Facts of the Case

The petitioner, M/s Rajesh Metals through its proprietor Rajesh Kakar, filed a writ petition challenging a Show Cause Notice dated 11.07.2024 and the consequent adjudication order dated 03.02.2025 passed by the CGST Delhi North. The Show Cause Notice alleged fraudulent availment of input tax credit through M/s Sun Corporation, which was stated to be a fake firm issuing goods-less invoices.

The petitioner filed a detailed reply to the Show Cause Notice on 16.12.2024 claiming that copper scrap had been purchased through proper invoices, e-way bills and banking channels. Notices for personal hearing were issued on 17.12.2024, 07.01.2025 and 17.01.2025. However, the petitioner did not attend any of the hearings. The adjudicating authority thereafter passed the impugned order confirming demand, interest and penalty.

Issues Involved

Whether the High Court should exercise writ jurisdiction under Article 226 in a case involving allegations of fraudulent availment of ITC, whether partial non-consideration of the reply to the Show Cause Notice warranted interference 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 contended that the reply to the Show Cause Notice filed on 16.12.2024 was not properly considered by the adjudicating authority while passing the impugned order. It was argued that the impugned order violated principles of natural justice and deserved to be set aside. The petitioner sought interference by the High Court instead of being relegated to the appellate remedy.

Respondent’s Arguments

The Revenue argued that the matter involved serious allegations of fraudulent availment of ITC through fake firms and goods-less invoices, requiring detailed factual examination. It was submitted that the petitioner was granted multiple opportunities of personal hearing but failed to appear. The Department relied upon settled judicial precedents holding that writ jurisdiction should not be exercised in such matters and that the petitioner had an efficacious alternate remedy under Section 107 of the CGST Act.

Court Order / Findings

The Delhi High Court noted that allegations in the present case related to fraudulent availment of ITC, which involve complex factual disputes not amenable to adjudication under writ jurisdiction. The Court relied upon its earlier decision in Mukesh Kumar Garg vs Union of India and the Supreme Court judgment in Assistant Commissioner of State Tax vs Commercial Steel Limited, reiterating that writ jurisdiction should not ordinarily be exercised where statutory appellate remedies are available.

The Court observed that although the reply to the Show Cause Notice appeared to be detailed and may not have been fully dealt with in the impugned order, this by itself did not justify bypassing the statutory appellate mechanism. The Court held that such issues could be appropriately examined by the appellate authority under Section 107 of the CGST Act.

Important Clarification

The High Court clarified that disputes involving allegations of fraudulent ITC require factual adjudication and appreciation of evidence, which must be undertaken by the statutory appellate authority. The writ court would not examine such matters on merits, even if some procedural infirmities are alleged, unless exceptional circumstances are made out.

Final Outcome

The writ petition was disposed of. The petitioner was granted liberty to file an appeal under Section 107 of the CGST Act against the impugned order dated 03.02.2025 on or before 30.11.2025, along with the requisite pre-deposit. The appellate authority was directed not to dismiss the appeal on the ground of limitation and to decide it on merits. The liberty to appeal was made subject to payment of ₹10,000 as cost to the Department.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/PMS10102025CW156122025_165550.pdf

 

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