Writ Petition Not Maintained for Procedural Challenges in ITC Denial When Appellate Remedy Exists

Issue: Whether a writ petition challenging demands and penalties related to the alleged issuance of “goods-less invoices” and fraudulent Input Tax Credit (ITC) can be entertained on grounds of procedural irregularities (officer’s authority, lack of pre-consultation, consolidated SCN for multiple years) when an alternate and effective appellate remedy is available.

Facts:

A show cause notice (SCN) was issued to the assessee, alleging that the assessee had issued “goods-less invoices” to various entities to enable fraudulent availment of Input Tax Credit (ITC).
Subsequently, an impugned order-in-original was passed, raising demands and imposing penalties against the assessee.
The assessee challenged this order on several procedural grounds:
- The SCN was issued and signed by an officer who allegedly lacked proper authority.
- There was no pre-consultation prior to the issuance of the SCN (a procedural requirement under certain circumstances or interpretations).
- A consolidated SCN was issued for multiple financial years, which the assessee argued was improper.

Decision: The court held that there was no infirmity in the impugned order warranting the exercise of writ jurisdiction. The court noted that the statement of the assessee’s director was recorded by the respondent-department, and the principles of natural justice were complied with during the adjudication proceedings. Accordingly, the writ petition was disposed of, granting the assessee liberty to avail the remedy of appeal under Section 107 of the CGST Act. The decision was in favor of the revenue.

Key Takeaways:

Availability of Alternate Remedy (Section 107 CGST Act): The primary reason for the court’s decision was the existence of an effective and comprehensive appellate remedy under Section 107 of the CGST Act. High Courts generally refrain from exercising extraordinary writ jurisdiction when such a remedy is available.
Procedural Irregularities vs. Jurisdictional Errors: While the assessee raised procedural contentions (officer’s authority, pre-consultation, consolidated SCN), these were not deemed to be so fundamental as to vitiate the entire proceedings or constitute a jurisdictional error that would necessitate direct writ intervention. Such issues can often be raised and addressed effectively before the appellate authority.
Compliance with Natural Justice: The court specifically noted that the recording of the director’s statement and overall conduct showed compliance with the principles of natural justice. This suggests that the assessee was given an opportunity to be heard, even if they disputed the form of the notice or the officer issuing it.
Factual Elements in Procedural Challenges: Even procedural challenges, such as the authority of an officer or the necessity of pre-consultation, often have underlying factual elements that are best examined by an appellate authority equipped to review evidence.
Discretionary Nature of Writ Jurisdiction: The exercise of writ jurisdiction is discretionary. Courts typically exercise this discretion cautiously, especially in tax matters where specific statutory remedies are provided.
Importance of Exhausting Remedies: This case reinforces the principle that taxpayers should first exhaust the statutory appellate mechanisms provided under the tax law before resorting to extraordinary remedies like a writ petition.

HIGH COURT OF DELHI

Banson Enterprises

Assistant Commissioner CGST

PRATHIBA M. SINGH and Rajneesh Kumar Gupta, JJ.

W.P.(C) 6503 of 2025

MAY 15, 2025

Shrey Lodha, Akshat Vachher, Advs. for the Petitioner. Ruchesh Sinha, SSC for the Respondent.

ORDER

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

CM APPL. 29654/2025 (exemption)

2. Allowed, subject to all just exceptions. The application stand disposed of.

W.P.(C) 6503/2025 & CM APPL. 29653/2025

3. The present petition has been filed by the Petitioners challenging inter alia the order-in-original dated 02^nd February, 2025 (hereinafter, ‘the impugned order’) by which demands and penalties have been raised against the Petitioner entity- M/s Banson Enterprises.

4. The impugned order arises out of show cause notice dated 03^rd August, 2024 (hereinafter, ‘the SCN’).

5. The allegations raised by the Department against the Petitioner entity in the said SCNisthata search was conducted at the premises of the Petitioner entity and it was revealed that the Petitioner entity had issued goods-less invoices to various entities in order to enable fraudulent availment of Input Tax Credit (hereinafter, ‘ITC’). The ITC which was availed by the Petitioner entity was to the tune of Rs.1,85,73,718/- and it is this amount which was set out in the SCN as the undue benefit which was reaped by the Petitioner.

