Delhi High Court
Ambika Traders Through Proprietor … vs Additional Commissioner, … on 29 July, 2025
Author: Prathiba M. Singh
Bench: Prathiba M. Singh
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 17th April, 2025
Date of Decision: 29th July 2025
+ W.P.(C) 4853/2025, CM APPL. 22194/2025 & CM APPL.
22195/2025
AMBIKA TRADERS THROUGH PROPRIETOR GAURAV
GUPTA ..... Petitioner
Through: Mr. Rajesh Jain, Mr. Rishabh Jain,
Mr. Virag Tiwari, Mr. Ramashish and
Ms. Tanya Saraswat, Advocates.
versus
ADDITIONAL COMMISSIONER, ADJUDICATION DGGSTI,
CGST DELHI NORTH .....Respondent
Through: Mr. R. Ramachandran, Sr. Standing
Counsel with Mr. Prateek Dhir,
Advocate.
CORAM:
JUSTICE PRATHIBA M. SINGH
JUSTICE RAJNEESH KUMAR GUPTA
JUDGMENT
Prathiba M. Singh, J.
1. This hearing has been done through hybrid mode
2. The present petition has been filed by the Petitioner- Ambika Traders
through its proprietor, Mr. Gaurav Gupta under Articles 226 and 227 of the
Constitution of India, inter alia, assailing the Order-in-Original bearing no.
74/ADJ-DGGI/DN/2024-25 dated 23rd January, 2025 (hereinafter,
‘impugned order’) passed by Respondent – Additional Commissioner,
Adjudication (DGGSTI), CGST Delhi North. The present petition further
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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:02.08.2025
16:38:50
assails the form DRC-07 dated 4th February, 2025 issued along with the
impugned order.
I. Facts
3. The Petitioner is stated to be a firm dealing in metal scrap. It is stated
to be a sole proprietorship of Mr. Gaurav Gupta and was registered under
the erstwhile VAT regime. Thereafter, it migrated to the GST regime with
GST No. 07AIAPG0187ElZQ.
4. On 3rd August, 2021, a search operation was carried out at the
residential premises of the proprietor of the Petitioner as also at its sales
office. Various records/files were resumed by the GST Department
(hereinafter, ‘the Department’) from the said premises. The proprietor of the
Petitioner, i.e. Mr. Gaurav Gupta was, thereafter, arrested on 4th August,
2021 by the Directorate General of GST Intelligence (hereinafter, ‘DGGI’),
Meerut Zonal Unit. Mr. Gaurav Gupta was released on regular bail on 22nd
October 2021.
5. A Show Cause Notice (hereinafter, ‘SCN’) was issued to the
Petitioner on 29th May, 2023 along with form DRC-01 by the DGGI,
Ghaziabad Regional Unit for the financial years 2017-2018, 2018-2019,
2019-2020, 2020-2021 and 2021-2022. Vide the said SCN, a demand of Rs.
83,76,32,528/- was raised against the Petitioner on the ground of alleged
fraudulent availment and wrongful passing on of Input Tax Credit
(hereinafter, ‘ITC’).
6. A detailed reply was filed by the Petitioner to the SCN on 19 th
December 2024. Thereafter, an additional reply to the SCN was filed by the
Petitioner on 30th December 2024. The impugned order is stated to have
been passed on 23rd January, 2025 along with form DRC-07 dated 4th
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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:02.08.2025
16:38:50
February 2025, whereby a demand to the tune of Rs. 83,76,32,528/- was
affirmed by the Respondent, along with a penalty of an equivalent amount.
Further, a penalty to the tune of Rs. 75,000/- was imposed upon the
proprietor of the Petitioner i.e. Mr. Gaurav Gupta.
7. A corrigendum to the aforesaid impugned order was also issued on
18th March, 2025, whereby the penalty imposed upon Mr. Gaurav Gupta
was rectified, as the same had been erroneously recorded as Rs. 1,00,000/-
instead of the correct amount of Rs. 75,000/-. The Petitioner vide the present
petition challenges the issuance of the SCN and passing of the impugned
order.
8. The Court heard this matter on 17th April, 2025. Mr. Rajesh Jain, ld.
Counsel for the Petitioner and Mr. R. Ramachandran, ld. Sr. Standing
Counsel for the Respondent made their submissions at length on the said
date.
II. Submissions by the Parties
9. Mr. Rajesh Jain, ld. Counsel appearing for Petitioner submits that the
reply to the SCN dated 19th December, 2024 as also the additional reply
dated 30th December, 2024 filed by the Petitioner have not been considered
by the Adjudicating Authority. It is the submission on behalf of the
Petitioner that non-consideration of the said replies by the Adjudicating
Authority amounts to gross violation of principles of natural justice.
10. Mr. Jain further submits that non-consideration of the reply is
violative of the mandatory obligation upon the Adjudicating Authority in
terms of Section 74(9) of the Central Goods and Service Tax Act, 2017
(hereinafter, ‘CGST Act‘). The relevant provision reads as under:
“74. Determination of tax not paid or short paid
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By:DHIRENDER KUMAR
Signing Date:02.08.2025
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or erroneously refunded or input tax credit
wrongly availed or utilised by reason of fraud or
any wilful-misstatement or suppression of facts.–
XXXX
(9) The proper officer shall, after considering the
representation, if any, made by the person
chargeable with tax, determine the amount of tax,
interest and penalty due from such person and issue
an order.”
11. Ld. Counsel for the Petitioner has placed reliance upon a Circular
bearing no. 171/03/2022-GST dated 6th July, 2022 issued by the Central
Board of Indirect Taxes and Customs, to show that if no goods were
procured or supplied by any entity, such an entity would not be liable to pay
any tax in terms of Sections 73 or 74 of the CGST Act. It is further
submitted by the ld. Counsel that, in such circumstances, only imposition of
penalty under Sections 122(1)(i), 122(1)(ii), and 122(1)(vii) of the CGST
Act could have been invoked, which has admittedly not been done in the
present case. It is also the case of the Petitioner that the said circular shall
have a binding effect on the Adjudicating Authority in terms of Section
168(1) of the CGST Act.
12. Further, it is submitted by the ld. Counsel for the Petitioner that the
grounds which can be taken in the impugned order raising demands of tax or
penalty would have to be only those grounds which were mentioned in the
SCN in terms of Section 75(7) of the CGST Act. The relevant provision
reads as under:
“75. General provisions relating to determination
of tax.-
XXXX
(7) The amount of tax, interest and penaltySignature Not Verified W.P.(C) 4853/2025 Page 4 of 47
Digitally Signed
By:DHIRENDER KUMAR
Signing Date:02.08.2025
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demanded in the order shall not be in excess of the
amount specified in the notice and no demand shall
be confirmed on the grounds other than the
grounds specified in the notice.”
13. Ld. Counsel for the Petitioner also draws the attention of the Court to
the fact that the SCN issued to the Petitioner pertains to multiple financial
years, i.e., from 2017-18 to 2021-22, which is impermissible under the
scheme and framework of Section 74 of the CGST Act.
14. Moreover, vide application dated 5th December 2024, the Petitioner
had sought cross examination of the witnesses, officers, etc. on behalf of Mr.
Gaurav Gupta. However, the same was rejected vide letter dated 13th
December, 2024 issued by the Adjudicating Authority. The relevant portion
of the said letter dated 13th December, 2024 reads as under:
“2. In this regard, as per your Letter dated 05.12.2024
and e-mail dated 12.12.2024, it is observed that you
have submitted a list of the Witnesses/Panchas/Officers
and requested for their Cross-Examination before
adjudication of the subject SCN. In view of the facts of
the case and proceedings held in the matter, till date, I
deny the request for Cross-Examination, on the
grounds mentioned below:
“(i) Mr. Gaurav Gupta Proprietor of Ms Ambika
Traders vide his Statement dated 03.08.2021
submitted that he used to make payments in Bank
Accounts, as directed by Mr. Rohit Rustogi and
the latter after deducting the commission at the
rate of 10 paisa per Kg, returned back the rest of
the amount to him. The Supplier firms of M/s
Ambika Traders did not exist, the money was
getting laundered/routed through facade of
issuance of invoices and banking channels
without actual transportation/movement of the
goods. Only money was being routes, documentsSignature Not Verified W.P.(C) 4853/2025 Page 5 of 47
Digitally Signed
By:DHIRENDER KUMAR
Signing Date:02.08.2025
16:38:50
were forged and no actual business
activity/supply took place as there was no supply
of goods.
(ii) Para 14.1 of the impugned SCN specifically
directed to submit the reply within 30 days of
receipt of this notice, but you failed to submit
any detailed reply to the SCN, till date despite
the fact that you admittedly in receipt of subject
in the month of September, 2023 and
Vakalatnama was signed by you on 07.11.2024.
