Writ Petition Challenging GST Demand for Fictitious Firms and Fraudulent ITC Dismissed; Assessee Directed to Appellate Remedy.

Writ Petition Challenging GST Demand for Fictitious Firms and Fraudulent ITC Dismissed; Assessee Directed to Appellate Remedy.

Issue:

Whether a writ petition challenging a demand-cum-show cause notice (SCN) and a subsequent Order-in-Original related to allegations of running fictitious firms and fraudulently availing Input Tax Credit (ITC) should be entertained on grounds of lack of jurisdiction and denial of proper opportunity of hearing, particularly when departmental notifications clarify jurisdiction and proper hearing was provided.

Facts:

A Demand-cum-Show Cause Notice was issued by respondent no. 3 (department) to the petitioner-assessee, alleging that the petitioner was involved in running fictitious firms and fraudulently availing Input Tax Credit (ITC). The petitioner filed a reply to this SCN. Subsequently, after a personal hearing, an Order-in-Original dated February 2, 2025, was passed by respondent no. 1 (Additional Commissioner, CGST Delhi (West)). The petitioner filed a writ petition against this SCN and order, citing two main grounds: lack of jurisdiction of the issuing authority and denial of a proper hearing.

Decision:

In favor of the revenue: The court dismissed the writ petition and relegated the petitioner to avail the appellate remedy before the Appellate Authority (under Section 107 of the CGST Act). The court ruled that:

1. Jurisdiction: Notifications dated March 11, 2022, and November 25, 2024, clarified that both Delhi North and Delhi West Commissioners had jurisdiction to issue and adjudicate notices under Sections 73 and 74 (which covers fraudulent ITC claims). Therefore, the issue of jurisdiction raised by the petitioner was not tenable, as the respondents had proper jurisdiction.
2. Opportunity of Hearing: The court found that a proper opportunity for personal hearing was granted to the petitioner, and their reply had been duly considered by the concerned authority.

In view of these findings, the court concluded that the writ petition was not the appropriate remedy.

Key Takeaways:

• Alternate Statutory Remedy: A fundamental principle of writ jurisdiction is that it is an extraordinary remedy. When an effective alternate statutory remedy (like an appeal under Section 107 of the CGST Act) is available, courts generally direct the petitioner to exhaust that remedy first, unless there are exceptional circumstances.
• Clarity on Jurisdiction: The existence of specific departmental notifications clarifying the jurisdiction of different Commissionerates within a state/jurisdiction (like Delhi North and Delhi West) effectively addresses challenges related to the authority of the officer. Such notifications, when validly issued, define the territorial and functional jurisdiction of officers.
• Proof of Hearing/Reply Consideration: The court will scrutinize the factual claim of denial of natural justice. If the department can demonstrate that a personal hearing was indeed granted and the assessee’s reply was duly considered, the claim of “denial of proper hearing” will not stand. This emphasizes the importance of both the department’s meticulous record-keeping and the assessee’s active participation in proceedings.
• “Lack of Jurisdiction” vs. Factual Disputes: Challenges based on a “lack of jurisdiction” are often entertainable in writ petitions. However, if the jurisdiction is clearly established by law or notification, and the challenge shifts to factual disputes (like whether the demand is justified on merits or how a reply was considered), the writ court will typically decline intervention, directing the party to appeal.
• Section 132 (Offences and Penalties): While Section 132 deals with punishment for certain offenses, the core demand in this case likely arose under Section 74 (fraudulent ITC). The dismissal of the writ implies that the alleged fraud and its tax implications are matters for the appellate forum.