Writ Petition Dismissed Despite Adjudicating Authority's Failure to Follow Court's Directions;

Writ Petition Dismissed Despite Adjudicating Authority’s Failure to Follow Court’s Directions; Petitioner Relegated to Appeal for Factual Adjudication

Issue

Whether a writ petition is maintainable against an adjudication order that was passed without adhering to specific directions issued by the High Court in a previous writ petition, particularly the direction to take an independent decision and not blindly rely on the Show Cause Notice (SCN) or audit report?
When can the High Court relegate a petitioner to the alternative remedy of a statutory appeal, even after finding that the adjudicating authority failed to properly consider the petitioner’s reply and submissions?

Facts

The petitioner was faced with a demand order primarily on the grounds of wrongful availment of Input Tax Credit (ITC). This order was passed after a previous round of litigation where the High Court had set aside an earlier order and remanded the matter back to the Adjudicating Authority with specific directions. The key direction was that the authority must not implicitly rely on the audit memo or SCN, but must independently examine the petitioner’s reply and then arrive at a decision.

The petitioner filed a fresh writ petition, arguing that the Adjudicating Authority had once again failed to comply with the High Court’s directions. It was submitted that the new order was passed by mechanically confirming the demand proposed in the SCN, without affording any real consideration to the detailed reply and oral submissions made by the petitioner. The authority had merely summarized the petitioner’s reply in the order without engaging with its merits.

The demands raised were of a mixed nature. A substantial portion related to a classification error where the petitioner had availed ITC as CGST and SGST instead of IGST. The remaining demands were purely factual, based on the returns and documents of the petitioner.

Decision

The High Court, while agreeing with the petitioner that its earlier directions were not properly followed, ultimately dismissed the writ petition and directed the petitioner to avail the statutory remedy of an appeal.

The Court observed the following:

Non-compliance by Authority: The Court noted that the Adjudicating Authority had indeed failed to follow the spirit of the previous directions. The impugned order did not reflect an independent application of mind; it merely summarized the petitioner’s reply and then confirmed the demand as per the SCN. It was unclear how the reply was considered before finalizing the demand.
Nature of Dispute: The Court recognized that determining the validity of the demands required a deep dive into various facts and documents. This included verifying the returns and ascertaining whether the demands were justified on merits.
Limitation of Writ Jurisdiction: Such a detailed factual examination is beyond the normal scope of the High Court’s writ jurisdiction under Article 226 of the Constitution. The appropriate forum for such an exercise is the first appellate authority, which can re-appreciate both facts and law.

Therefore, despite the procedural flaw in the adjudication order, the petitioner was directed to file a statutory appeal where all the factual issues could be thoroughly examined.

Key Takeaways

Writ Remedy is Discretionary: The existence of an alternative statutory remedy (like an appeal) is a strong factor for a High Court to decline intervention, even if there are procedural illegalities in the impugned order.
Violation of Directions vs. Factual Disputes: While a failure to follow a court’s directions is a serious procedural lapse, if the underlying dispute is predominantly factual, the High Court may still relegate the party to an appellate authority equipped to handle factual adjudication.
Role of Appellate Authority: The first appellate authority is the appropriate forum to examine and adjudicate on contentious factual matters, such as the correctness of ITC availment based on returns, invoices, and other documents.
Speaking Orders are Essential: Adjudicating authorities must pass “speaking orders” that demonstrate due consideration of the assessee’s reply. Merely summarizing the reply and then confirming the proposed demand does not meet the standard of a reasoned decision.

HIGH COURT OF DELHI

Infiniti Retail Ltd.

Union of India

PRATHIBA M. SINGH and Rajneesh Kumar Gupta, JJ.

W.P.(C) No. 4347 of 2025
CM APPL. No. 20078 and 20079 of 2025

MAY 21, 2025

Prakash Shah, Sr. Adv., Rajat Mittal, Mohit Rawal, Mihir Mehta and Suprateek Neogi, Advs. for the Petitioner. Anurag Ojha, SSC, Dipak Raj, Ms. Garima Kumar and Deep Raj, Advs. for the Respondent.

ORDER

Prathiba M. Singh, J.- This hearing has been done through hybrid mode.

2. The present petition has been filed by the Petitioner-Infiniti Retail Limited under Article 226 of the Constitution of India, inter alia, assailing the Order-in-Original dated 03^rd February, 2025 (hereinafter, ‘impugned order’) passed by the Respondent No.2- Additional Commissioner, CGST Delhi, West Commissionerate.

