Calcutta HC dismisses GST Appeal for Non-Exhaustion of Appeal Remedy against Order Blocking ITC on Alleged Fake Invoices [Read Order]

The Calcutta High Court dismissed a writ petition seeking to challenge a GST officer’s order blocking his input tax credit (ITC) on the ground of alleged “fake” invoices.

The single bench of Justice Raja Basu Chowdhury held that the petitioner had failed to exhaust his statutory remedy of appeal before approaching the court, and that the High Court could not re-evaluate the merits of the tax officer’s findings.

Sharma, who trades in metals under the name M/s ARS Metals, received a show-cause notice on November 31, 2023, after the Deputy Commissioner of Revenue invoked Section 86A of the West Bengal GST/CGST Act, 2017, to block his electronic credit ledger for the period August 2020 to March 2023. The department alleged that Sharma had claimed and utilized ITC on inward supplies from M/s Rachna Trading Co., a supplier whose registration had been cancelled and which, upon verification, was found to have no physical existence at its registered address.

In response, the tax officer conducted remand proceedings in May 2024 in compliance with an earlier Division Bench order dated May 7, 2024, which had remitted the matter for fresh adjudication and directed that statements of key witnesses Sri Shyam Sundar Tiwari and transporter Ashoke Kumar Saha be furnished and, if requested, cross-examinations allowed. Despite initially declining cross-examination, Sharma’s representative later participated but then refused re-examination of Tiwari, leaving without signing the note sheet. Additional documentary evidence, toll plaza reports and a chartered accountant’s statement was submitted, and the adjudicating officer issued the final blocking order on July 24, 2024.

Rather than pursue an appeal under Section 107 of the CGST Act, Sharma filed the present writ petition on November 11, 2024, contending that the officer had not verified toll-movement records for all 26 transport vehicles and had denied a fair opportunity to cross-examine all witnesses. He relied on precedents such as Granules India Ltd. and Popatrao Patil to argue that investigators must act as “model litigants” and verify material before drawing adverse inferences.

Justice Chowdhury held that Sharma had “given a go-by” to the statutory appellate remedy and that a writ petition was not a substitute for an appeal. The court noted that Sharma had access to all statements and documents, and that any failure to pursue cross-examination was self-inflicted. “The petitioner cannot complain of lack of opportunity when his own representative refused to participate in re-examination,” the judgment observed. Moreover, the petitioner bore the initial burden of furnishing toll records; the state was under no duty to verify facts not in its possession.

It was observed that, “Incidentally, according to him once, the petitioner refused to participate in the process of re-examination, the petitioner lost all further right to cross examine any further or other persons. In any event, it is submitted that the proper officer had duly considered the contentions raised by the petitioner and has dealt with the matter in detail. It is only thereafter, an adjudication order was passed. Despite the fact that the petitioner has an appellate remedy, the petitioner chooses not to avail the same. Instead, he has filed the instant writ petition. As such, no relief should be afforded to the petitioner.”

It was noted that, “The fact that the petitioner’s representative had opposed the re-examination and had not participated in the same, would corroborate from the minutes of the proceedings dated 5th July, 2024, inter alia, including the email communication dated 8th July, 2024. Still later, a further hearing was given to the petitioner on 10th July, 2024 and in the course of such hearing Mr. Banka, the representative of the petitioner had clarified that he had nothing to add though, on 15th July, 2024 certain additional documents had been disclosed by the petitioner.”

Accordingly, the writ petition and connected application were dismissed for non-exhaustion of statutory remedies and absence of any jurisdictional error. No costs were awarded, and parties were directed to act on digital copy of the order.

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