Rahul Steels Through Its Authorised Signatory Rahul Gadnhi and Others Vs Union of India and Others (Madhya High Court)
The petition challenged the validity of a common show cause notice issued under Sections 74 and 122 of the Central Goods and Services Tax Act, 2017. The petitioners, two proprietorship firms engaged in the business of cement, steel and TMT bars, questioned the show cause notice issued by the CGST authorities in connection with an investigation into alleged circular trading and passing of ineligible Input Tax Credit (ITC).
The respondents submitted that information had been received indicating that certain entities were availing and passing ineligible ITC without actual supply or receipt of goods through circular trading. Pursuant to this information, searches were conducted under Section 67(2) of the CGST Act at the premises of various entities. During the investigation, statements of proprietors and other persons were recorded. The investigation allegedly revealed that 43 vehicles shown as having transported goods in the transactions included vehicles registered as two-wheelers. Notices were issued to the vehicle owners.
According to the investigation, invoices relating to the same goods issued by M/s Panjon Limited ultimately returned to M/s Panjon Limited itself through M/s Rahul Steels, M/s Sagar Steels Suppliers, M/s Sanitex Chemicals Ltd., M/s Raunaq Laboratories Ltd. and M/s Purjaw Chemicals Pvt. Ltd. without actual movement of goods. It was alleged that the transactions were intended to inflate turnover for obtaining higher loans from banks or non-banking financial corporations and to avail fake input tax credit. After the preliminary investigation, a common show cause notice was issued to six noticees under Sections 74 and 122 of the CGST Act.