Further, regarding your submission dated
12.11.2024, it appears that you did not collect
the non-RUDs from SCN issuing authority within
30 of receipt of the SCN (Para 14.5 of SCN
refers).
(iii) You did not appear on any of PH scheduled
for 12.11.2024, 28.11.2024 and 12.12.2024, thus
failed to submit even any Oral submission before
the undersigned.”
15. It is the submission of the ld. Counsel for the Petitioner that no
prejudice would have been caused to the Respondent, if the opportunity of
cross examination would have been provided to the Petitioner. The Petitioner
relies upon the decisions of HIM Logistics Pvt. Ltd. v. The Principal
Commissioner of Customs, 2016 SCC OnLine Del 1236 and Flevel
International v. Central Excise, 2015 SCC OnLine Del 12173 to contend
that the denial of the opportunity for cross-examination is violative of the
settled legal position and is, therefore, unsustainable in law. The relevant
extracts of the said decisions, relied upon by the Petitioner, reads as under:
• HIM Logistics Pvt. Ltd. v. The Principal Commissioner of
Customs, 2016 SCC OnLine Del 1236Signature Not Verified W.P.(C) 4853/2025 Page 6 of 47
Digitally Signed
By:DHIRENDER KUMAR
Signing Date:02.08.2025
16:38:50
“16. In the present case, it is an admitted fact
that the Respondent Department is placing
considerable reliance on the statements of Mr.
Shyam Lal and Ms. Preeti, the partners of the
importer, in support of the case made out in the
SCN. The impugned order of the AA does not
indicate that any prejudice would be caused to
the Department by providing the Petitioner the
right of cross-examination. On the other hand
the denial of such right would prejudice the
Petitioner since the said statements are adverse
to the Petitioner. In the circumstances, the
denial of the Petitioner’s right of cross-
examination is held contrary to the law
explained in Basudev Garg (supra).”
• Flevel International v. Central Excise, 2015 SCC OnLine Del
12173
“42. It is settled law that the denial of an
opportunity of cross-examination of a witness
whose statements have been relied upon in the
adjudication order would vitiate the order of
adjudication. In Basudev Garg v.
Commissioner of Customs 2013 (294) E.L.T.
353 (Del), this Court referred to Section 9D of
the CE Act and noted that even while upholding
its constitutional validity in J & K Cigarettes
Ltd. v. Collector of Central Excise (2011) 22
S.T.R. 225 (Del), a Division Bench of this Court
had observed that the circumstances tax
officers sought for vide the written request
dated 05.12.2024. Request for cross
examination of witnesses and central tax
officers on the basis of whose
statements/reports the case was booked against
the petitioner was required to be acceded to.
Basic requirement of the rule of law is that
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By:DHIRENDER KUMAR
Signing Date:02.08.2025
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before condemning a person that too on the
basis of a statement of third party, the party
against whom such statements have been relied
upon is to be granted an opportunity to cross
examine the person who gave that statement.
This requirement flows from the opportunity of
hearing required to be given as per section
75(4) of the CGST Act. Applying the statements
unilaterally that too behind the back of the
petitioner cannot under any circumstances be
justified, even if the proceedings are quasi-
judicial in nature. The respondent was
therefore not at all justified in denying the
fundamental right of cross examination to the
petitioner. Even no prejudice would have been
caused to the respondent had the cross
examination of witnesses/officers been provided
to the petitioner.”
16. Furthermore, ld. Counsel for the Petitioner submits that a unique
situation has arisen in the present case in as much as without alleging the
outward supply of the goods being sourced from a third party, ITC on
supplies received from the suppliers has been denied by the Respondent.
According to the Petitioner, if the suppliers were found to be non-existent by
the Respondent, then as per paragraph 3 of the Circular bearing no.
171/03/2022-GST dated 6th July, 2022, neither the Petitioner could avail or
utilise the ITC nor any demand of tax on outward supplies could be fastened
on the Petitioner whether under Section 73 or 74 of the CGST Act.
17. Ld. Counsel for the Petitioner has also pointed out that no purpose
would be served to the Petitioner in availing the appellate remedy under
Section 107 of the CGST Act as the Appellate Authority cannot perform
functions of Adjudicating Authority. Moreover, it is submitted on behalf of
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By:DHIRENDER KUMAR
Signing Date:02.08.2025
16:38:50
the Petitioner that under Section 107 (11) of the CGST Act, the Appellate
Authority cannot remand back the matter to Adjudicating Authority, hence,
this Court shall be the appropriate forum to remand back the matter to the
Adjudicating Authority for proper adjudication. Section 107(11) of the
CGST Act reads as under:
“(11) The Appellate Authority shall, after making
such further inquiry as may be necessary, pass such
order, as it thinks just and proper, confirming,
modifying or annulling the decision or order
appealed against but shall not refer the case back
to the adjudicating authority that passed the said
decision or order:
Provided that an order enhancing any fee or
penalty or fine in lieu of confiscation or
confiscating goods of greater value or reducing the
amount of refund or input tax credit shall not be
passed unless the appellant has been given a
reasonable opportunity of showing cause against
the proposed order:
Provided further that where the Appellate Authority
is of the opinion that any tax has not been paid or
short-paid or erroneously refunded, or where input
tax credit has been wrongly availed or utilised, no
order requiring the appellant to pay such tax or
input tax credit shall be passed unless the appellant
is given notice to show cause against the proposed
order and the order is passed within the time limit
specified under section 73 or section 74.”
18. Mr. Ramachandra, ld. Sr. Standing Counsel for the Respondent on the
other hand submits that the impugned order is very detailed and there is a
clear appellate remedy available under Section 107 of the CGST Act. It is
submitted by the ld. Sr. Standing Counsel that considering the complex
factual nature of the matter, the Petitioner should be relegated to the
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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:02.08.2025
16:38:50
appellate remedy.
III. Analysis and Findings
19. Before going into the submissions raised on behalf of both the parties,
in order to have the perspective of the matter, a background of the same
would be necessary.
a) Background of the SCN
20. The DGGI, Meerut Zonal Unit is stated to have received certain
intelligence that the Petitioner is involved in availment and further passing
on of fraudulent ITC. Such ITC is based on invoices issued from non-
existent or fake firms. The allegation in the SCN is that the following five
suppliers had raised invoices in favour of the Petitioner, on the strength of
which the Petitioner availed ITC to the extent of:
Sl No. Name of Supplier Firms ITC Availed by M/ s
No. Ambika Trader (in Rs)
1 M/s Metals Scrap & Alloys 8,24,47,685/-
(07EGFPK5023J1ZE)
2 M/s Prime Impex 7,38,32,822/-
(07BCWPK1493A1ZH)
3 M/s A. K. Impex 3,87,12,240/-
(07BBKPJ6013N1ZF)
4 M/s Vinesh Traders 2,11,18,625/-
(07AKYPC1581A1ZA)
5 M/ s Deepak Trading Co 87,96,669/-
(07GALPS9710J lZ0)
Total 22,49,08,041/-
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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:02.08.2025
16:38:50
21. All the above five firms were investigated by the DGGI and were
found to be non-traceable. Since the registration under the GST regime, no
business activity had been conducted at the registered addresses of these
firms.
22. Mr. Gaurav Gupta was summoned and his statements were recorded
on 3rd August 2021 and 4th August 2021 respectively, in the office of DGGI.
23. Thus, from the initial investigation, it was observed that a substantial
amount of ITC to the tune of over Rs.22.49 Crores were availed from the
abovementioned five firms. In addition, from the statements of Mr. Gaurav
Gupta it was also revealed that there were other firms from whom ITC was
availed by the Petitioner.
24. Upon summons being issued to the abovementioned five firms, except
one person i.e. Mr. Anuj Kumar, proprietor of M/s Metals Scrap & Alloys,
none appeared before the Department. Further, there were 20 firms from
whom ITC was availed by the Petitioner, however, upon investigation it was
revealed that most of these firms never existed or their registered addresses
were either vague or incomplete. During the investigation it was also noticed
that the GST registrations of few of the suppliers of the Petitioner were
cancelled.
25. Several transporters of the Petitioner were also investigated by the
DGGI and were found to be non-existent. The investigation further revealed
that Mr. Gaurav Gupta was involved with one Mr. Rohit Rostagi i.e.
Proprietor of M/s Pooja Impex and M/s Pooja Enterprises, to whom he
would pay all the fraudulently availed ITC after deducting a commission @
10 paise per kg of the metal scrap.
26. As per the investigation carried out by the DGGI, there was no
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By:DHIRENDER KUMAR
Signing Date:02.08.2025
16:38:50
purchase of metal scrap by the Petitioner. The bank accounts of the
Petitioner and its suppliers were also analysed during the investigation.
