Facts of the Case

The petitioner, Surjeet Kumar, proprietor of M/s Chawla Steels, along with a connected petitioner Gaurav (proprietor of M/s Allied Plus Industries, and Surjeet's son), challenged a DRC-01 and show cause notice dated 26.06.2025 issued by the Superintendent (Anti-Evasion), CGST Delhi West, alleging wrongful availment of Input Tax Credit from a bogus supplier. The petitioners contended the SCN was itself defective as the underlying supply was inter-state (attracting IGST) rather than intra-state (CGST/SGST), that the supplier was based in Haryana, and that their request for cross-examination of the supplier had not been considered by the Adjudicating Authority.

Issues Involved

  1. Whether a writ court should exercise jurisdiction under Article 226 to examine an ITC-fraud show cause notice where the impugned demand is an appealable matter requiring factual determination.
  2. Whether the Adjudicating Authority was obliged to decide the petitioners' request for cross-examination of the supplier before proceeding further.

Petitioner's Arguments

  • The SCN was defective on its face since it invoked CGST/SGST for what was, on the petitioners' case, an inter-state supply that should attract IGST.
  • The alleged bogus supplier was located in Haryana, and the request for cross-examination of that supplier — necessary to test the fraud allegation — had not been addressed by the Adjudicating Authority.

Respondent's Arguments

  • The challenge to the SCN was premature, and in any event the case involved fraudulent availment of Input Tax Credit which this Court has consistently declined to examine in writ jurisdiction.
  • Relying on Mukesh Kumar Garg vs. Union of India and allied Delhi High Court rulings, it was submitted that ITC fraud cases involve a complex maze of transactions requiring factual analysis best left to the statutory appellate process under Section 107.

Court Order / Findings

  • Reiterating the settled position from Assistant Commissioner of State Tax vs. Commercial Steel Limited and its own decisions in Mukesh Kumar Garg, M/s Sheetal and Sons and M/s MHJ Metal Techs, the Court held that ordinarily it would not exercise writ jurisdiction in cases involving fraudulent availment of ITC, given the factual complexity and the impact on the exchequer and the GST regime.
  • On the ground of defective classification (IGST vs. CGST/SGST), the Court left it open to the petitioners to raise this before the Adjudicating Authority in light of their already-filed detailed reply dated 24.07.2025.
  • On cross-examination, relying on M/s Vallabh Textiles vs. Additional Commissioner Central Tax, the Court held that while cross-examination is not an unfettered right, a specific request must be fairly considered and either allowed or rejected with reasons — which had not been done here.
  • The Court directed that a date be fixed before the Adjudicating Authority for personal hearing, and that if considered appropriate, the opportunity for cross-examination be afforded to the petitioners in accordance with law, while leaving all rights and remedies against any future order open.

Important Clarification

  • Courts will generally decline writ jurisdiction over ITC-fraud show cause notices given the factual complexity of tracing bogus-supplier chains, but a specific, reasoned request for cross-examination of a named witness cannot simply be left undecided by the Adjudicating Authority — it must be considered and either granted or refused with reasons.
  • A dispute over whether a demand should properly be IGST or CGST/SGST is a factual/legal issue to be raised and decided at the adjudication stage itself, not a ground to bypass the statutory process through a writ.

Sections Involved

  • Section 16, CGST Act, 2017 – eligibility and conditions for availing Input Tax Credit.
  • Section 107, CGST Act, 2017 – appellate remedy against an adjudication order, the statutory alternative to writ jurisdiction.
  • FORM GST DRC-01 – summary of the show cause notice under which the demand was raised.

Decision – In Favour of

Disposed of with directions, not a clean win for either side — the challenge to the SCN was declined, but the Adjudicating Authority was specifically directed to consider the cross-examination request and fix a personal hearing.

Case Details

  • Court: High Court of Delhi at New Delhi
  • Case No.: W.P.(C) 18647/2025 & CM APPL. 77533/2025 (with connected W.P.(C) 18674/2025)
  • Coram: Justice Prathiba M. Singh and Justice Shail Jain
  • Date of Order: 9 December 2025

Link to Download the Order

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