3. Vide the impugned order, a demand has been raised against the Petitioner on various grounds in the following terms:

“(i) I, hereby confirm the Invocation of the extended period of limitation as provided under Section 74 (1) of the

CGST Act 2017 for demand and recovery of CST payable on M/s INFINITI RETAIL LIMITED (CROMA);

(ii) I hereby, confirm the demand of the wrongly availed Input Tax Credit [CGST, SGST & IGST] collectively amounting to R: 91,59,91,060/- (Rupees Ninety-One Croce Fifty Nine Lakh Ninety-One Thousand Sixty Only) as detailed in Para No: 13, L7, 18, 19,20&21 of the SCN under Section 74(1) read with Section 74(9) of the CGST Act along-with Interest payable thereon under Section 50 of the CCST Act, 2017 and order to recover the same.

(iii) I, hereby, confirm the demand of Interest as applicable from them under Section 50 of CGST Act, 2017 read with relevant provisions of Delhi GST Act, 2017 and Section 20 of IGST Act, 2017 on the amount of GST as mentioned in paint (ii) above and order to recover the same.

(iv) 1, hereby, impose penalty equal to the amount mentioned at point (ii) under Section 74(1) read with Section 74(9) and read with Section 122 of the CGST Act, 2017 and relevant provisions of Delhi GST Act, 2017 and Section 20 of IGST Act, 2017 and order to recover the same.

(v) 1, hereby, confirm the demand of the short payment of tax [CGST, SGST & IGST] collectively amounting to GST Rs. 16,80,26,918/- (Rupees Sixteen Crore Eighty Lakh Twenty-Eight Thousand Nine Hundred Eighteen Only) as detailed in Para No. 8, 10 11, 12, 15 & 16 of the SCN from them under Section 74(1) read with Section 74(9) of the CGST Act read with similar provisions of Delhi GST Act, 2017 end Section 20 of the IGST Act and order in recover the same.

(vi) I, hereby, confirm the demand of Interest as applicable from them under Section 50 of CGST Act, 2017 read with relevant provisions of Delhi GST Act, 2017 and Section 20 of IGST Act, 2017 on the amount of GST as mentioned in paint (v) above.

(vii) I, hereby, impost penalty equal to the amount of tax as mentioned in point (v) above from them under Section 74(1) read with Section 74(9) and read with Section 122 of the CGST Act, 2017 ana relevant provisions of Delhi GST Act, 2017 and Section 20 of IGST Act, 2017 and order to recover the same.

(viii) 1, hereby, confirm the demand of Interest amount to Rs. 19,31,640/- (Rupees Nineteen Lakh Thirty-One Thousand and Six Hundred Forty only) as detailed in Para No. 9 & 14 of the SCN from M/s INFINITY RETAIL LIMITED (CROMA) under Section 50 of the CGST Act, 2017 and order to recover the same.”

4. The submission of Mr. Prakash Shah, ld. Senior Counsel for the Petitioner is that the impugned order has been passed without bearing in mind the directions given by this Court in the previous writ petition being W.P.(C) 12459/2024 titled ‘Infiniti Retail Limited v. Union of India’ dated 10^th September, 2024. In the said decision, the Court had directed as under:

“6. As noted above, the impugned SCN is premised on the audit report. The petitioner is essentially aggrieved in the manner in which the audit was conducted and contends that its responses have been completely disregarded

7. Prima facie, there does appear to be certain gaps in the communications. The petitioner has been throughout asserting that it had provided all the documents as sought for and on the other hand, the respondents have been issuing reminders to the petitioner to provide such documents.

8. The petitioner seeks to contest the demands as proposed in the

9. The learned counsel appearing on behalf of the petitioner also submits that the petitioner would be satisfied if the order is passed directing the adjudicating authority to consider the responses to the show cause notices uninfluenced by the observations made in the audit memo or audit report.

10. In view of the above controversy, this Court consider it apposite to direct that the adjudicating authority shall not implicitly rely on the observations made in the audit memo or audit report. The adjudicating authority shall examine the petitioner’s response/reply to the impugned SCN and independently take the decision in regard to the proposed demand.

11. The petitioner is also at liberty to file all the documents as considered necessary to contest the demands as proposed under the impugned SCN.

12. In view of the above directions, the petitioner will not be prejudiced by the audit report/audit memo in so far as the adjudication of the impugned SCN is concerned.

13. All rights and contentions of the parties are reserved.”

5. As per the above-mentioned decision, the Adjudicating Authority was to not implicitly rely on the audit memo or the audit report but was to examine the Petitioner’s reply and take an independent decision in respect of the demand raised against the Petitioner.

6. The submission on behalf of the Petitioner is that there is no consideration afforded to the reply which has been filed by the Petitioner and the demand has been raised blindly following the contents of the Show Cause Notice (hereinafter, ‘SCN’) itself. The mere reproduction of the reply filed by the Petitioner would not be sufficient and a serious consideration for the same was required.

7. The Court has considered the matter. Directions given by this Court in W.P.(C) 12459/2024 ought to have been complied with by the Adjudicating Authority both in letter and spirit. The manner in which the impugned order has been framed would show that it primarily relies on the SCN. The reply filed by the Petitioner has been summarised in the impugned order and the oral submissions made by the Chartered Accountant appearing for the tax payer i.e. Petitioner have also been set out. However, in the findings portion of the impugned order, the manner in which the said reply has been afforded due consideration by finalising the demand, is unclear.

