Facts of the Case

The petitioner, Bhupender Kumar, a GST consultant, challenged an adjudication order dated 01.02.2025 passed by the Additional Commissioner (Adjudication), CGST Delhi North, imposing a penalty of ₹2,85,66,26,459 under Section 122(1A) of the CGST Act along with additional penalties under Sections 122(3) and 125. The proceedings arose out of an investigation conducted by the Directorate General of GST Intelligence, Ghaziabad Regional Unit, which revealed creation and operation of 54 fake firms for fraudulent availment and passing on of input tax credit. A show cause notice dated 08.03.2024 was issued alleging that the petitioner, along with other co-noticees, aided and abetted the mastermind, Shri Sanjay Sehgal, in creating bogus firms and facilitating fake ITC transactions. The petitioner did not file any reply to the show cause notice. Aggrieved by the adjudication order, the petitioner approached the High Court under Article 226.

Issues Involved

Whether penalty under Section 122(1A) of the CGST Act could be imposed without a specific show cause notice invoking that provision, whether the petitioner, being only a consultant, could be subjected to such penalty, whether Section 122(1A) could be applied to transactions prior to its insertion, and whether the High Court should exercise writ jurisdiction in a case involving large-scale fraudulent ITC and disputed facts.

Petitioner’s Arguments

The petitioner contended that no specific notice under Section 122(1A) was issued and therefore penalty under that provision was without jurisdiction. It was argued that the petitioner was merely a consultant and not the beneficiary or mastermind of the fraud, and that the main accused, Shri Sanjay Sehgal, had admitted his dominant role. The petitioner further submitted that Section 122(1A) could not be applied retrospectively and that the adjudication order travelled beyond the scope of the show cause notice in violation of Section 75(7) of the CGST Act.

Respondent’s Arguments

The Revenue submitted that the show cause notice clearly alleged aiding and abetting of fraudulent ITC and expressly contemplated penalty under Section 122 of the CGST Act, which included Section 122(1A). It was argued that the petitioner consciously chose not to file any reply to rebut allegations or deny benefit derived from the fraud. The Department contended that the petitioner’s own statements recorded during investigation established his active role in creation and operation of fake firms and that the matter involved complex factual issues unsuitable for writ adjudication.

Court Order / Findings

The Delhi High Court, after examining the show cause notice and detailed statements recorded during investigation, held that the allegations against the petitioner were serious and involved a complex factual matrix relating to large-scale fraudulent availment of ITC. The Court observed that the show cause notice sufficiently contemplated penalty under Section 122, including Section 122(1A), and that the petitioner had admitted involvement in creation of fake firms and facilitation of fraudulent transactions. The Court held that the question of the precise role played by the petitioner, the extent of benefit derived, and applicability of penalty provisions required factual examination, which could not be undertaken in writ jurisdiction. The Court further held that Section 122(1A) was in force on the date of issuance of the show cause notice and was applicable to a continuing offence such as fraudulent ITC. Accordingly, the Court declined to interfere with the adjudication order under Article 226.

Important Clarification

The Court clarified that in cases involving serious allegations of fraudulent ITC and massive revenue implications, writ jurisdiction should be exercised sparingly. Where statutory appellate remedies are available and factual adjudication is required, parties must pursue remedies under the CGST Act rather than invoking writ jurisdiction.

Final Outcome

The writ petition was dismissed. However, the petitioner was granted liberty to file a statutory appeal under Section 107 of the CGST Act within one month along with the requisite pre-deposit, and it was directed that such appeal, if filed within the stipulated period, shall be decided on merits without being dismissed on the ground of limitation.

Link to Download Order https://www.mytaxexpert.co.in/uploads/1769497451_BHUPENDERKUMARVsADDITIONALCOMMISSIONERADJUDICATIONCGSTDELHINORTHORS..pdf

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