There was a network of enterprises and firms who had availed of ITC
amounting to several crores by merely raising invoices to each other. The
total ITC availed of by the Petitioner for the financial years 2017-18, 2018-
19, 2019-20 and 2020-2021 is to the tune of Rs. 83,76,32,528/-. Paragraph
11 of the SCN is relevant in this regard and is set out below:
“11. Gist of Investigation
From the above investigation, it was found that M/ s
Ambika Traders had availed fraudulent Input Tax
Credit on the strength of fake GST invoices
amounting to the tune of Rs. 83,76,32,528/- (Eighty
Three Crores Seventy Six Lakhs Thirty Two Thousand
Five Hundred and Twenty Eight only) issued by 20
(Twenty) non-existent/fake supplier firms/companies
i.e. Pooja Impex (GSTIN : 07AIGPR1260D2ZI) , M/s
Pooja Enterprises(GSTIN: 07 AATFP8454E1ZQ), M/s
Metals Scrap & Alloys(GSTIN: 07EGFPK5023J1ZE),
M/s Prime Impex(GSTIN: 07BCWPK1493A1ZH), M/s
Pooja Udyog(GSTIN: 07ADUPR9585N1Z3), M/s
A.K.Impex(GSTIN: 07BBKPJ6013N1ZF), M/s Anupma
& Sons (GSTIN: 07KYYPS6808C1ZK), M/s Vinesh
Traders(GSTIN: 07AKYPC1581A1ZA), M/s S.P
Traders(GSTIN:07BNDPP3613D1ZC), M/s Rudra
Enterprises (GSTIN: 07CBMPB4975N1Zl), M/s Vik
International (GSTIN: 07CMWPS0210A1ZA), M/s
Alpha traders (GSTIN: 07APHPK6884L1Z6), M/s
Rahul Trading Company (GSTIN:
07BJMPR7820K1ZL), M/s S.G. Traders (GSTIN:
07UOPH5322E1ZS), M/s Sparsh Impex (GSTIN:
07AJVPC4600L2Z1), M/s Deepak Trading Co.
(GSTIN: 07GALPS9710J1Z0), M/s Soni Steel (GSTIN:
07APNPG4569A2ZW), M/s Radhey Enterprises
(GSTIN: 07AYMPC1386K3Z4), M/s Shri Shyam Metal
(GSTIN: 07AHFPG7305L1ZB) & M/s Shiv Trading CoSignature Not Verified W.P.(C) 4853/2025 Page 12 of 47
Digitally Signed
By:DHIRENDER KUMAR
Signing Date:02.08.2025
16:38:50
(GSTIN: 07CQZPP4731L1ZX).
From the statement _of the transporters, who deposed
during the course of investigation, it may be inferred
that M/s Ambika Traders never received any supplies
(goods or services or both) from these twenty non-
existent/fake suppliers and they fraudulently got
possession of the transport documents and forged
them. Many-a-inward supplies, as claimed by M/s
Ambika Traders, turned out to be the outward supplies;
this is duly collaborated by the depositions of the
transporters. Bereft of supplies, M/s Ambika Traders
availed and utilized ITC fraudulently.”
27. The SCN further notes the provisions of the CGST Act which are
alleged to have been contravened by the Petitioner. The relevant portion of
the SCN reads as under:
“9. Statutory Provisions:
9.1 In view of the foregoing, M/s Ambika Traders and
its aforesaid non-operational/ fake twenty supplier
firms have contravened the following provisions of the
CGST Act, 2017 and the Rules made thereunder:-
i. Section 16, of the CGST Act, 2017, in as much as,
they failed to fulfill the following conditions of Section
16(2),
(a) failed to receive underlying goods shown in
the invoices,
(b) the tax charged in respect of supply has not
been actually paid by the supplier;
(c) the supplier failed to furnish a valid return;
Further, they failed to pay to the supplier of
goods, the amount towards the value of supply
along with tax payable thereon within a period of
180 days from the date of issue of invoice by the
supplier.
ii. Section 31 of the CGST Act, 2017, in as much as
they issued invoices without the supply of underlying
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Signing Date:02.08.2025
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goods;
iii. Section 35 of the CGST Act, 2017, in as much as
they failed to maintain a true and correct account of –
(a) production or manufacture of goods; (b) inward
and outward supply of goods; (c) stock of goods;
iv. Section 39, and Section 49 of the CGST Act, 2017,
in as much as they failed to declare a true and correct
value of Inward Supplies and Input Tax Credit, and
they have availed fraudulent ITC based on the invoices
issued by the bogus supplier, and utilized the said fake
ITC to discharge outward GST liability in their
monthly GSTR-3B returns;
v. Section 41 of the CGST Act, 2017, in as much as M/s
Ambika Traders availed fraudulent ITC based on
bogus invoices;
vi. Section 44 of the CGST Act, 2017, in as much as
M/s Ambika Traders neither report nor reversed the
ITC availed based on bogus invoices in the annual
return.
vii. Section 74 of the CGST Act, 2017, in as much as
they have not paid or short paid GST or wrongly
availed or utilised input tax credit by reason of fraud
or any wilful-misstatement or suppression of facts and
therefore, they are liable to tax and penalty alongwith
interest payable thereon under section 50 of the CGST
Act, 2017.
viii. Section 122 of the CGST Act, 2017,
(1) Where a taxable person who –
(i) supplies any goods or services or both without issue
of any invoice or issues an incorrect or false invoice
with regard to any such supply;
(ii) issues any invoice or bill without supply of goods
or services or both in violation of the provisions of this
Act or the rules made thereunder;
(iii) collects any amount as tax but fails to pay the
same to the Government beyond a period of three
months from the date on which such payment becomes
due;
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Signing Date:02.08.2025
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(iv) collects any tax in contravention of the provisions
of this Act but fails to pay the same to the Government
beyond a period of three months from the date on
which such payment becomes due;
(v) fails to deduct the tax in accordance with the
provisions of sub-section (1) of section 51, or deducts
an amount which is less than the amount required to be
deducted under the said sub-section, or where he fails
to pay to the Government under sub-section (2)
thereof, the amount deducted as tax;
(vi) fails to collect tax in accordance with the
provisions of sub-section (1) of section 52, or collects
an amount which is less than the amount required to be
collected under the said sub-section or where he fails
to pay to the Government the amount collected as tax
under sub-section (3) of section 52;
(vii) takes or utilises input tax credit without actual
receipt of goods or services or both either fully or
partially, in contravention of the provisions of this Act
or the rules made thereunder;
(viii) fraudulently obtains refund of tax under this Act;
(ix) takes or distributes input tax credit in
contravention of section 20, or the rules made
thereunder:
(x) falsifies or substitutes financial records or produces
fake accounts or documents or furnishes any false
information or return with an intention to evade
payment of tax due under this Act;
(xi) is liable to be registered under this Act but fails to
obtain registration;
(xii) furnishes any false information with regard to
registration particulars, either at the time of applying
for registration, or subsequently;
(xiii) obstructs or prevents any officer in discharge of
his duties under this Act;
(xiv) transports any taxable goods without the cover of
documents as may be specified in this behalf;
(xv) suppresses his turnover leading to evasion of tax
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Signing Date:02.08.2025
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under this Act;
(xvi) fails to keep, maintain or retain books of account
and other documents in accordance with the provisions
of this Act or the rules made thereunder;
(xvii) fails to furnish information or documents called
for by an officer in accordance with the provisions of
this Act or the rules made thereunder or furnishes false
information or documents during any proceedings
under this Act;
(xviii) supplies, transports or stores any goods which
he has reasons to believe are liable to confiscation
under this Act;
(xix) issues any invoice or document by using the
registration number of another registered person;
(xx) tampers with, or destroys any material evidence or
document;
(xxi) disposes off or tampers with any goods that have
been detained, seized, or attached under this Act,
he shall be liable to pay a penalty of ten thousand
rupees or an amount equivalent to the tax evaded or
the tax not deducted under section 51 or short
deducted or deducted but not paid to the Government
or tax not collected under section 52 or short collected
or collected but not paid to the Government or input
tax credit availed of or passed on or distributed
irregularly, or the refund claimed fraudulently,
whichever is higher.
(2) Any registered person who supplies any goods or
services or both on which any tax has not been paid or
short-paid or erroneously refunded, or where the input
tax credit has been wrongly availed or utilised,–
(a) for any reason, other than the reason of fraud or
any wilful misstatement or suppression of facts to
evade tax, shall be liable to a penalty of ten thousand
rupees or ten per cent of the tax due from such person,
whichever is higher;
(b) for reason of fraud or any wilful misstatement or
suppression of facts to evade tax, shall be liable to aSignature Not Verified W.P.(C) 4853/2025 Page 16 of 47
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penalty equal to ten thousand rupees or the tax due
from such person, whichever is higher.
