Facts of the Case

The petitioner, M/s A.V. Metals Marketing Private Limited, filed a writ petition challenging 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 proceedings arose from a DGARM report relating to alleged bogus firms and goods-less invoices used for availing Input Tax Credit.

Investigations revealed that M/s Paramount Enterprises, a proprietary concern of one Amit Kumar, had allegedly availed and passed on ITC through several non-existent supplier firms including M/s A to Z Corporation, M/s Suman Enterprise, M/s Bhumi Traders, M/s Naveen Enterprises and M/s Tota Ram. Further analysis showed that credit was extended to multiple recipients including M/s VDR Colors and Chemicals Pvt. Ltd., M/s Surender Kumar Jain and the present petitioner, M/s A.V. Metals Marketing Pvt. Ltd.

Statements were recorded during investigation, including that of Surender Kumar Jain, indicating that invoices were issued without actual supply of goods and that the entities were under common operational control. On this basis, the Department alleged unlawful availment of fraudulent ITC aggregating to approximately ₹18.24 crore by the petitioner and connected entities.

The petitioner filed a reply to the SCN on 30.08.2024. However, the adjudication order was passed confirming demand, interest and penalty. The petitioner approached the High Court primarily on the ground that no effective personal hearing had been granted before passing the impugned order.

Issues Involved

Whether the writ petition was maintainable in a case involving serious allegations of fraudulent availment of ITC, whether the plea of non-grant of personal hearing justified interference under Article 226, and whether the petitioner ought to be relegated to the statutory appellate remedy under Section 107 of the CGST Act.

Petitioner’s Arguments

The petitioner contended that the impugned adjudication order was passed in violation of principles of natural justice as no personal hearing was actually afforded, despite the order recording that opportunities had been granted. It was argued that the absence of proof of service of personal hearing notices vitiated the adjudication proceedings, warranting interference by the High Court.

Respondent’s Arguments

The Revenue submitted that the SCN was duly served, a reply was filed by the petitioner, and the impugned order itself recorded that multiple opportunities of personal hearing were granted. It was argued that inability to trace proof of dispatch of hearing notices could not invalidate the adjudication, particularly in cases involving serious allegations of fraudulent ITC. The Department further contended that the matter involved complex factual disputes requiring detailed examination and that an efficacious statutory appellate remedy was available.

Court Order / Findings

The Delhi High Court examined the record and noted that the petitioner was fully aware of the investigation proceedings, the SCN was served, and a reply had been filed. The Court observed that the reply was vague and did not deal substantively with the allegations of goods-less invoices and non-existent suppliers.

The Court held that although personal hearing is ordinarily required, in the facts of the present case the principles of natural justice could not be said to have been violated merely because proof of dispatch of hearing notices was not traceable, especially when the impugned order recorded grant of opportunities.

Relying on authoritative precedents including Assistant Commissioner of State Tax vs. Commercial Steel Limited, Mukesh Kumar Garg vs. Union of India, M/s MHJ Metal Techs vs. CGST Delhi South, and other decisions concerning fraudulent ITC, the Court reiterated that writ jurisdiction should not ordinarily be exercised in cases involving alleged ITC fraud, as such matters require detailed factual adjudication best undertaken by the appellate authority.

Important Clarification

The High Court clarified that disputes involving allegations of fraudulent ITC and complex chains of transactions are not amenable to writ adjudication. Even where procedural infirmities are alleged, parties must ordinarily be relegated to the statutory appellate mechanism, where all factual and legal contentions can be examined on merits.

Final Outcome

The writ petition was disposed of as not maintainable. The petitioner was granted liberty to file an appeal under Section 107 of the CGST Act against the impugned adjudication order along with the requisite pre-deposit. The Appellate Authority was directed not to dismiss the appeal on the ground of limitation if filed on or before 31.01.2026, and to adjudicate the appeal on merits. All rights and contentions of the parties were left open.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/PMS23122025CW142912025_173923.pdf

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