FACTS OF THE CASE

The Petitioner, M/s A V Metals Marketing Pvt. Ltd., challenged the Order‑in‑Original dated 21.01.2025 issued by the Additional Commissioner of Central GST, Delhi North, which raised a demand of ₹23,20,171/‑ for alleged fraudulent availment of Input Tax Credit (ITC). During investigation, the Department found that the Petitioner was linked to a large chain of fake entities which transferred ITC without genuine supplies, part of a larger nexus involving over 79 fake firms and ITC exceeding ₹122 crore. The Petitioner contended that the impugned order was passed without proper hearing and violated principles of natural justice. 

ISSUES INVOLVED

  1. Whether the High Court should exercise writ jurisdiction under Article 226 of the Constitution to interfere with a GST demand order involving alleged fraudulent ITC?
  2. Whether the Petitioner was denied principles of natural justice?
  3. Whether the Petitioner should be relegated to the statutory appellate remedy under Section 107 of the CGST Act? 

PETITIONER’S ARGUMENTS

• The Petitioner argued that the impugned show‑cause and demand order was passed without granting a fair hearing.
• It relied on a typographical error in the notice’s due date for reply as a substantive defect.
• It urged the writ court to examine the merits rather than compel the Petitioner to approach the appellate authority.

RESPONDENT’S ARGUMENTS

• The Respondents (CGST Department) contended that the Petitioner was fully aware of notices and had opportunities to respond, but failed to reply to show‑cause notices adequately.
• They emphasized that the impugned order involved complex factual issues requiring detailed analysis best suited to an appellate authority.
• No fundamental rights violation or jurisdictional error was established to justify writ interference.

COURT ORDER / FINDINGS

  1. Writ Jurisdiction: The Court reiterated that writ jurisdiction under Article 226 is discretionary and not to be used as a substitute for statutory remedies where complex factual inquiries are involved and alternate remedy exists.
  2. No Violation of Natural Justice: A notice had been served and no material showed denial of hearing.
  3. Relegation to Appeal: The Petitioner was permitted to file an appeal under Section 107 of the CGST Act, 2017 before the appellate authority with requisite pre‑deposit within prescribed time, which would be entertained on merits.
  4. Doctrine of Multiplicity and Burden on Exchequer: The Court noted that misuse of ITC had burdened the GST regime and that writ interference was inappropriate in such cases.
  5. Guidance to Department: The CGST Department was advised to exercise caution in mentioning correct financial years, due dates, and material particulars in show‑cause notices. 

IMPORTANT CLARIFICATIONS

• Writ Petition maintainability: Not to be entertained in absence of exceptional circumstances and where alternate statutory remedy lies.
• Section 107 CGST Act: Effective remedy for challenging orders of demand and penalty.
• Principles of Natural Justice: Mere typographical errors do not invalidate proceedings without prejudice shown.
• Fraudulent ITC: Serious allegations involving ‘bogus’ firms require appellate scrutiny, not writ adjudication. 

SECTIONS / LAW INVOLVED

  • Article 226, Constitution of India
  • Section 107, Central Goods and Services Tax Act, 2017
  • Principles of natural justice (Audi Alteram Partem)
  • GST law on Input Tax Credit and statutory appeal mechanism

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/PMS01122025CW182302025_221953.pdf

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