(3) Any person who –
(a) aids or abets any of the offences specified in
clauses (i) to (xxi) of sub-section (1);
(b) acquires possession of, or in any way concerns
himself in transporting, removing, depositing, keeping,
concealing, supplying, or purchasing or in any other
manner deals with any goods which he knows or has
reasons to believe are liable to confiscation under this
Act or the rules made thereunder;
(c) receives or is in any way concerned with the supply
of, or in any other manner deals with any supply of
services which he knows or has reasons to believe are
in contravention of any provisions of this Act or the
rules made thereunder;
(d) fails to appear before the officer of central tax,
when issued with a summon for appearance to give
evidence or produce a document in an inquiry;
(e) fails to issue invoice in accordance with the
provisions of this Act or the rules made thereunder or
fails to account for an invoice in his books of account,
shall be liable to a penalty which may extend to twenty-
five thousand rupees
ix. Section 137 of the CGST Act, 2017:- Offences by
companies.–
(1) Where an offence committed by a person
under this Act Act is a company, every person who, at
the time the offence was committed was in charge of,
and was responsible to, the company for the conduct of
business of the company, as well as the company, shall
be deemed guilty of the offence and shall be liable to
be proceeded against and punished accordingly.
(2) Notwithstanding anything contained in sub-section
(1), where an offence under this Act has been
committed by a company and it is proved that the
offence has been committed with the consent or
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connivance of, or is attributable to any negligence on
the part of, any director, manager, secretary or
other officer of the company,
such director, manager, secretary or other officer shall
also be deemed to be guilty of that offence and shall be
liable to be proceeded against and punished
accordingly.
(3) Where an offence under this Act has been
committed by a taxable person being a partnership
firm or a Limited Liability Partnership or a Hindu
Undivided Family or a trust, the partner or karta or
managing trustee shall be deemed to be guilty of that
offence and shall be liable to be proceeded against and
punished accordingly and the provisions of sub-section
(2) shall, mutatis mutandis, apply to such persons.\
(4) Nothing contained in this section shall render any
such person liable to any punishment provided in this
Act, if he proves that the offence was committed
without his knowledge or that he had exercised all due
diligence to prevent the commission of such offence.
x. Section 155 of the CGST Act, 2017:- Burden of
proof.– Where any person claims that he is eligible
for input tax credit under this Act, the burden of
proving such claim shall lie on such person.
xi. Further, for the contravention, of the above
provisions of the CGST Act, 2017 read with the Delhi
GST Act, 2017 read with the IGST Act, 2017, the
offences were committed by M/s Ambika Traders and
its aforesaid supplier firms and hence liable for
penalty under Section 122 of the CGST Act, 2017
read with the Delhi GST Act, 2017 read with the
IGST Act, 2017.-”
28. The SCN clearly is issued both in respect of fraudulent availment ITC
and penalty for the same under Section 122(1) of the CGST Act. The
demands proposed to be raised against the Petitioner in terms of the SCN are
as under:
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i. Fraudulently availed ITC in contravention of Section 16 of
CGST Act amounting to Rs.83,76,32,528/-.
ii. Demand of fraudulently utilized ITC of Rs.83,76,32,528/-
under Section 74 of the CGST Act/Delhi Goods and Service Tax Act,
2017 (hereinafter, ‘DGST Act’) read with Section 20 of the Integrated
Goods and Services Tax Act, 2017 (hereinafter, ‘IGST Act‘).
iii. Interest under Section 50 of the CGST Act/ DGST Act read
with Section 20 of the IGST Act.
iv. Penalty under Section 74 of the CGST Act/ DGST Act read
with Section 20 of the IGST Act.
v. Penalty Section 122(1)(x)(xvi)(xvii) of the CGST Act/DGST
Act.
vi. Penalty under Section 122(3) of the CGST Act/DGST Act read
with Section 20 of the IGST Act.
vii. Penalty under Section 122(3)(a)(d)(e) and Section 137 of the
CGST Act read with provisions of DGST and IGST against Mr.
Gaurav Gupta.
29. Notices were issued to all the 20 alleged fake non-existent firms.
30. The Petitioner submitted a detailed reply to the SCN on 19th
December, 2024, wherein responses to various factual assertions were
provided and certain objections were raised. Subsequently, an additional
reply was filed on 30th December, 2024, setting forth further factual
submissions and additional objections.
b) Background of the Impugned Order
31. The impugned order under challenge in the present petition was
passed by the Adjudicating Authority upon affording the Petitioner fourSignature Not Verified W.P.(C) 4853/2025 Page 19 of 47
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opportunities of personal hearing. As recorded in the impugned order, the
proprietor of the Petitioner, Mr. Gaurav Gupta, had personally appeared on
one such occasion and the Petitioner was duly represented through ld.
Counsel during the course of the proceedings. The relevant portion of the
impugned order reads as under:
“16. Personal Hearings in this case were fixed for
12.11.24, 28.11.24, 12.12:24 and addition PH 20.12.
2024.. Advocate Rishabh Jain along with the
proprietor of M/s AMBIKA TRADERS Shri Gaurav
Gupta appeared on 20.12.2024 and submitted detailed
reply of SCN.”
32. The objections raised by the Petitioner before the Adjudicating
Authority are as under:
i. A consolidated demand cannot be raised for multiple financial
years.
ii. All Relied Upon Documents (hereinafter, ‘RUDs’) were not
supplied to the Petitioner.
iii. Certain objections were raised as to the manner in which the
panchnama was prepared by the DGGI.
33. After considering all the submissions, the Adjudicating Authority
comes to the conclusion that the behaviour of the noticee i.e., the Petitioner
has been evasive. There was no attempt on behalf of the Petitioner to explain
and justify the availment of ITC. The Adjudicating Authority holds that
there was no receipt of any goods nor supply of any goods. The finding of
the Adjudicating Authority is relevant and is set out below:
” In view of above, I find that the Supplier firms were
non-existent/fake firms and created only on paper for
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government exchequer. Therefore, in view of the facts
of the case and observations as above, I find no reason
to deny the allegations raised in the impugned Show
Cause Notice that fake/ non-existent Supplier firms
have been engaged in supplying of fake invoices to
Noticee No. 1 without any actual supply of goods and
or services.
Therefore, in view of the above, I hold
unambiguously, from the facts and discussions above,
that the Noticee’s behavior has been evasive to the
communications and opportunities provided to them
against the allegations leveled on them vide the said
communications and they are escaping the department
from appearing before the same, furnishing any
defense in their support and deposit any liability due to
them. Had there been any genuineness in their act of
availment of the impugned ITC amount, they would
have at least once tried to provide explanation of their
dubious act as informed to them vide the above said
communications. Hence, I hold that it has been proved
beyond the doubt they were involved in the conspiracy
to defraud the Government exchequer and hence, they
have wrongly availed the ITC in contravention to the
provisions of the CGST/ DGST Act, and thus the same
is ineligible to them and therefore the same is
recoverable from them along with the applicable
interest and penalty.
In this regard, I find that it has been established
that Supplier firms were non-existent/fake firms and
they have neither received any goods physically nor
supplied any goods physically. The firms were not
engaged in any actual business activity and have been
created only for the purpose of issuance of fake
invoices without actual supply of goods.”
34. The Adjudicating Authority also notes that in the era of self-
assessment there is an additional responsibility on the assessee. The relevant
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extract of the impugned order reads as under:
“Moreover, under the era of self-assessment in tax
matters, the assessee has a greater responsibility
towards assessment and payment of taxes due to the
Govt. properly in time. The burden of proving the
rightful claim of Input Tax Credit (ITC) lies on the
assessee. The department comes to know about the
details of taxes payable and Input Tax Credit (ITC)
available to the Noticees, only from the statutory
returns filed by them at certain intervals of time. Thus,
the Noticees were statutorily bound and capable to
have taken reasonable steps to ensure genuineness &
eligibility of Input Tax Credit (ITC) before taking it
into their account which in turn affects the discharge of
their outward tax liability.”
35. The conclusion of the Adjudicating Authority, thereafter, is as under:
“In view of the above, I find that impugned Input Tax
Credit (ITC) have been availed and utilized
fraudulently in contraventions, as discussed
hereinabove, with intent to take undue credit, to make
payment of taxes out of such undue Input Tax Credit
(ITC) and take undue benefit of Input Tax Credit (ITC)
through refund route by reason of fraud and
suppression of facts which caused loss to the Govt.
exchequer. There is wilful suppression of the material
facts from the department with such intent. The
department on its own efforts detected the case and
raised the demand otherwise it would have been gone
unnoticed. Hence, invocation of extended period of
limitation, under Section 74(1) of the CGST, 2017 read
with DGST Act, 2017 and IGST Act, 2017 in the instant
case is warranted and justified. Thus, Noticee No. 1 is
liable to pay the amount of wrongly availed/utilized
ITC under the provisions of Section 74(1) of the Act,
ibid.”
36. In view of the above findings, the Adjudicating Authority had raised
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demands and imposed penalties on the Petitioner as also its proprietor, Mr.
