GSTIN Cancellation OTP Shared to Accountant misused Later Creating Fake Firms: Delhi HC Says not for Writ Jurisdiction [Read Order]

The Delhi High Court has declined to entertain a writ petition filed in connection with the misuse of a Goods and Services Tax Identification Number (GSTIN), where the cancellation OTP shared by the proprietor with an accountant was allegedly misused to create multiple fake firms.

The court, observing that such allegations involve disputed facts, detailed investigation, and potential criminal liability, held that the matter cannot be examined under its writ jurisdiction under Article 226 of the Constitution, and must instead be pursued through alternate remedies and police inquiry.

The petitions were filed by Radhey Traders, through its proprietor, Sopal Singh, challenging two orders-in-original passed by the CGST officer. The first order dated 5 April 2024 confirmed a demand of ₹1.14 crore of allegedly ineligible Input Tax Credit (ITC), along with interest and penalty.

The second order dated 27 August 2024 confirmed a demand exceeding ₹8.19 crore due to discrepancies between GSTR-1 and GSTR-3B filings, and ineligible ITC of about ₹19.55 lakh claimed on the strength of suppliers whose GSTINs had been retrospectively cancelled.

The petitioner contended that he had merely obtained GST registration in November 2018 but never commenced business operations. He claimed that his GSTIN was subsequently misused by third parties, leading to transactions worth over ₹50 crore in FY 2019-20.

He argued that he had lodged police complaints, including FIR No. 0281/2024 with the Special Cell, Delhi Police, and maintained that he was unaware of the show cause notice or subsequent orders.

According to a Delhi Police status report, the petitioner freely gave an accountant he knew the OTP associated with his GST portal login in order to supposedly delete the registration, which was already suspended.

Allegedly, this OTP was used to change the registered email address and mobile number, which led to the creation of seven companies that sent invoices and enabled false ITC claims totaling over ₹50 crore. Later, it was discovered that many of these businesses did not exist.

The petitioner’s stand in the present writ petition was that “However, the same could not materialize and the Petitioner in the year 2019 went to the GST Office to surrender the firm where he was informed that due to non-usage the GSTIN of the Petitioner’s firm has been automatically suspended. The Petitioner had no knowledge of GST and was satisfied to learn that the firm’s registration has been suspended.”

“Afterwards, the Petitioner met Mr. ABC, Accountant (Mobile No. 9582XXXXXX, 8076XXXXXX) in his office at XXXXXXXXXXXXXXXXXXXXXX and told him about his GSTIN suspension. Mr. ABC told the Petitioner that he will help in the cancellation of the Petitioner’s Registration and thereafter asked for OTP to do the same. However, later on, when the Petitioner had given the OTP, Mr. ABC said that the GSTIN be suspended only and it will get cancelled on its own” he mentioned in the petition.

The Bench comprising Justice Prathiba M. Singh and Justice Shail Jain, after going through the above submissions held that the petitioner could not claim complete innocence since the misuse came from his own act of sharing the OTP.

The court held that “the Petitioner cannot claim to be completely innocent and prefer the present writ petitions challenging the impugned orders which have been passed. This Court also cannot go into a factual inquiry in the matter as to who is responsible for the availment of the fraudulent ITC in this manner. The giving of the OTP to a known person and subsequent misuse of the same, would require investigation by the police authorities. The same cannot be conducted by the Court - that too in a writ petition.”

The petition was dismissed directing an alternate remedy and noted that the investigation into the misuse of the GSTIN was already underway by the Police.

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