The Delhi High Court has imposed the cost of Rs. 1 Lakh on the accused of wrongful availment of Input Tax Credit (ITC) for abusing the process of law.
The bench of Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta has observed that there is also no arbitrary exercise of power by the Department, which would require exercising of writ jurisdiction. As is evident from the impugned order, various persons and entities including that of the Petitioner have either facilitated availment of or in fact availed ITC, by entering into arrangements with the main proponent – Mr. Karan Kumar Agarwal.
The bench stated that so long as there is no violation of natural justice or jurisdictional error, writ jurisdiction ought not to be exercised, especially if the Petitioner has not come with clean hands. In the present case there is no infraction, as the show cause notice was duly issued to the Petitioner Firm and the personal hearing notices have also been provided.
“This Court notices a pattern in which such persons, who had either availed of fraudulent ITC or have enabled the availment of fraudulent ITC repeatedly have challenged orders imposing penalty under Section 74 of the Central Goods and Services Act, 2017 before this Court, invoking the writ jurisdiction, on some technical grounds,” the bench said.
The grievance of the Petitioner Firm is that the reply was filed by the Petitioner Firm, however, the same was not considered and no personal hearing was given prior to passing of the impugned order. Ld. Counsel for the Petitioner Firm points out that in the said reply, it was clearly stated that in the year 2017-18, which is the relevant financial year, the Petitioner Firm had not even commenced its operations. Hence, there was no question of any supplies being taken from any other firm or entity in the said financial year.
The department submitted that three hearing notices were issued to the Petitioner Firm for hearing on 27th November, 2024, 4th December, 2024 and 27th December, 2024,. However, the hearings were not attended by the Petitioner Firm. In addition, prior to passing of the order, the concerned authority had verified from the portal that no reply had been uploaded. The department handed over a screenshot of the portal taken prior to passing the order.
The court held that large scale fraudulent availment of ITC without actual passing of goods or services may, if left unchecked, can lead to severe damage to the GST framework itself, which is meant to encourage legally entitled persons and businesses to avail of ITC and other similar facilities such as drawbacks etc.
The court held that having seen the hearing notices, the screenshot of the portal and the reply of the Petitioner Firm along with the statement of the Director of the Petitioner Firm, which is recorded in the order, the Court is not inclined to entertain the present writ petition.
The court dismissed the petition with costs of Rs. 1 lakh to be paid to the Delhi High Court Bar Association within two weeks.
Case Details
Case Title: M/S Mahesh Fabrinox Pvt. Ltd Versus Union Of India & Anr.
Case No.: W.P.(C) 6006/2025
Date: 06/05/2025
Counsel For Petitioner: N.K. Sharma
Counsel For Respondent: Neha Rastogi
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