A taxpayer must exhaust the statutory appeal remedy before filing a writ petition.

A taxpayer must exhaust the statutory appeal remedy before filing a writ petition.

Issue

Should the High Court or Supreme Court interfere with a GST demand order through a writ petition or a Special Leave Petition (SLP), especially when a statutory appeal remedy is available under the GST Act and the core issue involves the detailed verification of factual disputes?

Facts

• The GST department denied a substantial Input Tax Credit (ITC) of ₹8.59 crore to the assessee, a jeweler. The department’s case was that the ITC was fraudulently availed from non-existent or bogus suppliers.
• The assessee provided documentary evidence like purchase invoices and proof of bank payments but crucially failed to provide any evidence of the actual physical movement of the goods (such as transport receipts, e-way bills, or delivery challans), which was specifically requested in the show-cause notice.
• The adjudicating authority, noting that the trade was in precious metals where proving physical delivery is essential, confirmed the demand.
• Instead of filing a statutory appeal under Section 107 of the CGST Act, the assessee filed a writ petition directly in the High Court to challenge the order. The High Court dismissed the petition, directing the assessee to the appellate authority. The assessee then appealed this decision to the Supreme Court.

Decision

The Supreme Court ruled procedurally in favour of the revenue by dismissing the assessee’s petition.

• The court declined to interfere with the High Court’s decision. This upholds the principle that the assessee should have followed the normal statutory appeal process instead of directly approaching the higher courts.
• However, the Supreme Court provided a crucial safeguard and a clear path forward for the assessee. It granted them the liberty to file a statutory appeal and to raise all their grounds and arguments before the Appellate Authority.
• Most importantly, it specifically directed that the Appellate Authority must decide the appeal independently and on its own merits, without being influenced by any preliminary observations that the High Court might have made in its order.

Key Takeways

1. Exhaust Your Statutory Remedies First: It is a well-settled legal principle that the extraordinary jurisdiction of the High Court (via a writ petition) or the Supreme Court should not be invoked when an effective alternative remedy, such as a statutory appeal, is available under the law.
2. Factual Disputes are Best Left to Appellate Authorities: Complex questions of fact, such as whether goods were physically moved or whether a supplier is genuine, are best decided by the statutory appellate authorities. These forums are specifically designed to examine all evidence in detail, which is something a writ court typically does not do.
3. Proof of Payment Alone is Often Not Enough: In cases involving allegations of bogus suppliers, merely showing an invoice and a bank payment may not be sufficient. The taxpayer must also be prepared to prove the actual receipt and physical movement of the goods to successfully claim the ITC.
4. The “Without Prejudice” Direction is Key: The Supreme Court’s direction for the appellate authority to not be “influenced” by the High Court’s observations is very important. It ensures that even though the assessee lost at the higher courts (on the procedural issue of maintainability), they will get a completely fresh and unbiased hearing on the actual merits of their case before the first appellate authority.