Gaurav Gupta. The demand qua the Petitioner and Mr. Gaurav Gupta are as
under:
(i) Disallowance of ITC to the tune of Rs.83,76,32,528/- availed
by the Petitioner during the period, July, 2017 to August 2021;
(ii) The demand of fraudulently utilized ITC to the same amount
i.e. Rs.83,76,32,528/-;
(iii) Interest under Section 50 of the CGST Act/DGST Act read
with Section 20 of the IGST Act;
(iv) Penalty to the tune of Rs.83,76,32,528/- under Section 74 of the
CGST Act/DGST Act read with Section 20 of the IGST Act;
(v) Penalty imposed on Mr. Gaurav Gupta to the tune of
Rs.25,000/- for violation of each of the clauses under Section 122
(3)(a)(d)(e) of the CGST Act.
Thus, a total sum of Rs.1,67,52,65,056/- i.e., the demand of tax and
penalty has been raised against the Petitioner.
37. Insofar as the twenty fictitious and non-existent firms are concerned,
the penalty imposed upon them corresponds to the actual amount of ITC
allegedly availed or utilized by them.
c) Proceedings before this Court
38. The broad contentions raised for the Petitioner before this Court are as
under:
(a) That the two replies dated 19th December 2024 and 30th
December 2024 filed by the Petitioner to the SCN have not been
properly considered by the Adjudicating Authority.
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(b) That the impugned order passed by the Adjudicating Authority
proceeds beyond the SCN.
(c) That consolidated SCN for multiple financial years has been
issued under Section 74 of CGST Act, which is impermissible.
39. Each of the submissions made by the ld. Counsel for the Petitioner are
considered below:
Consideration of the reply
40. A perusal of the impugned order shows that it is a detailed order
setting out various facts, the investigation which took place, hearings which
were afforded and an analysis of the reply. After perusing the impugned
order which runs into almost 100 pages, it cannot be said that the replies
filed by the Petitioner have not been considered by the Adjudicating
Authority. The Adjudicating Authority has obviously not agreed with the
Petitioner’s stand in the replies filed to the SCN. In fact, some of the
conclusions arrived at by the Adjudicating Authority as extracted above
would show that the replies have been duly considered.
41. Moreover, a perusal of the reply dated 19th December, 2024 and the
additional reply dated 30th December, 2024 show that most of the contents
of these replies raised technical objections and there is no substantive reply
that actual business was conducted. Deficiencies are being pointed out in the
investigation process, supply of RUDs, recording of statements, etc.
42. The reply does not prima facie contest the investigation and the facts
revealed therein. In a case of fraudulent availment of ITC or utilization of
ITC, the best evidence for a person who is genuinely conducing a business
would be to state the exact nature of the goods sold, the quantities
purchased/sold, etc. There is, prima facie, no averment in the reply or the
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additional reply giving such details. Thus, the conclusion of the
Adjudicating Authority cannot be held to be arbitrary or perverse.
Consolidated SCN for Multiple Financial Years
43. Insofar as the issue of consolidated notice for various financial years
is concerned, a perusal of Section 74 of the CGST Act would itself show
that at least insofar as fraudulently availed or utilized ITC is concerned, the
language used in Section 74(3) of the CGST Act and Section 74(4) of the
CGST Act is “for any period” and “for such periods” respectively. This
contemplates that a notice can be issued for a period which could be more
than one financial year. Similar is the language even in Section 73 of the
CGST Act. The relevant provisions read as under:
“73. Determination of tax [, pertaining to the period
up to Financial Year 2023-24,] not paid or short paid
or erroneously refunded or input tax credit wrongly
availed or utilised for any reason other than fraud or
any wilful-misstatement or suppression of facts.–
XXXX
(3) Where a notice has been issued for any period
under sub-section (1), the proper officer may serve a
statement, containing the details of tax not paid or
short paid or erroneously refunded or input tax credit
wrongly availed or utilised for such periods other than
those covered under sub-section (1), on the person
chargeable with tax.
(4) The service of such statement shall be deemed to be
service of notice on such person under sub-section (1),
subject to the condition that the grounds relied upon
for such tax periods other than those covered under
sub-section (1) are the same as are mentioned in the
earlier notice.
XXXX
74. Determination of tax [, pertaining to the period up
to Financial Year 2023-24,] not paid or short paid or
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erroneously refunded or input tax credit wrongly
availed or utilised by reason of fraud or any wilful-
misstatement or suppression of facts.–
XXXX
(3) Where a notice has been issued for any period
under sub-section (1), the proper officer may serve a
statement, containing the details of tax not paid or
short paid or erroneously refunded or input tax credit
wrongly availed or utilised for such periods other than
those covered under sub-section (1), on the person
chargeable with tax.
(4) The service of statement under sub-section (3) shall
be deemed to be service of notice under sub-section (1)
of section 73, subject to the condition that the grounds
relied upon in the said statement, except the ground of
fraud, or any wilful-misstatement or suppression of
facts to evade tax, for periods other than those covered
under sub-section (1) are the same as are mentioned in
the earlier notice.”
44. Some of the other provisions of the CGST Act, which are relevant,
include Section 2(106) of the CGST Act, which defines “tax period” as
under:
“2.[…] (106) “tax period” means the period for which
the return is required to be furnished”
45. Thus, Sections 74(3), 74(4), 73(3) and 73(4) of the CGST Act use the
term “for any period” and “for such periods”. This would be in contrast
with the language used in Sections 73(10) and 74(10) of the CGST Act
where the term “financial year” is used. The said provisions read as under:
“73.[…] (10) The proper officer shall issue the order
under sub-section (9) within three years from the due
date for furnishing of annual return for the financial
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tax credit wrongly availed or utilised relates to or
within three years from the date of erroneous refund”
“74.[…] 10) The proper officer shall issue the order
under sub-section (9) within a period of five years from
the due date for furnishing of annual return for the
financial year to which the tax not paid or short paid
or input tax credit wrongly availed or utilised relates
to or within five years from the date of erroneous
refund.”
The Legislature is thus, conscious of the fact that insofar as wrongfully
availed ITC is concerned, the notice can relate to a period and need not to be
for a specific financial year.
46. The nature of ITC is such that fraudulent utilization and availment of
the same cannot be established on most occasions without connecting
transactions over different financial years. The purchase could be shown in
one financial year and the supply may be shown in the next financial year. It
is only when either are found to be fabricated or the firms are found to be
fake that the maze of transactions can be analysed and established as being
fraudulent or bogus.
47. A solitary availment or utilization of ITC in one financial year may
actually not be capable of by itself establishing the pattern of fraudulent
availment or utilization. It is only when the series of transactions are
analysed, investigated, and enquired into, and a consistent pattern is
established, that the fraudulent availment and utilization of ITC may be
revealed. The language in the abovementioned provisions i.e., the word
`period’ or `periods’ as against `financial year’ or `assessment year’ are
therefore, significant.
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48. The ITC mechanism is one of the salient features of the GST regime
which was introduced to encourage genuine businesses. In the words of Shri
Pranab Mukherjee, the then Hon’ble President of India, who addressed the
Nation at the launch of the GST on 1st July, 2017, ITC was highlighted as
one of the core features integral to the framework of the GST regime. The
relevant extract of the said speech of the Hon’ble President is set out below:
“I am told that a key feature of the system is that
buyers will get credit for tax paid on inputs only when
the seller has actually paid taxes to the government.
This creates a strong incentive for buyers to deal with
honest and compliant sellers who pay their dues
promptly.”
49. It is seen that the said feature of ITC has been misused by large
number of unscrupulous dealers, businesses who have in fact utilized or
availed of ITC through non-existent supplies/purchases, fake firms and non-
existent entities. The ultimate beneficiary of the ITC in the most cases may
not even be the persons in whose name the GST registration is obtained.
Businesses, individuals, and entities have charged commissions for passing
on ITC. In several cases, it has also been noticed that the persons in whose
name the GST registration stands are in fact domestic helps, drivers,
employees, etc., of businessmen who are engaged on salary and who may
not even be aware that their identities are being misused.
