HC Relegates Case to Appeal Due to Disputed Facts, 10% Writ Deposit to be Treated as Pre-Deposit.

Issue

Whether a High Court, in its writ jurisdiction, will adjudicate a matter involving complex and disputed questions of fact, or will it relegate the petitioner to the statutory appellate authority? Furthermore, can an amount deposited by the petitioner during the pendency of the writ petition be treated as the mandatory 10% pre-deposit for filing the appeal?

Facts

The petitioner, a steel scrap trader, faced a massive GST demand of approximately ₹130.61 crores.
The department’s allegations were serious, claiming the petitioner had availed Input Tax Credit (ITC) from non-existent entities, based on evidence of a lack of goods movement and the use of non-goods vehicle numbers.
The petitioner disputed these factual assertions, relying on their own records, and also challenged the proceedings on legal grounds (e.g., audit time limits, invocation of the extended period of limitation).
The petitioner filed a writ petition in the High Court challenging the entire demand. During the pendency of this writ petition, they paid 10% of the disputed tax.
The petitioner sought to have the writ petition decide the matter, or alternatively, to be allowed to file a statutory appeal, treating the 10% amount already paid as the required pre-deposit.

Decision

The High Court, in a pragmatic ruling, remanded the matter to the statutory appellate authority:

Writ Petition Disposed (Rule of Alternate Remedy): The court held that the case involved significant “claims and counter claims” that required a deep “enquiry into documents and complicated facts.” It ruled that such a fact-finding exercise cannot be undertaken in its writ jurisdiction. The proper course was to use the statutory appellate remedy.
Appeal to be Entertained: The petitioner was relegated to file a statutory appeal under Section 107. The court granted them three weeks to do so.
Delay Condoned: The appellate authority was explicitly directed to entertain the appeal without any objection to the limitation period, as the time spent in the bona fide pursuit of the writ petition was to be excluded.
10% Deposit is Valid Pre-Deposit: The court directed that the 10% of the disputed tax that the petitioner had paid during the writ proceedings be treated as the statutory pre-deposit required under Section 107(6). This resulted in an automatic stay of recovery on the balance amount pending the appeal.

Key Takeaways

Writ Court is Not for Factual Disputes: This case is a classic example of the “Rule of Alternate Remedy.” High Courts will not act as a fact-finding body. When a case hinges on complex factual verification (e.g., whether suppliers are non-existent or if goods actually moved), the court will direct the petitioner to the statutory authority (the Appellate Authority) designed for that purpose.
Bona Fide Writ Petitions CondonDelay: A taxpayer does not lose their right to appeal just because they first filed a writ petition in good faith. The time spent in the High Court is a valid reason for condoning the delay in filing the statutory appeal.
Deposits During Writ are Adjustable: Any amount paid to the department during an investigation or writ proceeding (whether “under protest” or “during pendency”) can be and should be treated as part of the mandatory pre-deposit for an appeal. This prevents the taxpayer from having to pay the same amount twice to secure their right to be heard.

HIGH COURT OF ANDHRA PRADESH

Sakthi Ferro Alloys India (P.) Ltd

State of Andhra Pradesh

R. Raghunandan Rao and Challa Gunaranjan, JJ.

Writ Petition No: 27655 of 2024

SEPTEMBER 26, 2025

M. Srikanth, Ld. Counsel for the Petitioner.

ORDER

R. Raghunandan Rao, J.- Heard Sri M. Srikanth, learned counsel appearing for Sri K.S. Naveen learned counsel for the petitioner and the learned Government Pleader for Commercial Taxes.

2. The petitioner herein is in the business of Trading Steel Scrap apart from having interests in Logistics, Warehousing, Industrial Parks and manufacturing of TMT Bars and other products.

3. Inspection of the business of the petitioner had been carried out for the financial year 2017-2018, on 31.01.2020. A notice was issued under DRC-01A, to the petitioner, on 07.06.2022, pointing out to certain discrepancies and the requirement of payment of deficit tax. The petitioner is said to have paid the requisite tax after which the 6^th respondent-Deputy Assistant Commissioner issued proceedings on 13.06.2022 concluding the adjudication. The said proceedings have concluded the adjudication for the period 2017-2018 to 2021-2022 up to October, 2021, by way of issue of DRC-05.

4. Thereafter, further audit proceedings were initiated by the 4^th respondent, who issued a notice, dated 21.10.2022, under Section 65 of the APGST Act, 2017 to the petitioner for conduct of audit. This audit was for the period June, 2017 to March, 2022. After verification of the documents submitted by the petitioner, the 4^th respondent again issued a discrepancy notice under Section 65(6), for the financial years 2017-2018 and 2018-2019, on 29.12.2023. Under this notice, the petitioner was called upon to submit a reply within 15 days. However, the 4^th respondent, without waiting for the prescribed 15 days period, had issued an audit report, on 12.01.2024, for the financial year 2017-2018 and 2018-2019. Apart from this, the 4^th respondent also issued a discrepancy notice, for the financial years 2019-2020 and 20202021, on 22.02.2024, giving time of 15 days to the petitioner to reply to the notice. Thereafter, an audit report for these financial years was also communicated to the petitioner, by E-mail on 20.03.2024.