6. The Petitioner filed a reply dated 24th October, 2024 to the SCN and subsequently, an opportunity for personal hearing was also availed of by the Petitioner. Consequently, the impugned order has been passed, raising the demands and penalties upon the Petitioner.

7. Mr. Shrey Lodha, ld. Counsel appearing for the Petitioner, has raised broadly three issues to challenge the impugned order:

i. Firstly, as per the mandate of rule 142(l)(a) of the Central Goods and Service Tax Rules, 2017, “the proper officer” ought to have issued the Summary of SCN along with the SCN. However, itis the case of the Petitioner that in the present case, the SCN has been issued and signed by an officer who did not have the authority to do so;

ii. Secondly, that there has been no pre-consultation prior to the issuance of SCN in terms of Rule 142(1A) of the Central Goods and Service Tax Rules, 2017, and iii. Thirdly, that a consolidated SCN has been issued for multiple financial years and the consequent impugned order has been passed. The said issue is already under consideration by this Court in W.P.(C) 4392/2025 titled Quest Infotech Pvt. Ltd. & Anr. v. Union of India.

8. Mr. Ruchesh Sinha, ld. Senior Standing Counsel appearing for the Respondent, on the other hand, submits that the impugned order is an appealable order. He further relies upon the decision of the Supreme Court in Civil Appeal No. 5121 of 2021 titled The Assistant Commissioner of State Tax and Others v. M/s Commercial Steel Limited as also upon the decision of the Allahabad High Court in Writ Tax No. 753 of 2023 titled Elesh Aggarwal v. Union of India.

9. It is further submitted by counsel for the Respondent that the statement of Mr. Bansal- Petitioner No. 2, being one of the Directors of the Petitioner entity has been recorded where he admits that he supplied goods- less invoices of taxable value 45,04,500/- to one M/s Saraswati Printers during Central Excise period i.e. from 30th June, 2016 to 21st March, 2017. Under such circumstances, it is submitted that the Petitioner ought to be relegated to the Appellate Tribunal.

10. The Court has considered the matter. As held in M/s Commercial Steel Limited (supra), a writ petition can be entertained under exceptional circumstances only which are set out in the said judgment as under:

“11. The respondent had a statutory remedy under section 107. Instead of availing of the remedy, the respondent instituted a petition under Article 226. The existence of an alternate remedy is not an absolute bar to the maintainability of a writ petition under Article 226 of the Constitution. But a writ petition can be entertained in exceptional circumstances where there is:

(i)

a breach of fundamental rights;

(ii)

a violation of the principles of natural justice;

(iii)

an excess of jurisdiction; or

(iv)

a challenge to the vires of the statute or delegated legislation.

12. In the present case, none of the above exceptions was established. There was, in fact, no violation of the principles of natural justice since a notice was served on the person in charge of the conveyance. In this backdrop, it was not appropriate for the High Court to entertain a writ petition. The assessment of facts would have to be carried out by the appellate authority. As a matter of fact, the High Court has while doing this exercise proceeded on the basis of surmises. However, since we are inclined to relegate the respondent to the pursuit of the alternate statutory remedy under Section 107, this Court makes no observation on the merits of the case of the respondent.

13. For the above reasons, we allow the appeal and set aside the impugned order of the High Court. The writ petition filed by the respondent shall stand dismissed. However, this shall not preclude the respondent from taking recourse to appropriate remedies which are available in terms of Section 107 of the CGST Act to pursue the grievance in regard to the action which has been adopted by the state in the present case.

11. The above legal position has also been reiterated in Elesh Aggarwal (supra) wherein the Allahabad High Court has held that no ground is made for interference on merits in exercise of extra ordinary jurisdiction.

12. The nature of the allegation against the Petitioner in the present case, as is clear from the SCN as also the impugned order is that the Petitioner, in collusion with other entities has taken substantial benefit of ITC without sale of any goods or services. This strikes at the root of the Input Tax Credit facility which is recognised in the GST regime.

13. The statement of Petitioner No. 2- Mr. Bansal, itself having been recorded by the Respondent-Department and the principles of natural justice having been fully complied with during the adjudication proceedings, this Court does not find any infirmity in the impugned order so as to exercise its extraordinary writ jurisdiction. There is no justification for not challenging the same by way of an appeal.