50. In fact, Parliamentary questions have been raised on such fraudulent
availment of ITC. In one such Parliamentary question, it was revealed as
under:
“The press release issued by Ministry of Finance on
07.01.2024 (Annexure 1) brought out that 29,273Signature Not Verified W.P.(C) 4853/2025 Page 28 of 47
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bogus firms involved in suspected Input Tax Credit
(ITC) evasion of Rs 44,015 crore were detected in a
sustained drive against non-existent tax payers by GST
formations across the country since May 2023. An
amount of Rs. 44,015 Crore (Rs.15240 Crore (State) +
Rs. 28775 Crore (Centre)) of fake ITC has been
detected.”1
51. On 7th January 2024, vide a press release issued by the Press
Information Bureau, New Delhi, the Ministry of Finance brought to light the
said large-scale involvement of fictitious entities in the alleged evasion of
ITC. As per the contents of the said press release, a total of 29,273 non-
genuine firms have purportedly been found to be involved in the evasion of
ITC amounting to approximately Rs. 44,015 Crores, as unearthed during a
sustained enforcement drive undertaken by the GST authorities across the
country since May 2023 against non-existent taxpayers. The relevant portion
of the said release reads as under:
“To curb frauds in Goods and Services Tax (GST) and
increase compliance, the GST formations, under the
Central Board of Indirect Taxes and Customs (CBIC)
and the State/UT Governments, across the country are
carrying out a focused drive on the issue of non-
existent / bogus registrations and issuance of fake
invoices without any underlying supply of goods and
services.
Since the initiation of the special drive against fake
registrations in mid-May 2023, a total of 29,273
bogus firms involved in suspected Input Tax Credit
(ITC) evasion of Rs. 44,015 crore have been detected.
This has saved Rs. 4,646 crore of which Rs. 3,802
crore is by blocking of ITC and Rs. 844 crore is by
1
Answer by the Minister of State in Ministry of Finance, Mr. Pankaj Chaudhary to a question raised on
Monday, 05th February, 2024 in Lok Sabha being unstarred Question No. 435 titled as ‘Unearthing of Fake
Input Tax Credit’
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way of recovery. So far, 121 arrests have been made
in the cases.
In the quarter ending December, 2023, 4,153 bogus
firms that involved suspected ITC evasion of around
Rs.12,036 crore were detected. 2,358 of these bogus
firms were detected by the Central GST Authorities.
This has protected revenue of Rs. 1,317 crore of which
Rs. 319 crore has been realised and Rs 997 crore has
been protected by blocking ITC. 41 persons were
arrested in these cases. 31 of these arrests were by
Central GST Authorities. State wise details are
annexed.”
52. Moreover, a Co-ordinate Bench of this Court vide order dated 3rd
October, 2024 in W.P.(C) 13855/2024 titled ‘M/s Vallabh Textile Through
Its Authorized Representative v. Additional/Joint Commissioner, CGST
Delhi East Commiserate & Ors.’, has held as under:
“1. The instant writ petition seeks to assail the validity
of a Show Cause Notice [“SCN”] dated 29 May 2024
and which raises issues pertaining to Financial Years
[“FYs”] 2017-18 to 2021-22.
2. The principal ground of challenge which was
addressed before us was with respect to the action of
the respondents who have proceeded to issue a
consolidated notice for the aforesaid period.
3. On an ex-facie perusal of Section 74 of the Central
Goods & Services Tax Act, 2017 [“CGST”]/Delhi
Goods & Services Tax Act, 2017 [“DGST”], we find
ourselves unable to sustain that challenge in the
absence of any prohibition that may have been
statutorily engrafted in this respect. That in any case
would not constitute a jurisdictional challenge
warranting the writ petition being entertained against
a SCN.
4. Insofar as FY 2017-18 is concerned, it was the
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that the same would not sustain bearing in mind the
provisions contained in Section 74(10) of the CGST
Act, 2017/DGST Act, 2017. Insofar as that question is
concerned, we leave it open to the writ petitioner to
initiate appropriate proceedings independently.
5. Bearing in mind the well settled principles which
govern situations and contingencies in which a SCN
challenge may be entertained by a Court under Article
226 of the Constitution, we find no ground to entertain
the instant writ petition.
6. It shall, subject to the aforesaid observation, stand
dismissed.”
53. Vide the said decision, the Coordinate Bench of this Court has
clarified the position in law that a consolidated SCN for multiple years is
permissible under the purview of Section 74 of the CGST Act, and hence,
the said argument cannot be a ground for entertaining a writ petition.
54. The present case appears to be one such case where a substantial
amount of ITC is alleged to have been availed/utilized running into more
than Rs.83 Crores. The Petitioner is alleged to be one of the main
entities/persons involved in the said activity. The transactions are between
the years 2017 to 2021. A consolidated notice is, therefore, not merely
permissible but, in fact, required in such cases in order to establish the
illegal modality adopted by such businesses and entities. The language of
the provision itself does not prevent issuance of SCN or order for multiple
years in a consolidated manner.
55. Even in the order which has been impugned before this Court, the
details of the amounts for each year are set out clearly in the content of the
order itself and is, therefore, clearly decipherable. Thus, it cannot be held
that the issuance of consolidated notice or order violates the language of the
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provisions. Especially, in the case of fraudulent availment of ITC or
utilization of ITC such consolidated notice and order would not just be
permissible but may, in fact, be required to show the wilful misstatement or
suppression or the fraudulent availment/utilization.
56. Insofar as the statement that the impugned order travels beyond SCN
is concerned, the same is a completely untenable argument as the SCN
contemplates demands of tax, interest, and penalty for wrongful availment
or utilization of ITC under Section 122 of the CGST Act. The impugned
order does not travel beyond SCN in any manner.
57. Further, the impugned order is an appealable order under Section 107
of the CGST Act and there is a substantive appellate remedy available to the
Petitioner. The allegation that an opportunity of cross-examination was not
afforded to the Petitioner is completely misplaced inasmuch as such
proceedings of SCN cannot be converted into mini-trials. The statements
which are recorded are of the Petitioner’s proprietor or its suppliers/
purchasers, some of whom appeared before the Department. Moreover, the
right of cross-examination is not an unfettered right as held by this Court in
the decision of ‘M/s Vallabh Textiles v. Additional Commissioner Central
Tax GST, Delhi East & Ors.’, (2025: DHC: 2559-DB) wherein the Court
observed as under:
“15. While cross-examination can be granted in
certain proceedings, if it is deemed appropriate, the
right to cross-examine cannot be an unfettered right.
This has been so held recently by this Court in Sushil
Aggarwal v. Principal Commissioner Of Customs
(2025:DHC:698-DB). The relevant portion of the
decision reads as under:
“15. Accordingly, this Court is of the opinion that in
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order to ensure that there is compliance of Section
138(B) of the Act, though the same cannot be
claimed as an unfettered right in all cases, in the
facts of the present case, both Mr. Sushil Aggarwal
and Mr. Aidasani are afforded an opportunity to
cross examine Mr. Bhalla.”
16. The rationale behind setting aside an
order/judgment on the grounds of non-provision of the
right to cross-examine is to safeguard the affected
party from being prejudiced due to non-providing of
cross examination. Therefore, such reasoning
presumes/implies the existence of prejudice. In other
words, if the alleging party fails to prove any
substantial prejudice caused to it due to such non-
provision, it shall not have the inherent right to set
aside such an order/judgment. This view has been
upheld by the Supreme Court in various judgments
including M/s. Telestar Travels Pvt. Ltd. v Special
Director Of Enforcement 2013(9) SCC 549. The
relevant portion of the said judgment reads as under:
“23. That brings us to the third limb of the attack
mounted by the appellants against the impugned
orders. It was argued by Mr Divan that while
holding that Bountiful Ltd. was a paper company
and was being controlled and operated from India
by the appellants through Shri Sirish Shah, the
adjudicating authority had relied upon the
statements of Miss Anita Chotrani and Mr Deepak
Raut, and a communication received from the Indian
High Commission in London. These statements and
the report were, according to Mr Divan,
inadmissible in evidence as the appellant’s request
for an opportunity to cross-examine these witnesses
had been unfairly declined, thereby violating the
principles of natural justice that must be complied
with no matter the strict rules of the Evidence Act
had been excluded from its application. …
24. Mr Malhotra, on the other hand, argued that the
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right of cross-examination was available to a party
under the Evidence Act which had no application to
the adjudication proceedings under FERA. … …He
also placed reliance upon a decision of this Court in
Surjeet Singh Chhabra v. Union of India(1997(1)
SCC 508 1997 SCC (Cri) 272) to argue that cross-
examination was unnecessary in certain
circumstances such as the one at hand where all
material facts were admitted by the appellants in
their statements before the authority concerned.
25. There is, in our opinion, no merit even in that
submission of the learned counsel. It is evident from
Rule 3 of the Adjudication Rules framed under
Section 79 of FERA that the rules of procedure do
not apply to adjudication proceedings. That does
not, however, mean that in a given situation, cross-
examination may not be permitted to test the
veracity of a deposition sought to be issued against
a party against whom action is proposed to be
taken. It is only when a deposition goes through the
fire of cross-examination that a court or statutory
authority may be able to determine and assess its
probative value. Using a deposition that is not so
tested, may therefore amount to using evidence,
which the party concerned has had no opportunity
to question. Such refusal may in turn amount to
violation of the rule of a fair hearing and
opportunity implicit in any adjudicatory process,
affecting the right of the citizen. The question,
however, is whether failure to permit the party to
cross-examine has resulted in any prejudice so as
to call for reversal of the orders and a de novo
enquiry into the matter. The answer to that
question would depend upon the facts and
circumstances of each case.”
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18. A perusal of the above decisions reveals that while
cross-examination would be required in certain cases,
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it need not be given as a matter of right in all cases.
The provision of the opportunity to cross-examine
depends on the facts and circumstances of each case
and is warranted only when the party seeking such an
opportunity is able to demonstrate that prejudice
would be caused in the absence thereof.
19. The Court is of the considered view that parties
cannot, by praying for cross-examination, cannot
convert Show-cause Notice proceedings into mini-
trials. Persons seeking cross-examination ought to give
specific reasons why cross-examination is needed in a
particular situation and that too of specific witnesses.
A blanket request to cross-examine all persons whose
statements have been recorded by the Department,
many of whom are typically employees, sellers,
purchasers, or other persons connected to the entity
under investigation, cannot be sustained. If a prayer
for cross-examination is made, the Authority has to
consider the same fairly and if the need is so felt in
respect of a particular person, the same ought to be
permitted. If not, the Authority can record the reasons
and proceed in the case. Moreover, cross examination
need not also be of all persons whose statements are
recorded. It could be permitted by the Authority in case
of some persons and not all.
20. In the present case, the mere rejection of the
Petitioner’s request for cross-examination cannot, in
and of itself, be treated as a sufficient ground to
bypass the statutorily prescribed appellate remedy and
invoke the writ jurisdiction of this Court.”
58. In the facts of this case, no prejudice is caused to the Petitioner if
cross-examination is not afforded as all the documents relied upon by the
Adjudicating Authority are those which have been recovered from the
Petitioner’s premises itself and the Petitioner is well in the knowledge of the
actual status of the purchasers and the suppliers.
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59. This Court has already taken a view that interference in such cases in
writ jurisdiction is limited. The Court cannot go into analysis of facts in writ
jurisdiction. It is well-settled in law that the High Court, despite being
vested with wide and extensive powers under Articles 226 and 227 of the
Constitution of India, must exercise such powers within the bounds of
judicial discipline and established legal principles. The jurisdiction of the
High Court does not extend to reappreciation of evidence or interference
with factual findings recorded by the competent authorities. The High Court
cannot assume the role of an Appellate Authority for adjudication of
disputed questions of fact. This position has been affirmed by the Supreme
Court in the decision of Shamshad Ahmad v. Tilak Raj Bajaj, (2008) 9
SCC 1. The relevant portion of the said decision reads as under:
“38. Though powers of a High Court under
Articles 226 and 227 are very wide and extensive
over all courts and tribunals throughout the
territories in relation to which it exercises
jurisdiction, such powers must be exercised within
the limits of law. The power is supervisory in
nature. The High Court does not act as a court of
appeal or a court of error. It can neither review
nor reappreciate, nor reweigh the evidence upon
which determination of a subordinate court or
inferior tribunal purports to be based or to correct
errors of fact or even of law and to substitute its
own decision for that of the inferior court or
tribunal. The powers are required to be exercised
most sparingly and only in appropriate cases in
order to keep the subordinate courts and inferior
tribunals within the limits of law
39. In Chandavarkar Sita Ratna Rao v. Ashalata S.
Guram [(1986) 4 SCC 447] this Court stated :
(SCC p. 458, para 16)
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“16. … unless there was any grave miscarriage of
justice or flagrant violation of law calling for
intervention it was not for the High Court under
Articles 226 and 227 of the Constitution to
interfere. If there is evidence on record on which a
finding can be arrived at and if the court has not
misdirected itself either on law or on fact, then in
exercise of the power under Article 226 or Article
227 of the Constitution, the High Court should
refrain from interfering with such findings made by
the appropriate authorities.”
60. Moreover, the scope of writ jurisdiction is quite limited when an
efficacious and adequate alternative remedy is available to the litigant.
Where a statutory remedy exists that is both efficacious and adequate, the
invocation of the writ jurisdiction of the High Court under Article 226 is
generally not warranted. While the existence of such alternative remedy
does not divest the High Court of its jurisdiction to issue writs, it remains a
material consideration in the exercise of its discretionary jurisdiction. Where
such alternate remedy exists, it would be a sound exercise of judicial
discretion to decline interference under Article 226, unless compelling
circumstances and grounds are demonstrated to justify such invocation. This
legal position stands affirmed by the Supreme Court way back in the case of
Union of India v. T.R. Varma, 1957 SCC OnLine SC 30. The relevant
portion of the said decision reads as under:
“6. At the very outset, we have to observe that a
writ petition under Article 226 is not the
appropriate proceeding for adjudication of disputes
like the present. Under the law, a person whose
services have been wrongfully terminated, is
entitled to institute an action to vindicate his rights,
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to award all the reliefs to which he may be entitled,
including some which would not be admissible in a
writ petition. It is well-settled that when an
alternative and equally efficacious remedy is open
to a litigant, he should be required to pursue that
remedy and not invoke the special jurisdiction of
the High Court to issue a prerogative writ. It is
true that the existence of another remedy does not
affect the jurisdiction of the Court to issue a writ;
but, as observed by this Court in Rashid
Ahmed v. Municipal Board, Kairana [(1950) SCR
566] “the existence of an adequate legal remedy is
a thing to be taken into consideration in the
matter of granting writs”. Vide also K.S. Rashid
and Son v. Income Tax Investigation
Commission [(1954) SCR 738, 747] . And where
such remedy exists, it will be a sound exercise of
discretion to refuse to interfere in a petition under
Article 226, unless there are good grounds
therefor. None such appears in the present case.
On the other hand, the point for determination in
this petition whether the respondent was denied a
reasonable opportunity to present his case, turns
mainly on the question whether he was prevented
from cross-examining the witnesses, who gave
evidence in support of the charge. That is a
question on which there is a serious dispute, which
cannot be satisfactorily decided without taking
evidence. It is not the practice of courts to decide
questions of that character in a writ petition, and it
would have been a proper exercise of discretion in
the present case if the learned Judges had referred
the respondent to a suit. In this appeal, we should
have ourselves adopted that course, and passed the
order which the learned Judges should have
passed. But we feel pressed by the fact that the
order dismissing the respondent having been made
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would now be time-barred. As the High Court has
gone into the matter on the merits, we propose to
dispose of this appeal on a consideration of the
merits.”
61. The said legal position has been reaffirmed by the Supreme Court in
the decisions of Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2
SCC 433 and Radha Krishan Industries v. State of H.P., (2021) 6 SCC
771. The relevant portion of the said decisions read as under:
Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433
“11. Under the scheme of the Act, there is a hierarchy
of authorities before which the petitioners can get
adequate redress against the wrongful acts complained
of. The petitioners have the right to prefer an appeal
before the Prescribed Authority under sub-section (1)
of Section 23 of the Act. If the petitioners are
dissatisfied with the decision in the appeal, they can
prefer a further appeal to the Tribunal under sub-
section (3) of Section 23 of the Act, and then ask for a
case to be stated upon a question of law for the opinion
of the High Court under Section 24 of the Act. The Act
provides for a complete machinery to challenge an
order of assessment, and the impugned orders of
assessment can only be challenged by the mode
prescribed by the Act and not by a petition under
Article 226 of the Constitution. It is now well
recognised that where a right or liability is created by
a statute which gives a special remedy for enforcing
it, the remedy provided by that statute only must be
availed of. This rule was stated with great clarity by
Willes, J. in Wolverhampton New Waterworks
Co. v. Hawkesford [(1859) 6 CBNS 336, 356 : 28
LJCP 242 : 141 ER 486 : 7 WR 464] in the following
passage:
“There are three classes of cases in which a liability
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there is a third class, viz. where a liability not
existing at common law is created by a statute which
at the same time gives a special and particular
remedy for enforcing it. . .the remedy provided by
the statute must be followed, and it is not competent
to the party to pursue the course applicable to cases
of the second class. The form given by the statute
must be adopted and adhered to.”
The rule laid down in this passage was approved by
the House of Lords in Neville v. London Express
Newspapers Ltd. [1919 AC 368 : 1919 All ER Rep 61 :
88 LJKB 282 : 120 LT 299] and has been reaffirmed
by the Privy Council in Attorney-General of Trinidad
and Tobago v. Gordon Grant & Co. Ltd. [1935 AC 532
: 104 LJ PC 82 : 153 LT 441 (PC)] and Secretary of
State v. Mask & Co. [AIR 1940 PC 105 : 67 IA 222 :
188 IC 231] It has also been held to be equally
applicable to enforcement of rights, and has been
followed by this Court throughout. The High Court was
therefore justified in dismissing the writ petitions in
limine.”
Radha Krishan Industries v. State of H.P., (2021) 6 SCC 771.
