Chhattisgarh HC rejects writ petition of alleged issuer of Fake Invoices [Read Order]

The Chhattisgarh High Court rejected a writ petition filed by a trader who was penalised for allegedly purchasing goods from bogus dealers and thereby issuing fake invoices for availing input tax credit.

The petitioner, Dadhichi Iron, and Steel are engaged in the business of trading of iron and steel items. They purchase goods from steel manufacturers and sell the same to the different customers in different parts of the country. According to the counsel for the petitioner, the petitioner pays GST on the goods purchased from the manufacturers and further pays GST on the value of the supply of said goods made at the time of sale being made by the petitioner to other customers.

According to them, they were entitled to the Input Tax Credit on the GST paid on the goods and services purchased. The respondents initially commenced an investigation against the petitioner on the allegation of the petitioner allegedly purchasing goods from bogus dealers and thereby issuing Chhattisgarh HC fake invoices and a notice in this regard was issued to the petitioner, based upon which subsequently the Input Tax Credit available to the petitioner was blocked and thereafter a proceeding was drawn in-respect-of the illegal availing of the Input Tax Credit. The said notice was subjected to challenge in a Writ Petition which this court disposed-off directing the petitioner to file a detailed representation/objection to the concerned authorities under the department, who in turn was further directed to take-into-consideration the contents of the representation/objection and decide the same

Justice P. Sam Koshy while rejecting the writ petition held, “ having heard the contentions put forth on either side and on perusal of record and also taking note of the provisions of the Act what clearly reflects is that the initial issuance of the show cause notice and the proceedings drawn were in respect of the intrastate transactions made by the petitioner, wherein he had used fake and bogus invoices for the purpose of availing ineligible ITC, whereas subsequent to a secret information being received and further investigation being made, particularly in the course of a raid, which was conducted at the premises of the petitioner-establishment and other related premises, it was revealed that the magnitude of the offence committed by the petitioner-establishment was far more grave and serious. It was in the course of raid found that the petitioner had been making false and bogus transactions and has illegally availed ineligible ITC credits”.

The Court also said that, “The magnitude of which detected by now is approximately Rs.60 crores and with further investigation, the amount is likely to increase manifold. This Court does not find any substance in the arguments of the petitioner when they say that the investigation and the proceedings now initiated is one, which hit by Section 6(2)(1)(b) of the CGST Act of 2017. What has also to be appreciated is the fact that there is a clear distinction between a proceeding drawn for the demand of tax evaded by the petitioner-establishment and the investigation be conducted by the Department of the DG, GST Intelligence Wings in respect of an offence committed by an establishment by way of using bogus and fake invoices and illegally availing ITC, which the petitioner-establishment otherwise was ineligible.”