Facts of the Case

The petitioner, Sardar Auto Traders, challenged an order dated 4 February 2025 issued in Form GST DRC-07 for Assessment Year 2017-18 under the CGST Act. The investigation was initiated based on a reference from the Jaipur Zonal Unit of the Directorate General of GST Intelligence. During investigation, it was alleged that certain non-operational or non-existent firms were created for fraudulent availment and passing on of input tax credit. Four entities, namely M/s Sahni Traders, M/s M.R. Enterprises, M/s S K Traders and M/s Mahaveer Impex, were found to have passed on ITC to 76 recipient firms, including the petitioner. The ITC allegedly availed by the petitioner amounted to ₹1,48,333 comprising CGST of ₹74,166 and SGST of ₹74,166. A show cause notice dated 3 August 2024 was issued, to which the petitioner filed a reply on 4 August 2024. Thereafter, an Order-in-Original dated 31 January 2025 was passed confirming the demand and penalty under Section 74(9) of the CGST Act, followed by issuance of DRC-07.

Issues Involved

Whether the High Court should exercise writ jurisdiction in a case involving alleged fraudulent availment of ITC as a recipient, whether parallel or overlapping proceedings by Central and State GST authorities could be examined 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 for the same assessment year, proceedings had already been initiated and concluded by the Delhi GST authorities and that issuance of notice and adjudication by the Central GST authorities resulted in duplication and overlapping of demands. It was argued that such parallel proceedings were impermissible and warranted interference by the High Court.

Respondent’s Arguments

The Revenue submitted that the proceedings pertained to fraudulent availment of ITC based on investigation by DGGI and that the impugned order was an appealable order under Section 107 of the CGST Act. It was argued that disputed questions of fact relating to fraudulent ITC could not be adjudicated in writ jurisdiction and that the petitioner had an efficacious statutory remedy.

Court Order / Findings

The Delhi High Court noted that the case related to alleged fraudulent availment of ITC and that the impugned order was appealable under Section 107 of the CGST Act. Relying on its earlier decision in Mukesh Kumar Garg vs Union of India, the Court reiterated that writ jurisdiction should ordinarily not be exercised in cases involving fraudulent ITC and bogus invoicing, which involve complex factual analysis. The Court held that the petitioner’s grounds, including the plea of overlapping demands, could be raised before the appellate authority. Accordingly, the Court declined to entertain the writ petition.

Important Clarification

The Court clarified that where allegations of fraudulent ITC are involved, adjudication requires detailed factual examination which cannot be undertaken under Article 226. The existence of an efficacious statutory appellate remedy disentitles the petitioner from invoking writ jurisdiction, except in exceptional circumstances.

Final Outcome

The writ petition was disposed of. The petitioner was relegated to the statutory remedy of appeal under Section 107 of the CGST Act and was granted time till 31 August 2025 to file the appeal along with the prescribed pre-deposit. It was directed that if the appeal is filed within the said period, it shall not be dismissed on the ground of limitation and shall be decided on merits, with all pleas left open.

Link to Download Order https://www.mytaxexpert.co.in/uploads/1769497886_SARDARAUTOTRADERSVsADDITIONALCOMMISSIONERCGSTWARD32ZONE1ANDANR.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.