“C.1. Maintainability of the writ petition before the
High Court
24. The High Court has dealt with the maintainability
of the petition under Article 226 of the Constitution.
Relying on the decision of this Court in CCT v. Glaxo
Smith Kline Consumer Health Care
Ltd. [CCT v. Glaxo Smith Kline Consumer Health
Care Ltd., (2020) 19 SCC 681 : 2020 SCC OnLine SC
440] , the High Court noted that although it can
entertain a petition under Article 226 of the
Constitution, it must not do so when the aggrieved
person has an effective alternate remedy available in
law. However, certain exceptions to this “rule of
alternate remedy” include where, the statutory
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provisions of the law or acted in defiance of the
fundamental principles of judicial procedure; or has
resorted to invoke provisions, which are repealed; or
where an order has been passed in violation of the
principles of natural justice. Applying this formulation,
the High Court noted that the appellant has an
alternate remedy available under the GST Act and
thus, the petition was not maintainable.
XXXXX
27. The principles of law which emerge are that:
27.1. The power under Article 226 of the Constitution
to issue writs can be exercised not only for the
enforcement of fundamental rights, but for any other
purpose as well.
27.2. The High Court has the discretion not to
entertain a writ petition. One of the restrictions
placed on the power of the High Court is where an
effective alternate remedy is available to the
aggrieved person.
27.3. Exceptions to the rule of alternate remedy arise
where : (a) the writ petition has been filed for the
enforcement of a fundamental right protected by Part
III of the Constitution; (b) there has been a violation
of the principles of natural justice; (c) the order or
proceedings are wholly without jurisdiction; or (d) the
vires of a legislation is challenged.
27.4. An alternate remedy by itself does not divest the
High Court of its powers under Article 226 of the
Constitution in an appropriate case though
ordinarily, a writ petition should not be entertained
when an efficacious alternate remedy is provided by
law.
27.5. When a right is created by a statute, which itself
prescribes the remedy or procedure for enforcing the
right or liability, resort must be had to that particular
statutory remedy before invoking the discretionary
remedy under Article 226 of the Constitution. This
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policy, convenience and discretion.
27.6. In cases where there are disputed questions of
fact, the High Court may decide to decline
jurisdiction in a writ petition. However, if the High
Court is objectively of the view that the nature of the
controversy requires the exercise of its writ
jurisdiction, such a view would not readily be
interfered with.
28. These principles have been consistently upheld by
this Court in Chand Ratan v. Durga Prasad [Chand
Ratan v. Durga Prasad, (2003) 5 SCC 399] , Babubhai
Muljibhai Patel v. Nandlal Khodidas Barot [Babubhai
Muljibhai Patel v. Nandlal Khodidas Barot, (1974) 2
SCC 706] and Rajasthan SEB v. Union of
India [Rajasthan SEB v. Union of India, (2008) 5 SCC
632] among other decisions.”
62. Furthermore, recently the Supreme Court in the context of CGST Act,
has in Civil Appeal No. 5121/2021 dated 3rd September, 2021 titled ‘The
Assistant Commissioner of State Tax & Ors. v. M/s Commercial Steel
Limited’, held 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
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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”
63. The said legal position has also been reiterated by this Court in M/s
Sheetal and Sons & Ors. v. Union of India & Anr., (2025: DHC: 4057-
DB) and by the Allahabad High Court in Writ Tax No. 753 of 2023 titled
‘Elesh Aggarwal v. Union of India‘ wherein the Allahabad High Court has
held that no ground is made for interference on merits in exercise of extra
ordinary jurisdiction. The relevant portion of the decision in M/s Sheetal
and Sons & Ors. (Supra) reads as under:
“15. The Supreme Court in the decision in Civil
Appeal No 5121 of 2021 titled ‘The Assistant
Commissioner of State Tax & Ors. v. M/s Commercial
Steel Limited’ discussed the maintainability of a writ
petition under Article226. In the said decision, the
Supreme Court reiterated the position that existence
of an alternative remedy is not absolute bar to theSignature Not Verified W.P.(C) 4853/2025 Page 43 of 47
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maintainability of a writ petition, however, a writ
petition under Article 226 can only be filed under
exceptional circumstances….
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16. In view of the fact that the impugned order is an
appealable order and the principles laid down in the
abovementioned decision i.e. The Assistant
Commissioner of State Tax & Ors. (Supra), the
Petitioners are relegated to avail of the appellate
remedy.”
64. Recently, this Court in the case of ‘Mukesh Kumar Garg v. Union of
India & Ors.‘ (2025: DHC: 3532-DB), while adjudicating upon a matter
concerning fraudulent availment of ITC, observed as under:
“24. It is well settled in various decisions of the
Supreme Court that petitions under Article 226 of the
Constitution of India would be liable to be
entertained only in case of persons who come with
clean hands and not in favour of the persons who
present twisted facts or misrepresent the true and
correct picture on record. The said decisions along
with their relevant paragraphs read as under:
• K.D. Sharma v. SAIL, (2008) 12 SCC 481
“34. The jurisdiction of the Supreme Court under
Article 32 and of the High Court under Article 226 of
the Constitution is extraordinary, equitable and
discretionary. Prerogative writs mentioned therein are
issued for doing substantial justice. It is, therefore, of
utmost necessity that the petitioner approaching the
writ court must come with clean hands, put forward all
the facts before the court without concealing or
suppressing anything and seek an appropriate relief. If
there is no candid disclosure of relevant and material
facts or the petitioner is guilty of misleading the court,
his petition may be dismissed at the threshold without
considering the merits of the claim.
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38. The above principles have been accepted in our
legal system also. As per settled law, the party who
invokes the extraordinary jurisdiction of this Court
under Article 32 or of a High Court under Article 226
of the Constitution is supposed to be truthful, frank and
open. He must disclose all material facts without any
reservation even if they are against him. He cannot be
allowed to play “hide and seek” or to “pick and
choose” the facts he likes todisclose and to suppress
(keep back) or not to disclose (conceal) other facts.
The very basis of the writ jurisdiction rests in
disclosure of true and complete (correct) facts. If
material facts are suppressed or distorted, the very
functioning of writ courts and exercise would become
impossible. The petitioner must disclose all the facts
having a bearing on the relief sought without any
qualification. This is because “the court knows law but
not facts”.”
• Ramjas Foundation v. Union of India, (2010) 14
SCC 38
“21. The principle that a person who does not come to
the court with clean hands is not entitled to be heard
on the merits of his grievance and, in any case, such
person is not entitled to any relief is applicable not
only to the petitions filed under Articles 32, 226 and
136 of the Constitution but also to the cases instituted
in others courts and judicial forums. The object
underlying the principle is that every court is not only
entitled but is duty bound to protect itself from
unscrupulous litigants who do not have any respect for
truth and who try to pollute the stream of justice by
resorting to falsehood or by making misstatement or by
suppressing facts which have a bearing on
adjudication of the issue(s) arising in the case.”
• Prestige Lights Ltd. v. SBI, (2007) 8 SCC 449
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“33. It is thus clear that though the appellant Company
had approached the High Court under Article 226 of
the Constitution, it had not candidly stated all the facts
to the Court. The High Court is exercising
discretionary and extraordinary jurisdiction under
Article 226 of the Constitution. Over and above, a
court of law is also a court of equity. It is, therefore, of
utmost necessity that when a party approaches a High
Court, he must place all the facts before the Court
without any reservation. If there is suppression of
material facts on the part of the applicant or twisted
facts have been placed before the Court, the writ court
may refuse to entertain the petition and dismiss it
without entering into merits of the matter.”
65. In the light of the above facts and the settled position in law, the
present writ petition is not liable to be entertained especially since the
Petitioner has an alternative, effective and efficacious remedy available.
66. All the contentions raised before this Court can always be raised
before the Appellate Authority.
67. The limitation for availing of the appellate remedy, however, has
expired in terms of Section 107 of the CGST Act. Since the petition has
remained pending before this Court since April 2025, the Petitioner is given
time till 31st August, 2025 to file an appeal challenging the impugned order
dated 23rd January 2025 along with the requisite pre-deposit. If the same is
filed within the stipulated time, the appeal shall not be dismissed on the
ground of being barred by limitation and shall be adjudicated on merits.
68. Needless to add, nothing said in this judgement shall affect the final
adjudication by the Appellate Authority.
69. The writ petition is disposed of with costs of Rs.25,000/- to the Delhi
High Court Bar Association. The said costs shall be deposited within two
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weeks. The bank details of the Delhi High Court Bar Association are as
under:
• Name: Delhi High Court Bar Association
• Account No.: 15530100000478
• IFSC Code: UCBA0001553
• Bank & Branch: UCO Bank, Delhi High Court
70. Pending applications, if any, are also disposed of.
PRATHIBA M. SINGH
JUDGE
RAJNEESH KUMAR GUPTA
JUDGE
JULY, 29 2025
dj/ck.
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