No Documentary Proof of Hearing Notice Dispatch Alone Doesn’t Mean Natural Justice Violated: Delhi HC in GST Fake ITC Case [Read Order]

In a recent ruling, the Delhi High Court explained that the mere absence of documentary proof showing dispatch of personal hearing notices does not, by itself, establish a violation of principles of natural justice, particularly in cases involving allegations of fraudulent availment of Input Tax Credit (ITC), where the assessees were aware of the proceedings and had an effective statutory remedy available.

VDR Colors and Chemicals Pvt. Ltd., along with A.V. Metals Marketing Pvt. Ltd. and Surender Kumar Jain, filed writ petitions before the Delhi High Court challenging an adjudication order dated 29 January 2025 passed by the Assistant Commissioner (Adjudication), CGST, Delhi North. The order was passed pursuant to a Show Cause Notice dated 21 May 2024 alleging fraudulent availment of ITC.

The proceedings arose from a Directorate General of Analytics and Risk Management (DGARM) report concerning verification of M/s Paramount Enterprises, a proprietary concern, which revealed transactions with several firms that were allegedly non-existent.

Further investigation suggested that ITC had been passed on through a chain of firms and ultimately availed by the petitioners without any actual movement of goods. Statements were recorded during the investigation, including that of Surender Kumar Jain, which was later retracted. The department alleged that the petitioners had fraudulently availed ITC amounting to approximately Rs. 18.24 crore.

The petitioners submitted a reply to the Show Cause Notice on 30 August 2024. Subsequently, the impugned adjudication order was passed confirming the demands and penalties. Aggrieved, the petitioners approached the High Court primarily on the ground that no personal hearing was granted to them before passing the order, which according to them amounted to a breach of natural justice.

The petitioner’s counsel argued that the impugned order deserved to be set aside as the department failed to produce any documentary proof showing that notices for personal hearing were issued or dispatched. It was argued that denial of personal hearing went to the root of the matter and justified invocation of writ jurisdiction despite the availability of an appellate remedy.

On the other hand, counsel for the respondents argued that the adjudication order itself recorded that multiple opportunities of personal hearing were granted on specific dates, but neither the petitioners nor their authorised representatives appeared. They further argued that merely because proof of dispatch could not be traced, the Court should not disbelieve the official record, especially considering the serious allegations of large-scale ITC fraud causing loss to the public exchequer.

The Division Bench comprising Justice Prathiba M. Singh and Justice Shail Jain observed that while personal hearing is generally required in adjudication proceedings, the overall facts showed that the petitioners were fully aware of the investigation, had received the Show Cause Notice, and had filed replies. The court observed that the replies filed by the petitioners were vague and did not deal with the allegations on merits such as the nature of goods supplied or the genuineness of transactions.

The High Court further observed that cases involving fraudulent availment of ITC involve complex factual issues and examination of detailed evidence, which are not suitable for adjudication under writ jurisdiction. The Court explained that the impugned order was appealable under Section 107 of the CGST Act and that financial difficulty in making the statutory pre-deposit could not be a ground to bypass the appellate mechanism.

In these circumstances, the Delhi High Court declined to entertain the writ petitions. However, the Court granted liberty to the petitioners to file statutory appeals and directed that if the appeals were filed along with the requisite pre-deposit by 31 January 2026, they would not be dismissed on the ground of limitation and would be decided on merits. The writ petitions were disposed of with all rights and contentions left open.