual supply of goods." 34. Th....
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.... (iii) Interest under Section 50 of the CGST Act/DGST Act read with Section 20 of the IGST Act; (iv) Penalty to the tune of Rs. 83,76,32,528/- under Section 74 of the CGST Act/DGST Act read with Section 20 of the IGST Act; (v) Penalty imposed on Mr. Gaurav Gupta to the tune of Rs. 25,000/- for violation of each of the clauses under Section 122 (3)(a)(d)(e) of the CGST Act. Thus, a total sum of Rs. 1,67,52,65,056/- i.e., the demand of tax and penalty has been raised against the Petitioner. 37. Insofar as the twenty fictitious and non-existent firms are concerned, the penalty imposed upon them corresponds to the actual amount of ITC allegedly availed or utilized by them. c) Proceedings before this Court 38. The broad contentions raised for the Petitioner before this Court are as under: (a) That the two replies dated 19th December 2024 and 30th December 2024 filed by the Petitioner to the SCN have not been properly considered by the Adjudicating Authority. (b) That the impugned order passed by the Adjudicating Authority proceeds beyond the SCN. (c) That consolidated SCN for multiple financial years has been issued under S....
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....23-24,] not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful-misstatement or suppression of facts.-- XXXX (3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax. (4) The service of such statement shall be deemed to be service of notice on such person under sub-section (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice. XXXX 74. Determination of tax [, pertaining to the period up to Financial Year 2023-24,] not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful-misstatement or suppression of facts.-- XXXX (3) Where a notice has been issued for any period unde....
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.... financial year. It is only when either are found to be fabricated or the firms are found to be fake that the maze of transactions can be analysed and established as being fraudulent or bogus. 47. A solitary availment or utilization of ITC in one financial year may actually not be capable of by itself establishing the pattern of fraudulent availment or utilization. It is only when the series of transactions are analysed, investigated, and enquired into, and a consistent pattern is established, that the fraudulent availment and utilization of ITC may be revealed. The language in the abovementioned provisions i.e., the word 'period' or 'periods' as against 'inancial year' or 'assessment year' are therefore, significant. 48. The ITC mechanism is one of the salient features of the GST regime which was introduced to encourage genuine businesses. In the words of Shri Pranab Mukherjee, the then Hon'ble President of India, who addressed the Nation at the launch of the GST on 1st July, 2017, ITC was highlighted as one of the core features integral to the framework of the GST regime. The relevant extract of the said speech of the Hon'ble President is set out below: "I am told ....
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....the country are carrying out a focused drive on the issue of non-existent / bogus registrations and issuance of fake invoices without any underlying supply of goods and services. Since the initiation of the special drive against fake registrations in mid-May 2023, a total of 29,273 bogus firms involved in suspected Input Tax Credit (ITC) evasion of Rs. 44,015 crore have been detected. This has saved Rs. 4,646 crore of which Rs. 3,802 crore is by blocking of ITC and Rs. 844 crore is by way of recovery. So far, 121 arrests have been made in the cases. In the quarter ending December, 2023, 4,153 bogus firms that involved suspected ITC evasion of around Rs.12,036 crore were detected. 2,358 of these bogus firms were detected by the Central GST Authorities. This has protected revenue of Rs. 1,317 crore of which Rs. 319 crore has been realised and Rs 997 crore has been protected by blocking ITC. 41 persons were arrested in these cases. 31 of these arrests were by Central GST Authorities. State wise details are annexed." 52. Moreover, a Co-ordinate Bench of this Court vide order dated 3rd October, 2024 in W.P.(C) 13855/2024 titled 'M/s Vallabh Textile Through Its Autho....
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....s and entities. The language of the provision itself does not prevent issuance of SCN or order for multiple years in a consolidated manner. 55. Even in the order which has been impugned before this Court, the details of the amounts for each year are set out clearly in the content of the order itself and is, therefore, clearly decipherable. Thus, it cannot be held that the issuance of consolidated notice or order violates the language of the provisions. Especially, in the case of fraudulent availment of ITC or utilization of ITC such consolidated notice and order would not just be permissible but may, in fact, be required to show the wilful misstatement or suppression or the fraudulent availment/utilization. 56. Insofar as the statement that the impugned order travels beyond SCN is concerned, the same is a completely untenable argument as the SCN contemplates demands of tax, interest, and penalty for wrongful availment or utilization of ITC under Section 122 of the CGST Act. The impugned order does not travel beyond SCN in any manner. 57. Further, the impugned order is an appealable order under Section 107 of the CGST Act and there is a substantive appellate remedy availabl....
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....unication received from the Indian High Commission in London. These statements and the report were, according to Mr Divan, inadmissible in evidence as the appellant's request for an opportunity to cross-examine these witnesses had been unfairly declined, thereby violating the principles of natural justice that must be complied with no matter the strict rules of the Evidence Act had been excluded from its application. ... 24. Mr Malhotra, on the other hand, argued that the right of cross-examination was available to a party under the Evidence Act which had no application to the adjudication proceedings under FERA. ... ...He also placed reliance upon a decision of this Court in Surjeet Singh Chhabra v. Union of India(1997(1) SCC 508 1997 SCC (Cri) 272) to argue that cross-examination was unnecessary in certain circumstances such as the one at hand where all material facts were admitted by the appellants in their statements before the authority concerned. 25. There is, in our opinion, no merit even in that submission of the learned counsel. It is evident from Rule 3 of the Adjudication Rules framed under Section 79 of FERA that the rules of procedure do not apply to ....
