Facts of the Case

The petitioner, High Spirit Commercial Ventures Private Limited, filed a writ petition challenging a Show Cause Notice dated 24.07.2024 and an Order-in-Original dated 04.02.2025 passed by the Additional Commissioner, CGST Delhi West Commissionerate. The impugned order raised substantial demands against the petitioner on allegations of fraudulent availment and passing on of Input Tax Credit (ITC) from non-existent entities.

The Department’s case was that a large-scale investigation revealed a network of 53 bogus firms allegedly created by one Mukesh Jain for the purpose of fraudulent ITC availment. Out of these, 21 firms fell under the jurisdiction of the Delhi West Commissionerate, including the petitioner. It was alleged that the petitioner availed ineligible ITC amounting to ₹3,98,98,262 and passed on ITC of ₹4,75,08,348 without actual supply of goods or services.

The petitioner contended that it was based in Maharashtra and had no connection with Mukesh Jain or the alleged bogus entities. However, the Department asserted that inspection at the petitioner’s registered place of business revealed it to be non-existent. Statements of various counterparties were recorded, some of whom admitted transactions with the petitioner and reversed ITC, strengthening the Department’s case.

Issues Involved

Whether the High Court should exercise writ jurisdiction under Article 226 of the Constitution to interfere with demands raised for alleged fraudulent availment of ITC, whether such matters involving disputed facts and complex investigation can be adjudicated in writ proceedings, 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 argued that it was wrongly implicated and had no connection with Mukesh Jain or the alleged network of bogus firms. It was contended that the demands were based on incorrect assumptions and that the petitioner was carrying on genuine business. The petitioner sought quashing of the Show Cause Notice and the Order-in-Original through writ jurisdiction.

Respondent’s Arguments

The Revenue contended that the matter involved serious allegations of large-scale fraudulent availment of ITC causing substantial loss to the exchequer. It was argued that the impugned order was detailed, based on investigation, statements, and material evidence, and was appealable under Section 107 of the CGST Act. The Department relied on earlier decisions of the Delhi High Court holding that writ jurisdiction should not ordinarily be exercised in cases involving fraudulent ITC and complex factual disputes.

Court Order / Findings

The Delhi High Court observed that cases involving fraudulent availment of ITC raise serious issues affecting the GST regime and involve detailed factual examination which cannot be undertaken in writ jurisdiction. The Court relied upon its earlier decision in M/s MHJ Metal Techs v. Central Goods and Services Tax Delhi South, wherein it was held that writ jurisdiction should not be exercised in matters involving fraudulent ITC and that parties should be relegated to the statutory appellate mechanism.

The Court noted that the impugned Order-in-Original was appealable under Section 107 of the CGST Act and that even co-noticees in similar matters had already availed appellate remedies. The Court also took note of the fact that the Supreme Court had dismissed the SLP against the Metal Techs judgment, thereby affirming the approach adopted by the High Court.

In view of the availability of an effective alternate remedy and the complex factual nature of the dispute, the Court declined to entertain the writ petition.

Important Clarification

The High Court clarified that in cases of alleged fraudulent availment of ITC, writ jurisdiction under Article 226 should be exercised sparingly. Such disputes require detailed factual adjudication and are best addressed through the statutory appellate process. Observations made by the Court would not prejudice the petitioner’s case before the appellate authority.

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 along with the requisite pre-deposit. The appellate authority was directed to entertain and adjudicate the appeal on merits without dismissing it on the ground of limitation, provided the appeal is filed within the time granted by the Court.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/75431102025CW62712025_165253.pdf

 

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