Facts of the Case

The petitioners challenged an order dated 28th January, 2024 passed by the Additional Commissioner, CGST Delhi South Commissionerate, pursuant to an investigation initiated against M/s Haryana Excell Forging for alleged wrongful passing of input tax credit amounting to approximately ₹41.64 crores. The petitioner firm, Devi Industrial Engineers, was one of the recipients of ITC from the said entity, having allegedly received ITC of ₹76,710, as reflected at Serial No. 18 in the list of recipients.

A show cause notice dated 24th July, 2024 was issued to the petitioner for the tax period April 2018 to March 2019 proposing denial of ITC on the ground that invoices were issued without actual receipt of goods. The petitioner participated in the proceedings and filed a reply on 26th August, 2024. However, demand was confirmed vide the impugned order, and three separate DRC-07 orders were issued for Financial Years 2017–18, 2018–19 and 2019–20.

Issues Involved

Whether multiple DRC-07 demands could be sustained for different financial years in respect of a single transaction of ITC, whether issuance of identical demands for multiple years amounted to duplication, and whether such duplicate demands were legally sustainable.

Petitioner’s Arguments

The petitioner contended that there was only a single transaction with M/s Haryana Excell Forging pertaining to Financial Year 2018–19, and yet three separate DRC-07 orders had been issued for three financial years raising identical demands. It was submitted that the demand for ₹76,710 had already been deposited and that the additional DRC-07s for Financial Years 2017–18 and 2019–20 were clearly duplicate and liable to be quashed.

Respondent’s Arguments

The Revenue, through its Senior Standing Counsel, fairly conceded that the DRC-07 orders issued for the three financial years raised duplicate demands against the petitioner.

Court Order / Findings

The Delhi High Court observed that although the alleged passing of ITC by M/s Haryana Excell Forging spanned across three financial years, insofar as the petitioner was concerned, there was only one transaction. The Court held that issuance of three identical DRC-07 demands for three financial years amounted to duplication and could not be sustained in law.

Accordingly, the Court quashed the DRC-07 orders for Financial Years 2017–18 and 2019–20, while upholding the DRC-07 pertaining to Financial Year 2018–19. The Court clarified that the order was passed in the unique facts and circumstances of the case and would not apply to other noticees.

Important Clarification

The High Court clarified that payment made by the petitioner would be treated as without prejudice and that the petitioner or its directors were at liberty to avail appropriate remedies in accordance with law in respect of the surviving DRC-07 demand for Financial Year 2018–19, including challenges to penalties imposed on the directors.

Final Outcome

The writ petition was partly allowed. The duplicate DRC-07 demands for Financial Years 2017–18 and 2019–20 were quashed, while the DRC-07 demand for Financial Year 2018–19 was upheld. The petition was disposed of with liberty to the petitioner and its directors to pursue remedies as available in law.

SOURCE LINK: https://delhihighcourt.nic.in/app/showFileJudgment/PMS10112025CW158742025_110939.pdf  

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