Facts of the Case

M/s Scan Energy and Power Ltd filed WP No. 20815 of 2023 before the Telangana High Court challenging a summons dated 01.08.2023 issued by the Central Tax (Rangareddy GST Commissionerate) to the company and its key managerial personnel, in connection with an investigation (F.No. GEXCOM/AE/INV/GST/1473/2023-AE-RR) into alleged wrongful availment and utilisation of Input Tax Credit (ITC).

The petitioner contended the summons was issued and executed in unreasonable haste — served in the evening with four officers of the company simultaneously taken along with department officers for questioning the same day — contrary to CBIC's own GST Investigation Instructions Nos. 1, 3, and 4 of 2022-23, which require a reasonable breathing period before compelling appearance.

The department countered that it had received specific intelligence that the company was fraudulently availing ITC using fake invoices, and that on search it appeared no genuine transactions had occurred and the company itself might not genuinely exist; by the time the matter was heard, four of the summoned employees had already been arrested, leaving only the company's Director, Mr. Nimish Gadodia, still to appear.

Issues Involved

  1. Whether the summons dated 01.08.2023, and the manner of its execution, was arbitrary and contrary to the CBIC's own GST Investigation Instructions.
  2. Whether the Director should be granted breathing time to appear before the investigating authority, and on what terms.

Petitioner's Arguments

  • The summons was issued and acted upon in unreasonable haste, without allowing any reasonable time to the petitioner or its officers to prepare and respond, contrary to CBIC's own Investigation Instructions Nos. 1/2022-23, 3/2022-23, and 4/2022-23.
  • There was a threat of arrest of the petitioner's remaining officers, and the Director was willing to appear and fully cooperate with the investigation if granted a short, reasonable period of time.

Respondent's Arguments

  • The department had received intelligence that the petitioner was fraudulently availing Input Tax Credit through fake invoices without any genuine underlying transactions, and on search found indications that the company itself may not genuinely exist as claimed.
  • Four of the summoned employees, taken along with department officers, had by the date of hearing already been arrested; the investigation was at a live and active stage.

Court Order / Findings

  • The Court did not rule on whether the summons or its manner of execution violated the CBIC investigation instructions, and made no finding on the merits of the fraud allegations.
  • Taking note of the fact that four employees had already been arrested and that the Director was willing to cooperate, the Court permitted the Director, Sri Nimish Gadodia, to appear before the department by a specified date (04.08.2023), directing him to render full cooperation in the investigation.
  • It directed the department to ensure the investigation was conducted strictly in accordance with law and its own guidelines, and clarified that none of its observations should have any bearing on the nature of the enquiry or the department's stand.
  • The writ petition was disposed of on these terms, with liberty to the department to proceed further in accordance with law if the Director failed to appear as directed.

Important Clarification

This order does not decide whether the summons was validly issued or whether the CBIC investigation instructions were breached — those questions were left entirely open. The practical outcome was a short breathing period for the Director to appear and cooperate, with the investigation itself proceeding unaffected; this should not be read as either vindicating or condemning the department's conduct.

Sections Involved

  • Central Goods and Services Tax Act, 2017 – summons and investigation powers of GST officers
  • CBIC GST Investigation Instructions No. 1/2022-23, 3/2022-23 and 4/2022-23 (procedural safeguards for investigation)
  • Article 226 of the Constitution of India – writ jurisdiction invoked by the petitioner

Decision – In Favour of

Disposed of without deciding the legality of the summons — a procedural accommodation was granted (a short window for the Director to appear and cooperate), while the underlying ITC-fraud investigation was left to proceed on its own merits.

Case Details

High Court for the State of Telangana at Hyderabad, Special Original Jurisdiction. WP No. 20815 of 2023 (M/s Scan Energy and Power Ltd v. Commissioner of Central Tax, Rangareddy GST Commissionerate). Coram: Hon'ble Sri Justice P. Sam Koshy and Hon'ble Sri Justice Laxmi Narayana Alishetty. Order dated 02.08.2023.

Link to Download the Order

Click here to view/download the full order

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.