Facts of the Case

  • Investigation was initiated based on inputs from the Directorate General of GST Intelligence (DGGI), Jaipur.
  • Authorities discovered creation of non-existent firms used for fraudulent ITC claims.
  • Four entities (Sahni Traders, M.R. Enterprises, S.K. Traders, Mahaveer Impex) allegedly passed ITC to multiple recipients, including the petitioner.
  • The petitioner allegedly availed ITC amounting to ₹1,48,333 without actual supply of goods/services.
  • Show Cause Notice was issued, followed by Order-in-Original confirming demand and penalty under GST law.

Issues Involved

  1. Whether writ petition under Article 226 is maintainable in cases involving fraudulent ITC.
  2. Whether parallel proceedings by State GST and Central GST authorities are permissible.
  3. Whether the petitioner can challenge demand directly before the High Court without exhausting appellate remedies.

Petitioner’s Arguments

  • The petitioner contended that duplicate proceedings were initiated for the same assessment year by Delhi GST authorities.
  • It was argued that once State GST proceedings concluded, Central GST authorities could not initiate parallel action.
  • The demand and penalty were therefore alleged to be unsustainable.

Respondent’s Arguments

  • The department maintained that the case involved fraudulent ITC through bogus firms and invoices.
  • The impugned order was appealable under Section 107 of the CGST Act, and therefore writ jurisdiction should not be invoked.
  • The matter required factual examination, which cannot be adjudicated under writ jurisdiction. 

Court’s Findings / Order

  • The Court relied on its earlier decision in Mukesh Kumar Garg vs Union of India & Ors. and reiterated that:
    • In cases of fraudulent ITC, writ petitions are generally not maintainable.
    • The impugned order being appealable, the petitioner must avail statutory remedy.
  • The Court emphasized:
    • Writ jurisdiction cannot be used to adjudicate complex factual disputes.
    • Allowing such petitions may lead to multiplicity of proceedings and conflicting decisions.

Final Order:

  • Writ petition dismissed/not entertained.
  • Liberty granted to file appeal before the Appellate Authority.
  • Time extended till 31 August 2025 to file appeal (not to be rejected on limitation grounds).

Important Clarifications by Court

  • Fraudulent ITC cases require detailed factual analysis, unsuitable for writ jurisdiction.
  • Appellate remedy is the primary route under GST law.
  • Grounds such as overlapping/duplicate demands can be raised before the appellate authority.
  • Courts will not exercise writ powers to assist litigants in cases involving serious tax fraud allegations. 

Sections Involved

  • Section 16, CGST Act, 2017 – Input Tax Credit
  • Section 74(9), CGST Act, 2017 – Determination of tax in fraud cases
  • Section 107, CGST Act, 2017 – Appeal to Appellate Authority
  • Sections 122(1) & 122(3), CGST Act, 2017 – Penalties
  • Article 226, Constitution of India – Writ Jurisdiction

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/PMS31072025CW105182025_151443.pdf

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