Fraudulent GST ITC Claim from Non-Existent Supplier: Delhi HC Dismisses Writ Petition, Upholds Finality of Order and Ledger Blocking [Read Order]

The High Court of Delhi, dismissed the writ petition filed by the petitioner upholding the finality of the Order-in-Original dated 27th January 2025 and the blocking of its electronic cash ledger, which confirmed a Goods and Service Tax ( GST ) demand of Rs. 29.90 lakh arising from fraudulent Input Tax Credit ( ITC ) availed through a non-existent supplier.

Treco Wire India Pvt.Ltd, petitioner-assessee, filed a petition against the Order-in-Original dated 27th January 2025, issued pursuant to the Show Cause Notice dated 22nd November 2023. The order had confirmed a demand of about Rs. 1.11 crores.

The case arose from an investigation conducted by the Directorate General of GST Intelligence (DGGI) against bogus and fake suppliers, including M/s Balaji Sales Corporation, which was found to be non-existent and engaged in passing on fraudulent Input Tax Credit (ITC). During the probe, it was discovered that the assessee had availed ITC of Rs. 29,90,898 based on bogus invoices issued by M/s Balaji.

The petitioner’s business premises in Chandni Chowk were found locked, and its additional premises in Shahbad Daulatpur could not be located. Summons were issued, and its bank account was provisionally attached on 1st May 2023, which was later confirmed on 3rd August 2023. A request was also made for blocking ITC of Rs. 29,90,898 in the petitioner’s electronic ledger.

Subsequently, a Show Cause Notice dated 22nd November 2023 was issued. The petitioner filed short replies and attended hearings. After considering the submissions, the Adjudicating Authority passed the Order-in-Original on 27th January 2025, holding that the petitioner had wrongly availed ITC of Rs. 29,90,898. The demand was confirmed with interest, recovery directions, and penalty, while penalties on the directors were dropped.

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Following the order, the petitioner’s electronic cash ledger was also blocked on 13th January 2025.

Justice Prathiba M Singh and Justice Shail Jain heard the parties and considered the matter. It noted that the impugned order dated 27th January 2025 could have been challenged through an appeal under Section 107 of the CGST Act within three months, extendable by one month. Since no appeal was filed within this period, the findings in the impugned order attained finality.

The Court also observed that though the petitioner claimed to have filed the writ in April 2025, records showed it was filed only on 8th September 2025, with no explanation for the delay in listing.

On the issue of natural justice, the bench held that the petitioner was served with the SCN and had filed replies and documents in November and December 2024. While the Adjudicating Authority may have inadvertently recorded non-appearance, it had still considered the replies and documents. Hence, there was no violation of natural justice. The petitioner, however, failed to provide any evidence proving the existence of M/s Balaji or its link with the transactions.

The Court found no fault with the blocking and debiting of the petitioner’s electronic cash ledger, as the order had already attained finality. Referring to precedents, it reiterated that once the statutory period for appeal under Section 107 had lapsed, delay could not be condoned unless exceptional circumstances existed, which were absent here.

It also stated that writ jurisdiction should not be exercised in cases involving fraudulent ITC claims, especially when an appellate remedy was available but not availed.

The Court further observed that the petitioner appeared complicit with M/s Balaji in availing fraudulent ITC and failed to cooperate during investigation or hearings. The constitutional challenge to Section 16(2)(c) of the CGST Act was left to be decided in the pending batch of matters led by Bharti Telemedia Ltd. v. Union of India.

In conclusion, the Court dismissed the writ petition, with no order as to costs.

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