Case Law Details
Samarth Traders And Anr Vs Assistant Commissioner of Central Tax (Delhi High Court)
The petition was filed under Article 226 of the Constitution challenging an Order-in-Original dated 21 January 2025 issued by the Assistant Commissioner of Central Tax, Division – Old Delhi, Commissionerate CGST Delhi North. The impugned order confirmed demands and penalties against the petitioner on the ground of wrongful availment of Input Tax Credit (ITC) under Section 74(1) of the CGST Act.
The order confirmed GST demand of Rs. 1,33,94,470/- (CGST and SGST equally) and ordered its recovery. Interest on the above amount was also confirmed under Section 50. The order further directed appropriation of the amount available in the petitioner’s bank accounts, which had been provisionally attached under Section 83. Additionally, a penalty of an equal amount was imposed under Section 74, while penalty under Section 137 was not imposed on the proprietor. A separate penalty of Rs. 50,000/- was imposed on the proprietor under Section 122(3).
The basis for these proceedings was an investigation conducted against M/s Ramesh & Co., during which DGGI searched the proprietor’s residence and allegedly discovered that the firm, along with two others—M/s Shiv Traders and M/s Laxmi Trading Co.—had passed on fraudulent ITC without actual supply of goods or services. The petitioner was identified as one of the recipients of such ITC. According to the impugned order, summons were issued to the petitioner, who allegedly did not cooperate, failed to provide documents sought, and did not appear to record a statement. The order records that the petitioner’s GSTR-2A reflected ITC received from the three firms, which were stated to be bogus or non-existent entities. The adjudicating authority concluded that these firms issued invoices without actual supply, enabling the petitioner to avail ITC on paper transactions without movement of goods. It was further stated that this allowed the petitioner to avoid making GST payments through cash for outward supplies.
The order also records that the proprietor of the petitioner-firm was aware that the ITC was ineligible but failed to disclose this to the department and did not discharge his liability for more than one and a half years. Based on these findings, the authority held that the offences fell under relevant provisions of the CGST Act and related legislation.
The petitioner was issued a Show Cause Notice on 31 July 2023. The impugned order states that the petitioner did not cooperate and that multiple opportunities for personal hearing were given. The order refers to personal hearing notices dated 11 June 2024 for a hearing on 14 March 2022, during which the petitioner’s representative appeared with an authority letter and submitted written submissions, stating that no further submissions were to be made. As the adjudicating authority changed, fresh hearing opportunities were issued for 02 December, 16 December, and 30 December 2024, which the petitioner or its representative allegedly did not attend. The authority therefore proceeded to decide the matter based on records and earlier submissions.
Before the High Court, it was shown that the petitioner had filed a reply to the Show Cause Notice on 23 November 2023. The issue in dispute was whether adequate opportunity for personal hearing had been granted. The department asserted that hearings were offered, whereas the petitioner claimed they were not.
The Court held that, irrespective of these competing claims, a substantial amount of penalty had been imposed. Therefore, the petitioner should avail the appellate remedy under Section 107 of the CGST Act. The Court directed that if the appeal is filed by 15 December 2025 along with the requisite pre-deposit, it shall not be dismissed on limitation and must be adjudicated on merits. The writ petition and pending applications were disposed of accordingly.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This hearing has been done through hybrid mode.
CM APPL. 70129/2025 (for exemption)
2. Allowed, subject to all just exceptions. Application is disposed of.
W.P.(C) 17046/2025
3. The present petition has been filed by the Petitioner under Article 226 of the Constitution of India, inter alia, challenging the Order-in-Original dated 21stJanuary, 2025 (hereinafter, ‘impugned order’) passed by the Office of Assistant Commissioner of Central Tax Division – Old Delhi, Commissionerate CGST Delhi North.
4. Vide the impugned order, a demand has been raised against the Petitioner in the following terms:
“ORDER
(i) I hereby, confirm the demand of GST totaling Rs. 1,33,94,470/ (CGST:Rs. 66,97,237/- + SGST: Rs, 66,97,237/-) (Rs. One Crore Thirty Three Lacs Ninety Four Thousand Four Hundred and Seventy only) from the noticee, under Section 74(1) of the CGST Act, 2017 read with relevant provisions of the SGST Act, 2017, on account of wrongly availed Input Tax Credit, and order to recover the same from the noticee
(ii) I hereby, confirm the demand and recovery of interest, at applicable rate, GST totaling Rs, 1,33,94,470- CGST:Rs. 66,97,237/- + SGST:Rs.66,97,237/-) (Rs. One Crore Thirty Three Lacs Ninety Four Thousand Four Hundred and Seventy only) from the noticee, under Section 50 of the CGST Act, 2017 read with relevant provisions of the SGST Act, 2017:
(iii) I, hereby, order to appropriate the amount available in bank account(s) of M/s Samarth Traders which have been provisionally attached by DGGI under Section 83 of the CGST Act, 2017 against the confirmed demand GST totalingRs. 1,33,94,470/-(CGST:Rs.66,97,237/- + SGST:Rs.66,97,237/-.
(iv) I hereby, impose Penalty of Rs.1,33,94,470/-(CGST:Rs. 66 97,237/-+ SGST:Rs. 66,97,237/-) (Rs. One Crore Thirty Three Lacs Ninety Four Thousand Four Hundred and Seventy only) upon the noticee, under Section 74 of the CGST Act, 2017 Read with relevant provisions of the SGST Act, 2017 and order to recover the same from the noticee;
(v) I, refrain from imposing penalty under Section 137 of CGST Act, 2017 upon Shri Rakesh Kumar Bansal, Proprietor of M/s Samarth Traders;
(vi) I impose penalty of Re 50,000/- (CGST Rs. 25,000/- and SGST Rs. 25,000/-) (Rs. Fifty Thousand only) upon Shri Rakesh Kumar Bansal, Proprietor of M/s Samarth Traders under Section 122(3) of the CGST Act, 2017 reed with Section 122(3) of the SGST Act, 2017.”
