The Delhi High Court has imposed the cost Rs. 50K cost on accused challenging the order and held that the misuse of Section 16 of the Central Goods and Service Tax Act by availing wrongful Input Tax Credit (ITC) caused enormous dent in GST regime.
The bench of Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta has observed that in a large number of writ petitions that the 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. The misuse, if permitted to continue, would create an enormous dent in the GST regime itself.
The two individuals including the Petitioner is accused of incorporating or established 28 firms. In collusion with various other traders the Petitioner had availed of fake Input Tax Credit without any supply of goods or services.
According to the Department, the total ITC, which was availed of by the entity, which was controlled by Anuj Garg, who is the son of Mukesh Kumar Garg is to the tune of Rs.1,15,73,68,714 (More than Rs. 115 crores). A detailed order has been passed by the Respondent department after issuance of the SCN. The Petitioner had also filed a reply to the SCN. Personal hearing was also granted to the Petitioner. In the order, penalties have been imposed on the Petitioner.
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 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.
The court noted that the allegations against the Petitioner in the order are extremely serious in nature. They reveal the complex maze of transactions, which are alleged to have been carried out between various non-existent firms for the sake of enabling fraudulent availment of the ITC.
The court noted that none of the grounds are made out as the SCN and the order have been passed by the appropriate authority which has jurisdiction. The Petitioner had been awarded an opportunity to file a reply and had also been afforded a hearing.
The court held that the writ petition is not liable to be entertained. If the Petitioner wishes to urge any other issues, it can be considered in the appeal, if the Petitioner chooses to avail of the appellate remedy under Section 107 of the CGST Act.
The court dismissed the petition with costs of Rs.50,000 to be deposited with the Delhi High Court Bar Association within four weeks.
Case Details
Case Title: Mukesh Kumar Garg Versus UOI
Case No.: W.P.(C) 5737/2025 & CM APPL.26171/2025
Date: 09th May, 2025
Counsel For Petitioner: Akhil K. Maggu
Counsel For Respondent: Monica Benjamin
