Writ Petition Not Maintainable in Fraudulent ITC Cases; Statutory Appeal is the Only Remedy

Writ Petition Not Maintainable in Fraudulent ITC Cases; Statutory Appeal is the Only Remedy

Issue

Whether a High Court should entertain a writ petition under Article 226 to adjudicate a GST case involving allegations of a massive fraudulent Input Tax Credit (ITC) ring, complex financial transactions, and non-existent suppliers, or if the petitioner must be relegated to the statutory appellate remedy.

Facts

• The Fraud Network: GST authorities identified a large-scale network of fake firms generating bogus invoices. The investigation revealed:

  • 670 entities involved.

  • 55 non-existent suppliers.

  • Over ₹553 crore of inadmissible ITC passed on.

• Petitioner’s Role: The petitioner, R Gupta Metal Store, was named as one of the beneficiary firms in this network.

• Proceedings: A Show Cause Notice (SCN) was issued. The petitioner participated in the adjudication process by filing a reply with supporting documents.

• The Challenge: Instead of following the standard hierarchy (Adjudication $\rightarrow$ Appeal), the petitioner invoked the writ jurisdiction of the Delhi High Court, likely challenging the proceedings or the order on the grounds of natural justice or jurisdiction.

Decision

• The Delhi High Court dismissed the writ petition.

• Writ vs. Fact-Finding: The Court held that cases involving fraudulent ITC claims typically require a deep examination of “complex financial transactions” and “extensive evidence” (e.g., proof of movement of goods, money trails, existence of suppliers). This factual analysis is unsuitable for writ jurisdiction, which is summary in nature.

• Statutory Remedy: The Court emphasized that the petitioner must pursue the statutory appellate remedy (Section 107 appeal before the Appellate Authority) where facts can be re-appreciated.

• No Forum Shopping: The judgment stressed that parties implicated in GST fraud cannot try remedies in multiple forums (Courts vs. Tribunals) simultaneously. This risks conflicting decisions and unnecessary litigation.

Key Takeaways

• • Complex Fraud = Appellate Route: High Courts generally refuse to intervene in “fake invoice” cases because determining the genuineness of a transaction is a question of fact, not law.

  • Alternate Remedy Bar: The existence of an effective statutory appeal is a strong bar to writ petitions in tax evasion cases.

• Judicial Policy: The courts are sending a clear signal: do not clutter the High Court with evidentiary disputes regarding ITC fraud; go to the Commissioner (Appeals) first.