5. A perusal of the above would show that a substantial amount of penalty has been imposed upon the Petitioner on the ground that there was wrongful availment of Input Tax Credit (hereinafter, ‘ITC’).
6. The proceedings qua the Petitioner arise out of an investigation conducted against M/s. Ramesh & Co. where the officials of Directorate General of Goods and Service Tax Intelligence (hereinafter, ‘DGGI’) had searched the residential premises of the proprietor of M/s Ramesh & Co. and during the course of the said investigation, it is stated to have been revealed that the said M/s Ramesh & Co. as also other entities namely, M/s Shiv Traders and M/s Laxmi Trading Co. had passed on fraudulent ITC without actual supply of goods and services. One of the parties to whom such ITC has been passed on, is the Petitioner. The relevant portion of the impugned order in this regard reads as under:
“26. During the inquiry, M/s Samarth Traders has been issued summons but he has wilfully chosen not to adherer to the same. The noticee has intentionally not cooperated in the investigation process and has been trying to delay the same. Noticee has neither not supplied the requisite documents which have been sought from him vide summons issued till date nor appeared to tender his/her voluntary statement. Further, as per GSTR2A of the Noticee company, the details of Input Tax Credit passed-on by M/s Ramnesh and Company, M/s Shiv Traders and M/s Laxmi Trading Co. are as under:
27. M/s Samarth Traders is found to have availed fraudulent ITC from fake/non-existent firm. The above investigation shows that M/s Samarth Traders, which was found to be holding GSTIN registration No. 07AMBPB0136DIZZ having Shri Rakesh Kumar Bansal as proprietor, had availed a total fake ITC of Rs. 1,33,94,475/- on bogus invoices issued by M/s Ramesh and Company, M/s Shiv Traders and M/s Laxmi Trading Co. which during departmental proceedings are prima-facie found to be non-existent and bogus entities engaged in passing-on fraudulent ITC without any supply of goods/services. As such, M/s Samarth Traders has availed fake ITC on paper transactions against which no goods actually moved. By adopting such modus operandi, M/s Samarth Traders has accumulated and utilised fake ITC in the absence of which the regular GST payments relating to outward supplies would have to be discharged vide Cash Ledger. By receiving such amounts including amount representing GST, M/s Ramesh and Company, M/s Shiv Traders and M/s Laxmi Trading Co. have collected GST amounts without depositing the same with the government as their actual payment is via fake ITC
This fake ITC enabled M/s Samarth Traders to obviate cash payment on their own outward supplies of goods. 28. From the facts and findings above, it appears that said offence committed was in the knowledge of Shri Rakesh Kumar Bansal, Proprietor of M/s Samarth Traders He seems to have knowingly engaged and associated himself in this irregular availment of ITC. Further, the director of the noticee company was very well aware of ineligible ITC but never disclosed the said fact to the department. Despite awareness of the issue and lapse of more than l.5 years Shri Rakesh Kumar Bansal has not discharged his liability. By these acts of omission and commission, said Shri Rakesh Kumar Bansal, Proprietor of M/s Samarth Traders has committed the offences, as specified Section 137 of the CGST Act, 2017 read with relevant provisions of the respective state Act, 2017 and the provisions of Section 20 of Integrated Goods & Service Tax Act, 2017”
7. After the issuance of the Show Cause Notice dated 31st July, 2023, it is stated in the impugned order that the Petitioner did not co-operate in the investigation. Moreover, personal hearing notices were also issued to the Petitioner but the Petitioner did not appear before the Adjudicating Authority. Paragraph 33 of the impugned order reads as under:
“33. To follow the principal of Natural Justice, the opportunities of Personal hearings, in the impugned matter, were given/provided to the noticee vide this office letter(s) dated 11.06.2024, to attend the personal hearing on 14.03.2022. The taxpayer’s representative Shri Sanjeev Kumar Aggarwal appeared to attend the personal hearing on 14.03.2022 with the authority letter and submitted a written submission. He further added on the hearing that he has nothing more to add apart from their written submission. The then adjudicating authority has been changed so the matter was to decide by the present adjudication authority therefore, the Personal hearings, in the impugned matter, was provided again to the Noticee on 02.12.2024, 16.12.2024 and 30.12.2024. However, neither the noticee nor his representative was come to attend the personal hearing on the given dates. Therefore, the matter shall be decided on the basis of merit and the records and personal hearings submitted by the noticee earlier.”
8. A perusal of the record would show that the Petitioner has filed a reply to the Show Cause Notice on 23rd November, 2023. But the question is whether the personal hearing was granted or not to the Petitioner. The stand of the Department was that the same has been granted but the stand of the Petitioner is that the same has not been granted.
9. Be that as it may, considering that the substantial amount of penalty has been imposed upon the Petitioner, let the Petitioner avail of its appellate remedy under Section 107 of the Central Goods and Service Tax Act, 2017 by 15thDecember along with the requisite pre-deposit.
10. If the same is filed by 15thDecember, 2025, the same shall not be dismissed on the ground of limitation and shall be adjudicated on merits.
11. The present petition is disposed of in the above terms. Pending applications, if any, are also disposed of.
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