Facts of the Case

The Petitioners, including M/s A.V. Metals Marketing Pvt. Ltd. and connected entities, challenged the adjudication order dated 29.01.2025 passed by the Assistant Commissioner (Adjudication), CGST Delhi North pursuant to a Show Cause Notice dated 21.05.2024.

The case originated from a DGARM investigation revealing a network of alleged bogus firms issuing invoices without actual supply of goods, enabling fraudulent availment of Input Tax Credit (ITC). Entities such as M/s Paramount Enterprises and other non-existent firms were allegedly used to circulate fake ITC.

The Department alleged that the Petitioners were beneficiaries of such transactions, with fraudulent ITC amounting to several crores. Statements recorded during investigation indicated that invoices were issued without movement of goods.

The Petitioners filed a reply to the SCN; however, the adjudication order confirmed demand, interest, and penalties. The primary grievance raised before the High Court was non-grant of personal hearing before passing the impugned order. 

Issues Involved

  1. Whether writ petition under Article 226 is maintainable in cases involving fraudulent availment of ITC.
  2. Whether alleged non-grant of personal hearing constitutes violation of natural justice warranting interference.
  3. Whether the Petitioner should be relegated to statutory appellate remedy under Section 107 of the CGST Act. 

Petitioner’s Arguments

  • The impugned order was passed in violation of principles of natural justice, as no effective personal hearing was granted.
  • The Department failed to provide proof of service of hearing notices.
  • Such procedural lapse vitiates the entire adjudication proceedings, justifying intervention under Article 226. 

Respondent’s Arguments

  • The SCN was duly served and the Petitioners had filed a reply.
  • The impugned order records that multiple opportunities of personal hearing were granted.
  • Mere absence of proof of dispatch cannot invalidate proceedings, especially in cases involving serious tax fraud.
  • The matter involves complex factual disputes, unsuitable for writ jurisdiction, and an effective alternative remedy exists. 

Court Order / Findings

The Delhi High Court held:

  • The Petitioners were aware of proceedings and had responded to the SCN.
  • The reply filed was vague and failed to substantively address allegations of bogus transactions.
  • Although personal hearing is generally required, absence of proof of dispatch alone is insufficient to invalidate the order when opportunities are recorded.
  • In cases involving fraudulent ITC and complex factual matrix, writ jurisdiction should not be exercised.

The Court relied on the following precedents:

  • Assistant Commissioner of State Tax v. Commercial Steel Ltd. (Supreme Court)
  • Mukesh Kumar Garg v. Union of India (Delhi HC)
  • M/s MHJ Metal Techs v. CGST Delhi South
  • M/s Sheetal and Sons v. Union of India

These cases reiterate that writ jurisdiction is limited where statutory remedies exist, especially in tax fraud matters.

Important Clarification

  • Allegations of fraudulent ITC involve detailed factual examination, which cannot be adjudicated under writ jurisdiction.
  • Even procedural grounds like natural justice violations may not justify writ interference when alternative statutory remedies are available.
  • Courts discourage forum shopping and parallel remedies in tax matters.

Sections Involved

  • Section 16, Central Goods and Services Tax Act, 2017 (Input Tax Credit)
  • Section 107, CGST Act (Appeals)
  • Section 122(1) & 122(3), CGST Act (Penalties)
  • Article 226, Constitution of India

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/PMS23122025CW142912025_173923.pdf 

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