Delhi HC Dismisses Writ Against GST Demand Citing Fraudulent ITC Allegations, Grants One Month to File Appeal [Read Order]

The HIgh Court of Delhi, dismissed a writ petition against a Goods and Service Tax (GST) demand citing allegations of fraudulent Input Tax Credit (ITC) but granted the petitioner one month to file an appeal with the required pre-deposit.

Utkash Arora,petitioner-assessee, was named in a case by the Central Goods and Service Tax Department over alleged fake ITC. The investigation found that three firms M/s Shreya Impex, M/s Akshita Enterprises, and M/s Modern Metal Industries were controlled by Vijay Prakash Sharma, with his wife and accountant shown as proprietors of two of the firms.

Officials discovered that 23 firms had claimed fake ITC of ₹1,22.26 crore without receiving any goods. The supplier firms were found to be non-existent and created only to issue fake invoices. Some entities, including the petitioner, were accused of helping pass on this fake ITC.

The order noted that a few noticees paid part of their dues, while most ignored the summons. The petitioner, listed as M/s Aura Interior Hardware at serial no. 174, faced a demand of ₹1,14,114 with penalty, based on records showing the passing of inadmissible ITC.

The petitioner counsel claimed that no Show Cause Notice was issued and no personal hearing took place. The order showed this was wrong, noting that hearings were fixed on 13.12.2024, 30.12.2024, and 13.01.2025. Some parties attended and gave submissions, but many, including the petitioner, did not, so the case was decided ex-parte on the evidence available.

The counsel also said there was no notice for 2020-21, only for 2017-18. The order made it clear that the case covered the period from 2017 to 2023.

Justice Prathiba M.Singh and Justice Rajneesh Kumar Gupta noted that the supplier firms were fake and created only to issue invoices, and referred to its earlier ruling in Mukesh Kumar Garg vs. Union of India & Ors., where it held that writ jurisdiction should not ordinarily be used in cases of fraudulent ITC because of the burden on the exchequer and the impact on the GST system.

The court observed that the petitioner approached it after the time for filing an appeal had already lapsed and held that the claim about the order being time-barred was not valid since the order was passed on 27 January 2025 and dispatched on 1 February 2025, within the permitted deadline of 5 February 2025.

The bench found the case involved fraudulent ITC and decided not to entertain the writ petition. However, it allowed the petitioner one month to file an appeal with the required pre-deposit, stating that if filed within this time, the appeal would not be rejected for being late and would be decided on merits.

The writ petition was dismissed, and all pending applications were disposed of.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates