Facts of the Case

The petitioner, Shri Sai Traders, challenged a show cause notice dated 4th August 2024 and a demand order dated 3rd February 2025 passed under the CGST Act, 2017, alleging fraudulent availment and passing on of Input Tax Credit. The impugned order was part of a larger investigation into a network allegedly run by Mr. Adesh Jain (proprietor of M/s MTR Distributor) and Mr. Rajesh Jindal, who floated multiple firms to issue invoices without actual supply of goods. The petitioner was alleged to be a bogus supplier to this network, involving supplies of approximately Rs.1,51,33,185, with the total fraudulent ITC passed on across the racket exceeding Rs.50 crore. The petitioner claimed its reply to the SCN had not been considered by the Adjudicating Authority.

Issues Involved

  1. Whether writ jurisdiction under Article 226 should be exercised in cases involving allegations of large-scale fraudulent availment of ITC through non-existent firms.
  2. Whether the alleged non-consideration of the petitioner's reply justified quashing the order rather than relegating the petitioner to statutory appeal.

Petitioner's Arguments

  • A reply had been filed to the impugned show cause notice, but the Adjudicating Authority failed to consider it before passing the demand order.
  • This non-consideration rendered the impugned order violative of principles of natural justice, warranting the writ court's intervention.

Respondent's Arguments

  • Represented by Senior Standing Counsel, the department pointed to the seriousness and scale of the allegations — a coordinated racket of non-existent firms generating over Rs.50 crore of fraudulent ITC — and to consistent precedent holding that such matters require detailed factual investigation unsuited to writ jurisdiction.

Court Order / Findings

  • Relying on the Supreme Court's ruling in Assistant Commissioner of State Tax v. Commercial Steel Limited and its own decisions in Mukesh Kumar Garg, Sheetal and Sons, and MHJ Metal Techs, the Court reiterated that in cases of fraudulent ITC availment involving complex, multi-party transactions, writ jurisdiction ought not ordinarily be exercised, since the factual analysis required is better suited to the statutory appellate process under Section 107.
  • The Court declined to entertain the writ petition on merits but permitted the petitioner to avail the statutory appellate remedy under Section 107 of the CGST Act by 10th December 2025, subject to the mandatory pre-deposit, directing that the appeal shall not be dismissed on the ground of limitation and shall be adjudicated on merits.
  • The Court clarified the order would not act as a precedent for other noticees under the same show cause notice.

Important Clarification

  • Writ courts consistently decline to adjudicate factual disputes in large-scale fraudulent ITC cases involving networks of non-existent or bogus firms, since such matters require detailed evidentiary analysis best undertaken by the statutory appellate authority under Section 107 of the CGST Act.
  • Even where writ jurisdiction is declined, courts frequently grant a limitation-bar waiver, permitting the appeal to be filed and heard on merits within an extended timeline, subject to the mandatory pre-deposit, so the assessee is not left without any remedy.

Sections Involved

  • Section 107, CGST Act, 2017 – statutory first appellate remedy and mandatory pre-deposit.
  • Section 16, CGST Act, 2017 – conditions governing entitlement to Input Tax Credit, central to the fraud allegations.
  • Section 122, CGST Act, 2017 – penalty provisions for fraudulent availment/passing on of ITC.

Decision – In Favour of

Disposed of with directions, in part in favour of the department — writ jurisdiction declined on merits, but the assessee was granted a limitation-bar waiver to pursue the statutory appeal with pre-deposit.

Case Details

High Court of Delhi at New Delhi; W.P.(C) 16349/2025 & CM APPL. 66957/2025; Coram: Justice Prathiba M. Singh and Justice Shail Jain; Date: 29.10.2025.

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