Facts of the Case

The Petitioner, Bhupender Kumar, a GST consultant, challenged an adjudication order imposing a massive penalty (approx. ₹285 crore) for alleged involvement in fraudulent availment and passing of Input Tax Credit (ITC).

  • Investigation by GST authorities revealed a network of fake firms used for fraudulent ITC transactions.
  • The Petitioner was alleged to have aided and abetted the creation and operation of such firms.
  • A Show Cause Notice (SCN) was issued, but the Petitioner failed to respond adequately.
  • Subsequently, penalty was imposed under Section 122(1A) of the CGST Act, 2017.
  • The Petitioner filed a writ petition challenging the penalty order before the Delhi High Court.

Issues Involved

  1. Whether penalty under Section 122(1A) CGST Act can be imposed when SCN was issued under Section 122(3).
  2. Whether writ jurisdiction under Article 226 is maintainable in cases involving disputed facts and tax fraud.
  3. Whether failure to reply to SCN affects the right to challenge the adjudication order.

Petitioner’s Arguments

  • The SCN was issued under Section 122(3) and not specifically under Section 122(1A); hence penalty under Section 122(1A) is invalid.
  • The Petitioner claimed he was merely a consultant, not directly involved in fraudulent transactions.
  • It was argued that principles of natural justice were violated.

Respondent’s Arguments

  • The Petitioner played an active role in facilitating fake firms and fraudulent ITC transactions.
  • The SCN, though issued under Section 122(3), contained allegations covering the scope of Section 122(1A).
  • The Petitioner failed to respond to the SCN and therefore cannot challenge the findings later.
  • The matter involves serious disputed facts, unsuitable for writ jurisdiction.

Court’s Findings / Order

  • The Delhi High Court held that:
    • The SCN contained sufficient allegations attracting Section 122(1A), even if not explicitly mentioned.
    • The Petitioner failed to respond to the SCN, thereby losing the opportunity to rebut allegations.
    • The case involves complex factual disputes, including alleged large-scale tax fraud.
  • Key Ruling:
    • Writ petition dismissed.
    • Petitioner directed to avail alternative remedy of appeal under Section 107 CGST Act.
  • The Court emphasized that:
    • Writ jurisdiction cannot be invoked in fact-intensive tax matters, especially involving fraud.
    • Proper remedy lies before the appellate authority. 

Important Clarification

  • Explicit mention of Section 122(1A) in SCN is not mandatory if allegations clearly fall within its scope.
  • Failure to reply to SCN can weaken the taxpayer’s case significantly.
  • Writ petitions are not maintainable where:
    • Disputed facts exist
    • Alternative statutory remedy is available 

Sections Involved

  • Section 122(1A), CGST Act, 2017 – Penalty for beneficiaries of fraudulent transactions
  • Section 122(3), CGST Act, 2017 – General penalty provisions
  • Section 107, CGST Act, 2017 – Appeal mechanism
  • Section 7, 16, 31, 37, 39 CGST Act – Alleged contraventions relating to supply, ITC, invoicing, returns
  • Section 155 CGST Act – Burden of proof

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/68907072025CW91412025_162428.pdf 

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