14. An appeal before the appellate authority is a full-fledged remedy provided under Section 107 of the Central Goods and Service Tax Act, 2017. 15. The contentions that the Petitioner wishes to raise can always be raised in appeal, in as much as this Court has already taken a view in W.P.(C) 5737/2025 titled Mukesh Kumar Garg v. Union of India & Ors. In the said case, the Court, has already taken a view in this regard that where cases involving fraudulent availment of ITC are concerned, considering the burden on the exchequer and the nature of impact on the GST regime, writ jurisdiction ought not to be usually exercised in such cases. The relevant portions of the said judgment are set out below:

“11. The Court has considered the matter under Article 226 of the Constitution of India, which is an exercise of extraordinary writ jurisdiction. The allegations against the Petitioner in the impugned order are extremely serious in nature. They reveal the complex maze of transactions, which are alleged to have been carried out between various nonexistent firms for the sake of enabling fraudulent availment of the ITC.

12. The entire concept of Input Tax Credit, as recognized under Section 16 of the CGST Act is for enabling businesses to get input tax on the goods and services which are manufactured/supplied by them in the chain of business transactions. The same is meant as an incentive for businesses who need not pay taxes on the inputs, which have already been taxed at the source itself. The said facility, which was introduced under Section 16 of the CGST Act is a major feature of the GST regime, which is business friendly and is meant to enable ease of doing business.

13. It is observed by this Court in a large number of writ petitions that this facility under Section 16 of the CGST Act has been misused by various individuals, firms, entities and companies to avail of ITC even when the output tax is not deposited or when the entities or individuals who had to deposit the output tax are themselves found to be not existent. Such misuse, if permitted to continue, would create an enormous dent in the GST regime itself.

14. As is seen in the present case, the Petitioner and his other family members are alleged to have incorporated or floated various firms and businesses only for the purposes of availing ITC without there being any supply of goods or services. The impugned order in question dated 30th January, 2025, which is under challenge, is a detailed order which consists of various facts as per the Department, which resulted in the imposition of demands and penalties. The demands and penalties have been imposed on a large number of firms and individuals, who were connected in the entire maze and not just the Petitioner.

15. The impugned order is an appealable order under Section 107 of the CGST Act. One of the co-noticees, who is also the son of the Petitioner i.e. Mr. Anuj Garg, has already appealed before the Appellate Authority.

16. Insofar as exercise of writ jurisdiction itself is concerned, it is the settled position that this jurisdiction ought not be exercised by the Court to support the unscrupulous litigants.

17. Moreover, when such transactions are entered into, a factual analysis would be required to be undertaken and the same cannot be decided in writ jurisdiction. The Court, in exercise of its writ jurisdiction, cannot adjudicate upon or ascertain the factual aspects pertaining to what was the role played by the Petitioner, whether the penalty imposed is justified or not, whether the same requires to be reduced proportionately in terms of the invoices raised by the Petitioner under his firm or whether penalty is liable to be imposed under Section 122(1) and Section 122(3) of the CGST Act.

18. The persons, who are involved in such transactions, cannot be allowed to try different remedies before different forums, inasmuch as the same would also result in multiplicity of litigation and could also lead to contradictory findings of different Forums, Tribunals and Courts.”

16. Under these circumstances, this Court is not inclined to entertain the present writ petition.

17. At this stage, liberty is sought by the Petitioner for filing an appeal as the limitation period for availing of the remedy under Section 107 of the Central Goods and Service Tax Act, 2017, is also coming to an end.

18. Accordingly, the Petitioner is permitted to avail of the appellate remedy by 15^th July, 2025, along with the necessary pre-deposit mandated under Section 107 of the Central Goods and Service Tax Act, 2017, in which case the appeal shall be adjudicated on merits and shall not be dismissed on the ground of limitation.

19. In so far as the issue pertaining to the issuance of consolidated show cause notice and orders-in-original for multiple financial years is concerned, the decision in Quest Infotech (supra) which may be passed by this Court shall bind the Appellate proceedings as well if the Petitioner chooses to go in appeal.

20. Needless to add, any observations made by this Court in this order, would not have any impact on the final adjudication by the appellate authority.

21. The petition is disposed of in said terms. Pending application(s), if any, also stand disposed of.