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Delhi HC directs DGGI to conclude investigation within 3 months in case of wrongful availment of ITC [Read Order]

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The High Court of Delhi, keeping in view the serious allegations of wrongful availment of Input Tax Credit (ITC) directed the Directorate General of Goods and Services Tax Intelligence (DGGI) as well as the Commissioner of CGST, Delhi to conclude the investigation in the present case within a period of three months.

Searches were also conducted in the registered premises of 8 input suppliers of M/s WMSPL who were suspected of supplying only invoices without actually supplying goods or services. All 8 premises were either found to be non-existent and in case the addresses were found, they were not being used by the registered suppliers of M/s WMSPL. Hence, it is evidence that the above mentioned 8 suppliers were created solely for the purpose of passing on fake ITC.

During the investigation, it was also found that another company by the name of M/s Watermelon HR Services Private Limited (Part of Watermelon group) also appeared to have availed fake ITC of approx. Rs.2,04,82,938/- from the same non-existent suppliers that are suspected to have provided fake ITC to M/s Watermelon Management Services Private Limited.

The writ petition is filed challenging the impugned order passed by the respondent, Commissioner of CGST, Delhi whereby it has kept the provisional attachment orders as well as corrigendum alive after specifying that the reason for attachment was that proceeding under Section 67 of the CGST Act was pending against the petitioner. However, the respondent accepted the fact that it should not conduct a parallel investigation, and accordingly, the respondent No.1 handed over its investigation to DGGI who had been investigating the matter.

The petitioner contended that though the DGGI was investigating the matter, yet he had never passed any attachment/freezing order. He submits that since no proceeding has been launched under Section 74 of the CGST Act and the raid and search of the petitioner’s premises, the impugned provisional attachment order is without jurisdiction and illegal.

However, the respondent authority contended that the petitioner has maintained no record of transactions undertaken during the Financial Years. It was also stated that the petitioner has not provided any evidence of the genuineness of ITC availed by it and/or eight other companies. Further, the Directors of the petitioner had failed to comply with the summons issued to them.

The Division Bench of Justice Manmohan and Justice Sanjeev Narula keeping in view the serious allegations of wrongful availment of Input Tax Credit (ITC) directed the Directorate General of Goods and Services Tax Intelligence (DGGI) as well as the Commissioner of CGST, Delhi to conclude the investigation in the present case within a period of three months.

“If upon conclusion of investigation DGGI is satisfied with the stand of the petitioner, then it shall close the proceeding and if not, issue an appropriate show cause notice in accordance with the law. All the rights and contentions of the parties are left open,” the bench said.

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