Facts of the Case

The petitions were filed challenging the adjudication order dated 29 January 2025 passed pursuant to a Show Cause Notice dated 21 May 2024.

The matter arose from a DGARM investigation which revealed suspicious GST transactions involving multiple firms, including M/s Paramount Enterprises and other entities. The investigation indicated that:

  • Several firms were engaged in transactions without actual supply of goods.
  • The Petitioners allegedly availed fraudulent Input Tax Credit (ITC) through non-existent firms.
  • Statements recorded suggested that invoices were issued without actual movement of goods.
  • Total alleged fraudulent ITC amounted to approximately ₹18.24 crores.

The Petitioners submitted a reply to the Show Cause Notice but contended that the final order was passed without granting personal hearing, thereby violating principles of natural justice.

Issues Involved

  1. Whether the adjudication order is liable to be set aside due to non-grant of personal hearing.
  2. Whether writ jurisdiction under Article 226 is maintainable when statutory appellate remedy exists under GST law.
  3. Whether cases involving fraudulent ITC require factual adjudication beyond writ jurisdiction. 

Petitioner’s Arguments

  • No proper opportunity of personal hearing was granted.
  • No proof of service of hearing notices was produced by the Department.
  • Violation of principles of natural justice renders the impugned order invalid. 

Respondent’s Arguments

  • Personal hearing opportunities were granted, but Petitioners failed to appear.
  • The impugned order itself records issuance of hearing notices.
  • Considering the serious nature of GST fraud, Petitioners should not benefit from procedural objections.
  • Petitioners have an effective alternate remedy under Section 107 of CGST Act.

Court’s Findings / Order

  • The Court observed that:
    • Petitioners were aware of proceedings and had filed replies.
    • Reply filed was vague and did not address allegations on merits.
    • Overall compliance of principles of natural justice was satisfied.
  • The Court held:
    • Mere absence of proof of dispatch of hearing notice is insufficient to invalidate proceedings.
    • In cases involving fraudulent ITC, writ jurisdiction should be exercised sparingly.
    • Such matters require detailed factual examination, which is not suitable under Article 226.
  • The Court relied on key precedents:
    • Assistant Commissioner of State Tax v. Commercial Steel Ltd. – writ not maintainable where alternate remedy exists.
    • Mukesh Kumar Garg v. Union of India – writ jurisdiction not appropriate in fraudulent ITC cases.
    • M/s Sheetal and Sons v. Union of India
    • M/s MHJ Metal Techs v. CGST Delhi South 

Important Clarification by Court

  • Writ jurisdiction under Article 226 is not a substitute for appellate remedy.
  • Fraudulent ITC cases involve complex factual analysis, unsuitable for writ adjudication.
  • Courts will prioritize protection of GST regime and public exchequer.
  • Natural justice is not violated merely due to absence of proof of notice dispatch if overall opportunity existed. 

Sections Involved

  • Section 16, CGST Act – Eligibility of Input Tax Credit
  • Section 107, CGST Act – Appeal to Appellate Authority
  • Section 122(1) & 122(3), CGST Act – Penalties
  • Article 226, Constitution of India – Writ Jurisdiction

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

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