8. The question however is whether the matter deserves to be remanded. In the opinion of this Court, no useful purpose would be served in sending the matter back to the Adjudicating Authority as the reasons that were to be given by the said AA, have been spelt out – though not in a fully satisfactory manner.

9. The impugned order is an appealable order. It is noticed that a substantial portion of the demand which has been raised is in respect of availment of Input Tax Credit (hereinafter ‘ITC’) of Central Goods and Service Tax (hereinafter, ‘CGST’) and State Goods and Service Tax (hereinafter, ‘SGST’) when it should have been ITC in respect of Integrated Goods and Service Tax (hereinafter, ‘IGST’). The said relevant paragraph being paragraph 34 (l) of the impugned order is set out below:

“I note that the noticee had taken ITC of CGST and SGST on the basis of invoices, which were issued by suppliers who were registered outside Delhi, which means that the place of supply in respect of such supplies was out of Delhi.

In terms of the provisions of Section 16(2)(b) of the CGST Act, 2017, ITC of the tax paid by the suppliers is available to the recipient subject to the conditions that the recipient has received goods or services or both. Payment of CGST and SGST by the suppliers suggests that the place of supply in respect of such involves was outside Delhi, because had the suppliers made supplies to the noticee in Delhi, they would have charged IGST on such supplies and not CGST & SGST. That being the case, the noticee availed ITC of Rs. 77,36,28,252/-((2017-18-Rs.6,75,10,042 (CGST-Rs.3,37,55,021 & SGST – Rs.3,37,55,021/-) ; 2018-19-Rs.15,06,05,576/- (CGST- Rs.7,53,02,788/- & SGST-Rs.7,53,02,788/-) : 2019-20 Rs.19,41,30,164/- (CGST-Rs.70,65,082/-) : 2020-21 Rs.36,13,82,470/- (CGST -Rs.18,06,91,235/- & SGST – Rs.18,06,91,235/-)), as detailed in (RUD-16) to the notice, in contravention of the provisions of Section 16(2)(b) of the CGST Act, 2017.

In view of the above, ITC of Rs. 77,36,28,252/- ((2017-18-s.6,75,10,042/- (CGST-Rs.3,37,55,021/- & SGST-RS.3,37,55,021/-) 2018-19-Rs.15,06,05,576/- (CGST-Rs.7,53,02,788/- & SGST- Rs.7,53,02,788/-): 2019-20-Rs.19,41,30,164/- (CGST-Rs.9,70,65,082/-): 2020-21 -Rs.36,13,82,470/- (CGST – Rs.18,06,91,235/- & SGST-Rs. 18,06,91,235/-)) as detailed in (RUD-16) to the notice is liable to be demanded and recovered from the noticee under Section 74 of the CGST Act, 2017 alongwith applicable Interest under Section 50(3) of the Act, ibid.”

10. All the remaining demands are factual in nature based upon the returns of the Petitioner.

11. In the opinion of this Court, the impugned order being an appealable order under Section 107 of the Central Goods and Service Tax Act, 2017, various facts and documents would be required to be gone into to ascertain as to whether any of the demands are justified or not. The same would be beyond the scope of writ jurisdiction which this Court is presently exercising.

12. However, insofar as the appeal under Section 107 of the Central Goods and Service Tax Act, 2017 is concerned, there is a mandatory predeposit that is imposed by the statute of 10 % that would be required to be deposited by the Petitioner. The discussion in paragraph 34 (l) of the impugned order would show that at best even if the impugned order is correct, the question would be whether the availment of ITC would be qua IGST or qua SGST/CGST. The availment of ITC itself does not appear to be in question even as per the impugned order itself.

13. Under these unique and peculiar circumstances, the Petitioner is relegated to avail of its appellate remedy under Section 107 of the Central Goods and Service Tax Act, 2017, in accordance with law.

14. In so far as the pre-deposit qua paragraph 34 (l) of the impugned order, in respect of availment of ITC is concerned, the same is waived as the entitlement to avail ITC appears to be not in doubt.

15. The Petitioner is permitted to file the appeal before the concerned Appellate Authority within a period of six weeks along with the pre-deposit in terms of statute except in respect of the amount mentioned in paragraph 34 (l) of the impugned order for the amount of Rs. 77,36,28,252/-.

16. The Appellate Authority would consider all the facts and determine whether the ITC is wrongly availed of and whether the Order-in-Original is liable to be interfered with. The Petitioner shall be bound by the said determination subject to any remedies it may avail of. Contentions of all parties are left open.

17. The present writ petition is disposed of in the above terms. All the pending applications, if any, are also disposed of.