Taxpayer Liable Despite CA’s Alleged Misappropriation: Punjab & Haryana High Court Dismisses GST Fraud Plea

The Punjab and Haryana High Court has dismissed a writ petition filed by a manpower supply firm based in Gurugram, challenging GST demand orders running into crores, holding that the petitioner/assessee cannot escape statutory tax liability on the ground that its Chartered Accountant (CA) allegedly misappropriated funds meant for tax payment. The Bench of Justice Lisa Gill and Justice Ramesh Chander Dimri ruled that the firm had an effective statutory appellate remedy under the GST law and that no exceptional circumstances were made out to justify bypassing the appeal mechanism by directly invoking writ jurisdiction under Article 226 of the Constitution. The petitioner firm was issued multiple demand orders under Section 73 of the CGST Act, 2017 for the financial years 2017–18, 2018–19, and 2019–20, citing non-payment of tax and irregular availment of input tax credit. The cumulative unpaid tax allegedly exceeded ₹1.83 crore, excluding interest and penalties. The firm claimed that since the inception of GST, it had relied entirely on its Chartered Accountant for compliance, computation of GST liability, and payment of taxes. Due to initial issues with internet banking, the firm transferred GST amounts directly to the CA’s bank account for onward remittance to the government. According to the petitioner, it later discovered that the Chartered Accountant had deposited only partial GST payments and had misappropriated substantial sums, while allegedly manipulating GST returns by adjusting fake input tax credits. The firm stated that the CA became untraceable thereafter. Police complaints were initially lodged and later pursued before the Economic Offences Wing, Gurugram, alleging cheating and fraud. The petitioner contended that it was a victim of professional misconduct and had no intention to evade tax. The firm challenged three assessment orders dated 31 December 2023, 26 April 2024, and 22 August 2024, along with the rejection of its rectification application dated 5 May 2025. It argued that the orders were passed in violation of principles of natural justice, claiming that it was not granted a proper opportunity of hearing as required under Section 75(4) of the CGST Act. The petitioner further alleged that the GST authorities passed mechanical orders without appreciating the fraud committed by the Chartered Accountant. The State of Haryana opposed the petition, arguing that multiple notices and personal hearing opportunities were duly issued. It emphasized that the petitioner had failed to respond to show cause notices and did not appear for scheduled hearings. The Court noted that each of the impugned orders specifically recorded service of notices, issuance of Form GST ASMT-10, and grant of personal hearings, which the petitioner failed to utilise. Importantly, the Bench observed that the Chartered Accountant acted as an agent of the petitioner, and any lapse on his part would legally bind the principal. The High Court reiterated that where a statutory appellate remedy exists, writ jurisdiction should be exercised sparingly. The petitioner admittedly did not file appeals under Section 107 of the CGST Act, despite the orders clearly mentioning the appellate authority and procedure. The Court further held that disputes regarding misappropriation by the Chartered Accountant raised questions of fact, which cannot be adjudicated in writ proceedings. Such grievances, the Bench said, lie in criminal or civil proceedings against the errant professional, not in setting aside tax demands. Upholding the rejection of the rectification application, the Court clarified that Section 161 of the CGST Act permits rectification only for errors apparent on the face of the record. The petitioner’s plea did not fall within that scope and therefore could not be entertained. The High Court dismissed the writ petition in its entirety, holding that tax liability cannot be diluted merely because payments entrusted to a consultant were misused. Case Details Case Title: M/S Knight Fly Boyz Versus Office Of Deputy Commissioner Of State Tax (SGST) Gurugram (East) And Another Case No.: CWP-17615-2025 Date: 21/01/2026 Counsel For Appellant: A.P.Jyothish, Advocate Counsel For Respondent: Mamta Singla Talwar, DAG, Haryana Click Here To Read Order Read More: DGGI Surat Rs. Detects Rs. 80 Crore GST Evasion, 3 Arrested

Taxpayer Liable Despite CA’s Alleged Misappropriation: Punjab & Haryana High Court Dismisses GST Fraud Plea

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