Facts of the Case

The petitioners, M/s Samarth Traders and its proprietor, challenged the Order-in-Original dated 21st January, 2025 passed by the Assistant Commissioner of Central Tax, Old Delhi Division, CGST Delhi North. By the impugned order, a demand of ₹1,33,94,470 towards CGST and SGST along with equivalent penalty under Section 74 of the CGST Act and interest under Section 50 was confirmed. The order also appropriated amounts lying in provisionally attached bank accounts under Section 83 and imposed penalty of ₹50,000 on the proprietor under Section 122(3), while refraining from imposing penalty under Section 137.

The proceedings arose out of an investigation conducted by the Directorate General of GST Intelligence against M/s Ramesh & Co. and other entities alleged to be non-existent and engaged in passing fraudulent input tax credit without actual supply of goods. The petitioner was alleged to be one of the beneficiaries of such fake ITC amounting to approximately ₹1.33 crore on the basis of bogus invoices issued by M/s Ramesh & Co., M/s Shiv Traders and M/s Laxmi Trading Co.

Issues Involved

Whether the High Court should exercise writ jurisdiction to interfere with an adjudication order involving serious allegations of fraudulent availment of input tax credit and substantial penalties under Section 74 of the CGST Act, and whether the petitioner should be relegated to the statutory appellate remedy under Section 107 of the Act.

Petitioner’s Arguments

The petitioners contended that the impugned order was passed without granting effective opportunity of personal hearing and without proper consideration of the reply filed to the show cause notice. It was submitted that the penalties imposed were excessive and that the adjudication suffered from procedural infirmities warranting interference under Article 226 of the Constitution.

Respondent’s Arguments

The Revenue submitted that the petitioner had failed to cooperate with the investigation and did not appear for personal hearings despite multiple opportunities. It was argued that the allegations involved large-scale fraudulent availment of input tax credit and that the impugned order was appealable under Section 107 of the CGST Act, making the writ petition not maintainable.

Court Order / Findings

The Delhi High Court noted that the impugned order involved confirmation of substantial tax demand and penalty on account of alleged fraudulent availment of input tax credit based on investigation by the DGGI. The Court observed that although there was some dispute regarding grant of personal hearing, the petitioner had already filed a reply to the show cause notice and the matter involved disputed questions of fact.

Considering the seriousness of the allegations and the availability of an efficacious statutory remedy, the Court declined to examine the merits of the impugned order in writ jurisdiction and held that the petitioner ought to avail the appellate remedy under Section 107 of the CGST Act.

Important Clarification

The High Court clarified that it had not examined the merits of the allegations or the legality of the impugned order and that all contentions of the petitioner were left open to be urged before the appellate authority. The appellate authority was directed not to reject the appeal on the ground of limitation if filed within the time granted by the Court.

Final Outcome

The writ petition was disposed of with liberty to the petitioner to file an appeal under Section 107 of the CGST Act by 15th December, 2025 along with the requisite pre-deposit. The appellate authority was directed to entertain the appeal without dismissing it on the ground of limitation and to adjudicate the same on merits in accordance with law.

SOURCE LINK: https://delhihighcourt.nic.in/app/showFileJudgment/75411112025CW170462025_182017.pdf

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