Safiya Malik

The High Court of Delhi Division Bench of Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta has dismissed a petition challenging an order of the Adjudicating Authority affirming a demand of Rs. 83.76 crores in fraudulent Input Tax Credit (ITC) under the Central Goods and Services Tax (CGST) Act. The Court held that the writ petition was not maintainable in light of an efficacious statutory remedy available under Section 107 of the CGST Act. The Bench declined to interfere under Article 226 of the Constitution and granted the petitioner liberty to file an appeal within an extended deadline. The Court also directed the petitioner to pay costs of Rs. 25,000 to the Delhi High Court Bar Association.

The petitioner, a sole proprietorship dealing in metal scrap, was registered under the VAT regime and later migrated to the GST regime. A search operation was conducted on 3 August 2021 at the residential and sales office premises of the petitioner, leading to seizure of various documents by the Directorate General of GST Intelligence (DGGI). The proprietor was arrested on 4 August 2021 and released on bail on 22 October 2021.

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On 29 May 2023, a Show Cause Notice (SCN) was issued along with Form DRC-01 for financial years 2017–18 to 2021–22 by DGGI Ghaziabad Regional Unit, alleging wrongful availment and passing on of ITC amounting to Rs. 83,76,32,528. The petitioner submitted detailed replies on 19 December 2024 and 30 December 2024.

The impugned Order-in-Original dated 23 January 2025 affirmed the demand and imposed an equivalent penalty under Section 74 of the CGST Act. A penalty of Rs. 75,000 was also imposed on the proprietor under Section 122(3). A corrigendum dated 18 March 2025 was issued to correct a clerical error in the amount of penalty.

The petitioner challenged the SCN and the impugned order primarily on the grounds that its replies were not considered, that the SCN combined multiple financial years contrary to the statutory framework, and that denial of cross-examination violated principles of natural justice.

The petitioner submitted that its replies were not considered by the Adjudicating Authority, thereby violating Section 74(9) of the CGST Act. The petitioner relied on Circular No. 171/03/2022-GST dated 6 July 2022 and Section 168(1) of the CGST Act, arguing that in the absence of actual procurement or supply, tax liability cannot be raised under Sections 73 or 74.

It was contended that the grounds in the impugned order must match those in the SCN as per Section 75(7) of the CGST Act. The petitioner further argued that issuance of a single SCN covering multiple financial years violated the statutory framework.

Additionally, the petitioner alleged that a request for cross-examination of officers and witnesses, made via letter dated 5 December 2024, was wrongly denied. The rejection letter dated 13 December 2024 cited non-appearance on scheduled personal hearing dates and delay in replying to the SCN as reasons.

The petitioner relied on judicial precedents including HIM Logistics Pvt. Ltd. v. The Principal Commissioner of Customs and Flevel International v. Central Excise to support the contention that denial of cross-examination vitiated the adjudication.

The respondents submitted that the impugned order was detailed, based on factual findings, and that an appellate remedy under Section 107 of the CGST Act was available and adequate.

According to the findings of the DGGI, several supplier firms named by the petitioner were non-existent. Statements of the proprietor recorded on 3 and 4 August 2021 revealed alleged fraudulent ITC transactions involving twenty firms. The investigation found no physical movement of goods and determined that the petitioner routed payments to intermediaries after deducting commissions. The total ITC availed was recorded as Rs. 83.76 crores.

The SCN alleged violations under Sections 16, 31, 35, 39, 41, 44, 74, 122, 137, and 155 of the CGST Act and equivalent provisions of the Delhi GST Act and IGST Act. Notices were issued to all twenty firms. The Adjudicating Authority, after granting four opportunities for personal hearing, passed the order confirming the demand, interest, and penalties.

"After perusing the impugned order which runs into almost 100 pages, it cannot be said that the replies filed by the Petitioner have not been considered by the Adjudicating Authority."

"The Adjudicating Authority has obviously not agreed with the Petitioner’s stand in the replies filed to the SCN."

"There is, prima facie, no averment in the reply or the additional reply giving such details [of actual business transactions]."

On the issue of consolidated SCN: "Section 74(3) of the CGST Act and Section 74(4)...use the term 'for any period' and 'for such periods' respectively. This contemplates that a notice can be issued for a period which could be more than one financial year."

"A consolidated notice is, therefore, not merely permissible but, in fact, required in such cases in order to establish the illegal modality adopted by such businesses and entities."

Regarding cross-examination: "Such proceedings of SCN cannot be converted into mini-trials...Moreover, the right of cross-examination is not an unfettered right."

"If a prayer for cross-examination is made, the Authority has to consider the same fairly and if the need is so felt in respect of a particular person, the same ought to be permitted."

On writ jurisdiction: "It is well-settled in law that the High Court...must exercise such powers within the bounds of judicial discipline and established legal principles."

"Where a statutory remedy exists that is both efficacious and adequate, the invocation of the writ jurisdiction...is generally not warranted."

"The present writ petition is not liable to be entertained especially since the Petitioner has an alternative, effective and efficacious remedy available."

"Petitions under Article 226...would be liable to be entertained only in case of persons who come with clean hands and not in favour of the persons who present twisted facts or misrepresent the true and correct picture on record."

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The Court directed that: "The present writ petition is not liable to be entertained especially since the Petitioner has an alternative, effective and efficacious remedy available."

"The Petitioner is given time till 31st August, 2025 to file an appeal challenging the impugned order dated 23rd January 2025 along with the requisite pre-deposit. If the same is filed within the stipulated time, the appeal shall not be dismissed on the ground of being barred by limitation and shall be adjudicated on merits."

"The writ petition is disposed of with costs of Rs. 25,000/- to the Delhi High Court Bar Association. The said costs shall be deposited within two weeks."

Advocates Representing the Parties:

For the Petitioners: Mr. Rajesh Jain, Mr. Rishabh Jain, Mr. Virag Tiwari, Mr. Ramashish and Ms. Tanya Saraswat, Advocates

For the Respondents: Mr. R. Ramachandran, Senior Standing Counsel with Mr. Prateek Dhir, Advocate

Case Title: Ambika Traders Through Proprietor Gaurav Gupta v. Additional Commissioner, Adjudication DGGSTI, CGST Delhi North

Neutral Citation: 2025: DHC:6181-DB

Case Number: W.P.(C) 4853/2025

Bench: Justice Prathiba M. Singh, Justice Rajneesh Kumar Gupta