Rs. 5 Lakh Cost Imposed On Trader Accused Of Wrongfully Availing GST ITC For Misleading The Court: Delhi HC

The Delhi High Court has imposed the cost of Rs. 5 Lakh cost imposed on traders accused of wrongfully availing Input Tax Credit (ITC) for misleading the court. The bench of Justice Prathiba M. Singh and Justice Shail Jain have observed that the Petitioner has completely misled the Court about the nature of his business. The entire attempt appears to have been to somehow escape legal action by the Department in respect of ITC availed from fraudulent entities. Such conduct cannot be condoned. The petitioner, Manish Kumar Jha, filed a petition seeking cancellation of its Goods and Services Tax (GST) registration effective June 30, 2025. The petitioner claimed that his business operations had ceased and that he had duly applied for closure through an online application dated July 4, 2025. However, what appeared to be an innocuous request soon exposed a major case of tax evasion. During the proceedings, the GST Department revealed that the petitioner had conducted business from August 7, 2024 to July 4, 2025, registering an impressive turnover of Rs. 5.95 crore — all within a span of less than a year — without paying a single rupee in cash towards GST liability. The Department informed the Court that the petitioner had availed of fraudulent ITC worth ₹1.07 crore, allegedly through fake invoices and non-existent transactions. Taking cognizance of these revelations, the Court directed the petitioner to submit an affidavit disclosing complete financial details — including turnover, tax paid in cash, and ITC availed. It also ordered both the petitioner and the GST Department to file the relevant GST returns and records for the seven-month period in question. In compliance, the petitioner filed an affidavit confirming that his turnover stood at ₹5.95 crore and that he had availed ITC of ₹1.07 crore while depositing “zero” tax in cash. He also claimed to have filed NIL returns from February 2024 onwards, citing non-operation of business. However, this only deepened the Court’s suspicion. The GST Department conducted a field inspection at the business address listed on record — D-4/87, Kunwar Singh Nagar, Nangloi, New Delhi. The report painted a damning picture. According to the visiting officer’s report, no GST signage or business activity was found at the address. The premises reportedly housed a small stall selling puja samagri (religious items). Local residents and shop owners confirmed that no firm named Shiva Enterprises had ever operated in the area. Moreover, the mobile number registered with GST authorities was found inactive. The report concluded that M/s Shiva Enterprises was “non-functioning / non-existent.” Confronted with these findings, Mr. Jha produced a video in Court, allegedly showing the rented premises with a board reading “Shiva Enterprises.” He also presented a certificate from the landlord asserting that no GST officer had inspected the premises. However, under questioning, Mr. Jha admitted that he had installed the board only the previous day and filmed the video thereafter — despite the landlord’s own certificate confirming that the premises had been vacated in July 2025. The Court noted that the board was clearly installed “only for the purposes of the video” to mislead the authorities. It held that both Mr. Jha and his landlord had “attempted to mislead the Court” by fabricating evidence to counter the GST Department’s inspection report. The court observed that the petitioner’s actions amounted to “gross misrepresentation and deliberate concealment of facts.” The order noted that the petitioner had not only defrauded the exchequer through fraudulent ITC claims but also attempted to manipulate judicial proceedings. Recognizing that the GST Department had already initiated further legal proceedings, the Court refrained from ordering criminal prosecution at this stage. Nonetheless, it imposed a total cost of ₹5,00,000 on the petitioner, to be paid as follows ₹2,00,000 to the Delhi High Court Bar Association, ₹2,00,000 to the GST Department (via Demand Draft in the name of Commissioner, Trade & Taxes, Delhi), and ₹1,00,000 to the Sales Tax Bar Association The Court directed that payment confirmations be filed within two weeks. Counsel for the GST Department confirmed that fresh notices have been issued to M/s Shiva Enterprises, requiring Mr. Jha to appear before the department for further inquiry. The case is now expected to proceed under the provisions related to fraudulent ITC claims, which may attract severe penalties under the GST Act, including recovery of tax, interest, and prosecution. Case Details Case Title: M/S Shiva Enterprises Versus Principal Commissioner, Department Of Trade And Taxes, Gnctd Case No.: W.P.(C) 13977/2025 Date: 30/11/2025 Counsel For Petitioner: Pranay Jain, Adv. Counsel For Respondent: Sumit K. Batra, Adv. Click Here To Read Order Read More: Payments Made To SIPCOT For Common Infrastructure Can’t Be Treated As Depreciable Assets: Madras HC

Rs. 5 Lakh Cost Imposed On Trader Accused Of Wrongfully Availing GST ITC For Misleading The Court: Delhi HC

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