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....s and not all. 20. In the present case, the mere rejection of the Petitioner's request for cross-examination cannot, in and of itself, be treated as a sufficient ground to bypass the statutorily prescribed appellate remedy and invoke the writ jurisdiction of this Court." 58. In the facts of this case, no prejudice is caused to the Petitioner if cross-examination is not afforded as all the documents relied upon by the Adjudicating Authority are those which have been recovered from the Petitioner's premises itself and the Petitioner is well in the knowledge of the actual status of the purchasers and the suppliers. 59. This Court has already taken a view that interference in such cases in writ jurisdiction is limited. The Court cannot go into analysis of facts in writ jurisdiction. It is well-settled in law that the High Court, despite being vested with wide and extensive powers under Articles 226 and 227 of the Constitution of India, must exercise such powers within the bounds of judicial discipline and established legal principles. The jurisdiction of the High Court does not extend to reappreciation of evidence or interference with factual findings recorded by the com....
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....retion to decline interference under Article 226, unless compelling circumstances and grounds are demonstrated to justify such invocation. This legal position stands affirmed by the Supreme Court way back in the case of Union of India v. T.R. Varma, 1957 SCC OnLine SC 30. The relevant portion of the said decision reads as under: "6. At the very outset, we have to observe that a writ petition under Article 226 is not the appropriate proceeding for adjudication of disputes like the present. Under the law, a person whose services have been wrongfully terminated, is entitled to institute an action to vindicate his rights, and in such an action, the Court will be competent to award all the reliefs to which he may be entitled, including some which would not be admissible in a writ petition. It is well-settled that when an alternative and equally efficacious remedy is open to a litigant, he should be required to pursue that remedy and not invoke the special jurisdiction of the High Court to issue a prerogative writ. It is true that the existence of another remedy does not affect the jurisdiction of the Court to issue a writ; but, as observed by this Court in Rashid Ahmed v. Munic....
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....opinion of the High Court under Section 24 of the Act. The Act provides for a complete machinery to challenge an order of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and not by a petition under Article 226 of the Constitution. It is now well recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of. This rule was stated with great clarity by Willes, J. in Wolverhampton New Waterworks Co. v. Hawkesford [(1859) 6 CBNS 336, 356 : 28 LJCP 242 : 141 ER 486 : 7 WR 464] in the following passage: "There are three classes of cases in which a liability may be established founded upon statute. But there is a third class, viz. where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it. . .the remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to." The rule laid ....
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....rcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged. 27.4. An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law. 27.5. When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion. 27.6. In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be ....
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....e said legal position has also been reiterated by this Court in M/s Sheetal and Sons & Ors. v. Union of India & Anr., (2025: DHC: 4057-DB) and by the Allahabad High Court in Writ Tax No. 753 of 2023 titled 'Elesh Aggarwal v. Union of India' wherein the Allahabad High Court has held that no ground is made for interference on merits in exercise of extra ordinary jurisdiction. The relevant portion of the decision in M/s Sheetal and Sons & Ors. (Supra) reads as under: "15. The Supreme Court in the decision in Civil Appeal No 5121 of 2021 titled 'The Assistant Commissioner of State Tax & Ors. v. M/s Commercial Steel Limited' discussed the maintainability of a writ petition under Article226. In the said decision, the Supreme Court reiterated the position that existence of an alternative remedy is not absolute bar to the maintainability of a writ petition, however, a writ petition under Article 226 can only be filed under exceptional circumstances.... XXXX 16. In view of the fact that the impugned order is an appealable order and the principles laid down in the abovementioned decision i.e. The Assistant Commissioner of State Tax & Ors. (Supra), the Petitioners a....
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.... 38 "21. The principle that a person who does not come to the court with clean hands is not entitled to be heard on the merits of his grievance and, in any case, such person is not entitled to any relief is applicable not only to the petitions filed under Articles 32, 226 and 136 of the Constitution but also to the cases instituted in others courts and judicial forums. The object underlying the principle is that every court is not only entitled but is duty bound to protect itself from unscrupulous litigants who do not have any respect for truth and who try to pollute the stream of justice by resorting to falsehood or by making misstatement or by suppressing facts which have a bearing on adjudication of the issue(s) arising in the case." * Prestige Lights Ltd. v. SBI, (2007) 8 SCC 449 "33. It is thus clear that though the appellant Company had approached the High Court under Article 226 of the Constitution, it had not candidly stated all the facts to the Court. The High Court is exercising discretionary and extraordinary jurisdiction under Article 226 of the Constitution. Over and above, a court of law is also a court of equity. It is, therefore, of utmost....