Facts of the Case

The petitioner, Diamon Trading, represented by its Managing Partner Sayed Ebrahim, filed WP(C) No.30956 of 2023 before the High Court of Kerala at Ernakulam, holding GST registration No. 32AARFD0121GIZZ. The Commercial Tax Department, Madurai Division, had detected fraudulent passing of input tax credit by the petitioner's supplier, M/s. Look Enterprises (the tenth respondent), which was found to have obtained only a fake GST registration to facilitate bogus supplies to various recipients, including the petitioner. Pursuant to this detection, the fourth respondent issued a communication, Ext.P2 (Order OC No.77/2023 dated 13.07.2023), putting the petitioner to notice that it was not eligible for the input tax credit claimed on supplies from the non-genuine supplier and that the credit could be reversed with interest. No final order reversing the ITC had, however, been passed against the petitioner. The petitioner sought to quash Ext.P2 and direct that full credit be granted based on tax invoices and e-way bills issued by the supplier. The matter was heard and decided on 20th October 2023 by a Single Judge.

Issues Involved

  1. Whether the communication Ext.P2, being merely an intimation and not a final adverse order, could be challenged by way of writ petition.
  2. Whether the petitioner was entitled to a direction granting full input tax credit despite the supplier's registration being found fake.

Petitioner's Arguments

  • The petitioner sought to quash Ext.P2 issued by the fourth respondent and prayed for a direction to grant full credit of input tax as per the tax invoices and e-way bills issued by the tenth respondent supplier.
  • The petitioner had genuinely transacted with the supplier and possessed supporting documentation, including tax invoices, e-way bills and bank statements evidencing payment.

Respondent's Arguments

  • The Commercial Tax Department's investigation had revealed that the supplier, M/s. Look Enterprises, did not obtain a genuine GST registration but only a fake registration to facilitate bogus supplies, and the petitioner had been put to notice that it was ineligible for the corresponding input tax credit.
  • No order had yet been passed reversing the input tax credit claimed by the petitioner, so the communication Ext.P2 was not an adverse order capable of being challenged before the Court.

Court Order/Findings

  • The Court observed that Ext.P2 was merely a communication putting the petitioner to notice of ineligibility, and that no final order had so far been passed reversing the input tax credit claimed by the petitioner.
  • The Court held that since no adverse order had been passed against the petitioner, the communication Ext.P2 could not be challenged before the Court, and the writ petition was premature.
  • The writ petition was dismissed as not maintainable, with the pending interlocutory application, if any, also dismissed.
  • The Court observed that the petitioner could take recourse to the appropriate remedy as and when any adverse order came to be passed.

Important Clarification

A mere departmental communication or pre-intimation notice flagging ineligibility for input tax credit on account of a supplier's fake GST registration, issued without a final adverse order, is not amenable to challenge by writ petition; the taxpayer must await the actual adjudication order before invoking judicial remedies. This distinction matters in fake-supplier ITC investigations, where recipients are frequently issued early communications long before any formal show-cause notice or order under Section 73/74 is passed, and prematurely rushing to a writ court in respect of such preliminary communications does not advance the recipient's cause.

Sections Involved

  • Input tax credit eligibility and reversal provisions under the Central Goods and Services Tax Act, 2017 and the Kerala State Goods and Services Tax Act, 2017.
  • Article 226 of the Constitution of India.

Decision – In Favour of

The decision favours the Department procedurally, as the writ petition was dismissed as not maintainable for want of any final adverse order. However, the Court did not decide the substantive ITC eligibility question against the petitioner either, expressly leaving open the appropriate statutory remedy once an adverse order is actually passed — an honest, non-final outcome rather than a merits victory for either side.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Kerala at Ernakulam
  • Case No.: WP(C) NO. 30956 OF 2023
  • CNR: Not available
  • Coram: Justice Dinesh Kumar Singh
  • Decision Date: 20-10-2023
  • Disposal Nature: Dismissed as not maintainable (no adverse order yet passed)

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