No Coercive Action To Be Taken If Taxpayers Cooperate With GST Investigation Into Fake ITC Claims: Chhattisgarh HC [Read Order]

In a recent ruling, the Chhattisgarh High Court held that no coercive action shall be taken against taxpayers if they cooperate with the GST investigation into alleged fake Input Tax Credit (ITC) claims.

The case arose from a writ petition filed by Harsh Wadhwani, proprietor of Vijay Laxmi Trade Company, and his authorised representative, challenging the proceedings initiated by the Directorate General of GST Intelligence (DGGI). The petitioners were engaged in trading and had filed returns in Form GSTR-3B for the financial year 2024-2025.

The DGGI issued a notice dated 2 July 2025 under Section 70 of the Central Goods and Services Tax Act, 2017, alleging that the petitioners had claimed ITC based on fake invoices issued by Taj Enterprises and Agastya Enterprises. The petitioners submitted their written reply on 28 July 2025 denying the allegations.

Subsequently, the department issued summons dated 11 September 2025 and 23 September 2025, directing the petitioners to appear and provide oral evidence. The petitioners’ counsel argued that the summonses were vague as they did not specify the purpose or the scope of the oral examination.

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The department’s counsel argued that scrutiny of the petitioners’ GSTR-3B returns revealed that ITC was availed based on fake invoices issued by the two firms. They submitted that the summons were valid and that if the petitioners cooperated in the investigation, there would be no reason for any coercive steps.

The bench comprising Justice Naresh Kumar Chandravanshi observed that the inquiry was confined to the alleged fake ITC claims involving Taj Enterprises and Agastya Enterprises. The court pointed out that the petitioners had already filed their replies and expressed readiness to participate in the investigation.

The court explained that while the authorities were entitled to summon and record oral evidence, such power must be exercised fairly and without unnecessary coercion when the taxpayers were cooperating. The court further observed that the petitioners’ objections should be dealt with by passing a speaking order in accordance with law.

The court directed the petitioners to appear before the DGGI, Raipur, on 28 October 2025 for recording their statements and to comply with future summons as required. It further directed that no coercive action be taken against the petitioners in connection with the inquiry so long as they continued to cooperate.

The court also directed the department to dispose of the petitioners’ objections expeditiously through a reasoned order. The writ petition was accordingly disposed of without any order as to costs.

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