GST Show Cause Notice Upheld as Prima Facie ITC Fraud Alleged in Supply Chain

Jyoti Tar Products Private Limited & Anr. Vs Deputy Commissioner (Calcutta High Court)

The writ petition challenged a show cause notice dated June 18, 2025 issued under Section 74 of the West Bengal Goods and Services Tax Act, 2017, along with a subsequent adjudication order dated November 04, 2025. The dispute arose from allegations that the petitioner had wrongly availed input tax credit (ITC) on purchases allegedly made from non-existent or fraudulent suppliers.

The petitioner, engaged in trading crude tar and allied products, had initially received a pre-show cause intimation in FORM GST DRC-01A in August 2023, indicating tax liability. After submitting replies, a show cause notice was issued in December 2023, followed by an adjudication order in July 2024 confirming demand of tax, interest, and penalty. This order was later set aside in appeal and remanded for fresh adjudication. In the de novo proceedings, another DRC-01A was issued, followed by the impugned show cause notice and eventual adjudication order.

The petitioner contended that ITC had been validly availed based on documents such as tax invoices, e-way bills, weighbridge receipts, bank statements, and GST returns. It argued that all statutory requirements under Section 16(2) were fulfilled and that additional documents sought by the department were not mandated. It was also submitted that the suppliers were registered at the time of transactions and had filed returns, and therefore ITC could not be denied due to subsequent cancellation of supplier registration. The petitioner further alleged that the show cause notice was issued with a predetermined mindset, rendering the proceedings an empty formality, and that the extended limitation under Section 74 was wrongly invoked without proof of suppression or collusion.