GST Registration Lasted under Two Years sufficient to Believe that Company was Created to Pass Fraudulent ITC: Delhi HC Directs Firm to Statutory Appeal [Read Order]
Since the impugned order was appealable under Section 107 of the CGST Act, the Court declined to exercise its writ jurisdiction.
ITC - Fake - GST - Taxscan
ITC - Fake - GST - Taxscan
The Delhi High Court has dismissed a petition observing that the company’s short-lived GST ( Goods and Services Tax ) registration barely spanning two financial years provided sufficient grounds to infer that it was created solely for the purpose of passing on fraudulent Input Tax Credit (ITC).
The petitioner, R S Trading Co. had challenged the Order-in-Original dated 18 June 2025 and the preceding show cause notice issued in March 2023, which had raised a demand exceeding ₹6.27 crore, along with equivalent penalties and interest under Sections 74 and 122 of the CGST Act.
The proceedings arose from investigations that uncovered large-scale fraudulent availment of ITC through fake invoices from non-existent suppliers.
According to the GST Department, RS Trading Co. was one among a network of 17 fictitious firms used to generate ineligible credits.
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The company’s proprietor, Manish Kumar, in his statements, admitted reliance on brokers and confirmed he did not personally know any of the supposed suppliers; he was arrested in March 2021 under Section 69 of the CGST Act for offences punishable under Section 132.
The High Court noted that the company’s registration was granted in July 2019, with the alleged suspicious transactions confined to 2019-20 and 2020-21. Following the proprietor’s arrest, the firm ceased operations, which reinforced the department’s stance that the entity existed only as a vehicle for tax evasion.
Justices Prathiba M. Singh and Shail Jain rejected the petitioner’s submission on a CBIC circular of July 2022 that had clarified penalty applicability in fake invoice cases, holding that such arguments could only be tested in appellate proceedings.
Since the impugned order was appealable under Section 107 of the CGST Act, the Court declined to exercise its writ jurisdiction. However, recognizing that the writ petition had been filed within the limitation period for appeal, the Bench allowed the petitioner to pursue the statutory remedy by filing an appeal by 15 December 2025, subject to pre-deposit requirements.
The Court directed that if such an appeal was filed within the time limit, it should be adjudicated on merits and not dismissed as time-barred. Accordingly, the petition was disposed of.
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