Sulender Shah And Anr Vs Additional Commissioner / Joint Commissioner CGST Delhi And Anr. (Delhi High Court)
Delhi High Court has declined to interfere with a Show Cause Notice (SCN) issued by GST authorities in a case involving a complex web of alleged fake firms, stating that the allegations are “serious in nature” and that the court, in its writ jurisdiction, cannot delve into the veracity of evidence at the adjudication stage.
The decision came in a writ petition filed by a Chartered Accountant, Sulender Shah, and a trader, Atul Aggarwal. They had sought the quashing of an SCN dated August 2, 2023, and a stay on the ongoing adjudication proceedings. The court dismissed the petition, allowing the tax authorities to proceed with the adjudication in accordance with the law.
This was the petitioners’ second attempt to seek relief from the court. In a previous petition, the court had, on December 7, 2023, directed the GST authorities to issue the summary of the notice and demand in the prescribed electronic forms, namely FORM GST DRC-01 and DRC-02.
In the current petition, the petitioners raised two main grievances. Firstly, they argued that the FORM GST DRC-01 issued by the department was not in accordance with the law. Secondly, they contended that the form failed to compute the specific tax and penalty liability against each of them individually. As a consequence of the SCN, the petitioner Sulender Shah also submitted that the Institute of Chartered Accountants of India (ICAI) had initiated disciplinary proceedings against him.
The court, however, was not persuaded by these arguments. It examined the core allegations laid out in the Show Cause Notice, which stated that the petitioners had business dealings with two individuals, Mr. Shubham Gupta and Mr. Vikas Gupta, who were allegedly involved in floating numerous fake firms.
The judgment highlighted that both petitioners had been arrested during the investigation and that their own recorded statements indicated a connection to the individuals in question, even as they sought to deny any knowledge of illegal activities. Mr. Shah, in his statement, denied being the Chartered Accountant for the fake companies but admitted to a business link with a related entity. Mr. Aggarwal admitted to knowing one of the main accused from school and providing him with “some links” to start a business, while claiming ignorance of any fake invoice operations until his arrest.
In addressing the petitioners’ challenge to the validity of the DRC-01 form, the court observed that the form contained a clear note explicitly referring to the enclosed Show Cause Notice for the computation of tax, interest, and penalty. The court opined that this was sufficient compliance with the law, especially in a case involving multiple noticees and a “maze of transactions.” It held that referencing the detailed SCN, which contains the specific amounts, is adequate to inform the noticee of the demand at the SCN stage.
Ultimately, the High Court underscored the limited scope of its writ jurisdiction. It firmly stated that it could not act as an adjudicating authority to determine the truthfulness of the petitioners’ statements recorded by the department. “In writ jurisdiction, the Court cannot go into the veracity of the statements of the Petitioners… as the same would be a matter of adjudication,” the court ruled.
Finding that the adjudication was already underway and considering the serious nature of the allegations, the court found no reason to exercise its extraordinary powers to quash the proceedings at the notice stage. The petition was consequently disposed of, with a clear direction that the proceedings based on the Show Cause Notice should continue as per the law.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
