Claiming GST ITC Without Actual Supply of Goods strikes Root Intent of ITC Facility: Delhi HC [Read Order]

The Delhi High Court has held that the fraudulent availing of Input Tax Credit ( ITC ) under the GST ( Goods and Services Tax ) regime, without any actual supply of goods or services, fundamentally violates the purpose and integrity of the ITC facility.

A petition was filed by Banson Enterprises challenging an order-in-original dated February 2, 2025, which imposed demands and penalties based on findings that the petitioner had issued goods-less invoices to facilitate wrongful ITC claims.

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The Department alleged that the petitioner had availed ITC worth over ₹1.85 crores through invoices not backed by genuine supply. It also submitted that the petitioner no. 2 admitted that he supplied goods- less invoices of taxable value 45,04,500/- to one M/s Saraswati Printers during the Central Excise period i.e. from 30th June, 2016 to 21st March, 2017.

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Despite the petitioner's contentions regarding procedural lapses under Rule 142 of the CGST Rules such as lack of proper authorization to issue the SCN, absence of pre-consultation, and the issuance of a consolidated notice for multiple years, the Court found no merit in the arguments for exercising its extraordinary writ jurisdiction.

The court referred to Mukesh Kumar Garg v. Union of India and stated the seriousness of such ITC frauds, noting that allowing such practices could cause “an enormous dent in the GST regime.”

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The bench of Justices Prathiba M. Singh and Rajneesh Kumar Gupta reiterated that Section 16 of the CGST Act, which provides for ITC, is designed to support legitimate business transactions and should not be misused for financial gain through fictitious or non-existent supply chains.

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While delivering judgment, the high court observed that “The nature of the allegation against the Petitioner in the present case, as is clear from the SCN as also the impugned order is that the Petitioner, in collusion with other entities has taken substantial benefit of ITC without sale of any goods or services. This strikes at the root of the Input Tax Credit facility which is recognised in the GST regime.”

The petitioner’s own director had admitted to issuing invoices without the movement of goods during a previous tax regime period, further weakening their case, noted the court.

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The high court concluded that no violation of natural justice had occurred, as the petitioner had been provided with a fair opportunity to respond and be heard. As such, the petition under Article 226 was dismissed, with liberty granted to the petitioner to file an appeal before the appropriate GST appellate authority under Section 107 of the CGST Act. It clarified that the appeal shall be adjudicated on merits and shall not be dismissed on the ground of limitation.

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To Read the full text of the Order CLICK HERE

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