5. After the issuance of the discrepancy notice and audit reports, the 4^th respondent issued a show cause notice on 30.04.2024 proposing levy of tax and penalties for the financial years 2017-2021. A detailed explanation was given by the petitioner, to the show cause notice, on 05.07.2024. After the petitioner had availed of the opportunity of proposing hearing and filing of documents, the 4^th respondent issued an assessment order, under Section 74 of the APGST Act, 2017, on 05.09.2024, for the financial years 2017-2018 and 2020-2021. After the assessment order had been passed, further rectification orders were issued on 10.9.2024, for the financial years 2017-2018 and 20182019. At the end of these orders, the petitioner was called upon to pay an amount of Rs.130,61,31,604/- for the financial years 2017-2021.

6. The petitioner has approached this Court, by way of the present Writ Petition challenging of the aforesaid proceedings and orders.

7. The ground of challenge, as set out in the affidavit filed in support of the Writ Petition and as elucidated by Sri M. Srikanth, learned counsel appearing for Sri K.S. Naveen, learned counsel for the petitioner are as follows:

(i)

Any audit carried out under Section 65, has to be completed within a period of three months which could be extended by the Commissioner, for a further period of six months, after he is satisfied, by reasons recorded in writing, that the audit could not be completed within the three months.

(ii)

The commencement date for fixing the three months period is the date on which the record and other documents, called for by the tax authorities, are made available by the registered person or if the audit is being conducted in the business premises of the registered person, the actual date on which audit commences in the place of business, whichever is later;

(iii)

In the present case, the audit commenced on 28.12.2022 as the petitioner had supplied all the documents which the assessing officer had called for on that day. The period of three months ended on 28.03.2023 after which the audit could not have been carried on as no order of extension was obtained from the Commissioner. However, the audit went on much beyond the period as the notices of discrepancy, as set out above, came to be issued much later than 28.03.2023. All further proceedings, including the notices and assessment order, under Section 74 of the GST Act, which are based on the aforesaid invalid audit reports, would have to be set aside;

(iv)

The limitation set out, in this regard, in Section 65(4) is mandatory in nature;

(v)

The assessment of the petitioner could not have been taken up under Section 74 as the pre-requisites of non-payment of tax on account of fraud or willful mis-statement or suppression of fact has not been made out either in the notice or in the order. Consequently, the order of assessment as well as penalty would have to be set aside;

(vi)

The period of limitation, set out under Section 73 of the GST Act had expired much before the order of assessment came to be passed on 12.09.2024. However, the said order would be within limitation extended period available under Section 74 is applied. The assessing authority having realized that an assessment, under Section 73, would be barred by limitation had deliberately invoked Section 74, even though the ingredients necessary for such invocation are absent in the present case. Neither the notice nor the assessment order makes out any case of non-payment of tax on account of fraud or willful mis-settlement or willful suppression of facts. As Section 74 is not applicable, the assessment orders would have to be treated as orders under Section 73 and the same has to be set aside on the ground of limitation.

8. The respondents have filed their counter affidavit apart from an additional counter affidavit. The contention of the respondents is that, the petitioner had obtained input tax credit from non-existent persons or entities which have been set out for the purposes of issuing fake input tax credit certificates. The statement in the show cause notice about such acts, are sufficient to make out a case for proceeding under section 74 rather than section 73. It is further contended that the respondents, having came to know all these facts, had called upon the petitioner to demonstrate actual movement of the goods, which are said to be purchased by the petitioner and for which ITC was being availed. However, the petitioner had not filed documents to demonstrate such movement of goods, or had filed documents which do not demonstrate any such movement of goods. The respondents would contend that the vehicle numbers of the transport vehicles, which are said to have delivered the goods of the petitioner, were verified and it was found that quite a few of the vehicles were not transport vehicles at all and could not have transported steel scrap and other goods that are said to have been purchased by the petitioner.

9. A perusal of the show cause notice prior to the assessment as well as the assessment order would show that the assessing officer has taken the consistent stand that the firms and business entities that are said to have supplied goods to the petitioner were not inexistence, in quite of few cases and in any event, the vehicles which are said to have transported these goods to the premises of the petitioner were not goods vehicles which could transport such goods.

10. The petitioner vehemently disputes all these facts and submits that the documents produced by the petitioner are sufficient to demonstrate that none of these allegations are true.

11. We have gone through the material placed before us. It is clear that the claims and counter claims placed before us can be resolved only by going through the documents and materials relied upon by the petitioner and the respondents. Such an exercise would require this Court to go into complicated questions of fact and conduct an enquiry as to whether the facts alleged by the petitioner or the facts alleged by the respondents are true and correct. That is an exercise which cannot be carried out by this Court. It would be best that such an exercise is carried out by the appellate authority who would be competent to go into these issues.

12. Inasmuch as the petitioner had paid 10% of the disputed tax, during the course of this Writ Petition, nothing prevents the petitioner from approaching the appellate authority. As far as the issue of limitation is concerned, the fact remains that the Writ Petition filed by the petitioner has been pending and it would only be appropriate to exclude such time from the calculation of limitation. In such an event, nothing would preclude the petitioner from moving the appellate authority.

13. In these circumstances, this Writ Petition is disposed of relegating the petitioner to the alternative remedy of appeal provided under the GST Act. Needless to say, the appellate authority, shall take up the appeal without going into the question of limitation for the purpose of filing of the appeal. For this purpose, the petitioner is granted three weeks time for filing the appeal. It would be open to the petitioner to raise all grounds, deemed fit by the petitioner, as grounds of appeal, before the appellate authority. The payment of 10% of the disputed tax, during the pendency of this Writ Petition shall be treated as the pre-deposit required under the provisions of Section 107 of the GST Act and the consequences of stay of further proceedings on such payment shall also be applied to the petitioner.

As a sequel, pending miscellaneous petitions, if any, shall stand closed.

There shall be no order as to costs.