Facts of the Case (Professional Language)

Petitioners M/s Samarth Traders & Anr. filed a writ petition under Article 226 challenging the Order‑in‑Original dated 21.01.2025 passed by the Assistant Commissioner of Central Tax, CGST Delhi North. The impugned order confirmed a GST demand of ₹1,33,94,470/-, along with interest and penalties, on the ground that the Petitioner had allegedly availed wrong Input Tax Credit (ITC) on the basis of fraudulent and bogus transactions with non‑existent suppliers detected during a GST Intelligence investigation. The authority also provisionally attached bank accounts and imposed substantial penalties under the CGST Act. The Petitioner was accused of not cooperating in the investigation and avoiding statutory hearings. 

Issues Involved

  1. Whether the impugned order confirming GST demand on alleged wrongful ITC is justified in law.
  2. Whether adequate opportunity of personal hearing was granted before concluding the departmental proceeding.
  3. Whether the substantial penalty and attachment of assets were sustainable given the facts and statutory safeguards.

Petitioner’s Arguments

  • The Petitioners contended that the demand for wrongful ITC and penalty was illegal and arbitrary.
  • It was argued that no valid personal hearing was granted prior to the adverse order.
  • The Petitioners maintained they were denied procedural fairness as required under the CGST Act and principles of natural justice. 

Respondent’s Arguments

  • The Departmental respondents submitted that the investigation revealed that the Petitioners had availed fraudulent ITC from non‑existent firms, which justified both demand and penalties.
  • They further argued that multiple opportunities for personal hearing had been granted, and non‑appearance should not impede the statutory proceeding.
  • It was asserted that the actions taken, including attachment under Section 83 and imposition of penalties, were legally sustainable and proportionate.

Court Order / Findings

The Delhi High Court (Coram: Justices Prathiba M. Singh & Shail Jain) acknowledged that a substantial demand and penalties were imposed on Samarth Traders. The Court noted:

  • The show cause process had been followed and multiple hearing opportunities were recorded, though the Petitioners did not appear.
  • Given the magnitude of the demand and penalties, the Court did not quash the impugned order, but directed that the Petitioners be permitted to pursue their statutory appellate remedy under Section 107 of the CGST Act with requisite pre‑deposit by 15th December 2025 without dismissal on account of limitation.
  • Pending applications were disposed of accordingly.

Important Clarification

The High Court did not set aside the departmental order on merits but allowed the Petitioners to file an appeal with proper pre‑deposit. The judgment reinforces that failure to appear at personal hearing does not invalidate statutory notice where multiple hearings are granted, and that administrative proceedings against wrongful ITC must proceed within statutory safeguards.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/75411112025CW170462025_182017.pdf

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