Alliance Polychem Private Limited Vs Deputy Commissioner (Delhi High Court)
Summary: The Delhi High Court has quashed a duplicate demand of Rs. 10,62,000/- raised against Alliance Polychem Private Limited towards ineligible Input Tax Credit (ITC).
The Petitioner challenged the Order-in-Original dated 03 February 2025, which confirmed a demand of Rs. 10,62,000/-. The principal grievance was that the demand arising from the Show Cause Notice dated 02 August 2024 (“SCN-I”) overlapped with the demand raised pursuant to an earlier Show Cause Notice dated 01 August 2024 (“SCN-II”), which had already culminated in an Order-in-Original dated 14 January 2025.
The Court noted that both proceedings concerned a demand of Rs. 10,62,000/- for ineligible ITC availed from M/s Orchid Overseas. The earlier order dated 14 January 2025 had denied the ineligible ITC of Rs. 10,62,000/- under Section 16 of the CGST Act, 2017, confirmed recovery under Section 74(1), imposed interest under Section 50 and imposed a penalty of Rs. 10,62,000/- under Section 74(1). The Petitioner was already in appeal against that order.
The Respondent’s counsel also accepted before the Court that the demand was overlapping. In these circumstances, the Court held that the same demand could not have been raised again through SCN-I, as this would amount to duplicate demands.
The Court, however, clarified that the earlier order did not involve the other firms covered by the investigation underlying the impugned order dated 03 February 2025. Consequently, the Court quashed the demand arising from the impugned order dated 03 February 2025 only insofar as it related to the Petitioner.
The Court expressly clarified that its order would not apply to other noticees or to other demands raised pursuant to the impugned order. It accordingly directed that the GSTN portal may be amended to reflect the quashing of the demand only in respect of the Petitioner.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This hearing has been done through hybrid mode.
2. The present petition has been filed by M/s. Alliance Polychem Private Limited challenging the impugned order dated 03rd February, 2025 by which a demand of Rs. 10,62,000/- has been confirmed against the Petitioner.
3. The primary grievance of the Petitioner is that the said order emanating from the Show Cause Notice dated 02nd August, 2024 (hereinafter “SCN-I”) is overlapping with the demand raised pursuant to the Show Cause Notice dated 01st August, 2024 (hereinafter “SCN-II”), which was confirmed vide order dated 14th January, 2025 . The overlapping nature of the demands is demonstrated in the following table:-
| S. No. | Description | Proceedings 1 | Proceedings 2 |
|---|---|---|---|
| 1 | Show Cause Notice | 01.08.2024 | 02.08.2024 |
| 2 | SCN Issuing Authority | Assistant Commissioner, CGST, Delhi West [Respondent No. 3] |
Superintendent, Anti Evasion, Group -4, Delhi West [Respondent No. 4] |
| 3 | Demand for ineligible ITC availed from M/s Orchid Overseas | Rs. 10,62,000/- | Rs. 10,62,000/- |
| 4 | SCN Answerable to | Superintendent, Range 115, Division Mundka, CGST, Delhi West Commissionerate [Respondent No. 2] |
Superintendent, Range 115, Division Mundka, CGST, Delhi West Commissionerate [Respondent No.2] |
| 5 | Reply submitted | 26.08.2024 | 10.01.2025 & 30.01.2025 |
| 6 | Order in Original | 14.01.2025 | 03.02.2025 |
| 7 | Passed by | Superintendent, Range 115, Division Mundka, CGST, Delhi West Commissionerate [Respondent No. 2] |
Deputy Commissioner, Mundka Division, CGST Delhi West [Respondent No. 1] |
4. The submission of Mr. Chinmaya Seth, ld. Counsel appearing for the Petitioner is that the demand under these circumstances deserves to be quashed.
5. The present writ petition was considered on 20th February, 2025, on which date the Order-in-Original dated 03rd February, 2025 was stayed.
6. Ms. Anushree Narain, ld. Counsel for the Respondent also submits that the demand is overlapping.
7. The Court has considered the matter. The order dated 03rd February, 2025 arises out of an investigation conducted against two firms namely M/s Shah Impex proprietor Shri Bhupinder Kumar and M/s Orchid Overseas, proprietor Shri Jitendra Kumar. The said investigation is alleged to have revealed that there were counterfeit invoices which were generated and there was no supply of goods or services but fake Input Tax Credit (hereinafter “ITC”) was availed off through thirteen firms.
8. The Petitioner is one such firm which is stated to have availed the ITC of Rs. 10,62,000/- from the said two firms. In respect of the said ITC which was availed, in order dated 14th January, 2025 arising out of SCN-II, the demand was raised by the Department against the Petitioner in the following terms:-
“a. I, hereby, deny ineligible ITC of Rs. 10,62,000/_ (IGST-Rs. 10,62,000/-; CGST-Rs 0/-; SGST-Rs. 0/-), in terms of Section 16 of the CGST Act, 2017 and therefore, confirm the demand and order for recovery of the same, from them, under Section 74 (1) of the CGST Act, 2017 read with the corresponding provisions of the Delhi SGST Act, 2017 and IGST Act,2017.
b. I, hereby, confirming the charging of interest and order for recovery of the same, on the amounts specified under (a) above, under Section 50 of the CGST Act, 2017 read with the corresponding provisions of the Delhi SGST Act, 2017 and IGST Act, 2017.
c. I, hereby, impose penalty of Rs. 10,62,000/- (IGST-Rs. 10,62,000/-; CGST-Rs. 0/-; SGST-Rs. 0/-) upon them for their act of omission and commission as stated above in this notice, under Section 74(1) of the CGST Act, 2017 and further the corresponding provisions of the Delhi SGST Act, 2017 and IGST Act, 2017”
9. Against the above order, the Petitioner is already in appeal.
10. Under these circumstances, the same demand could not have been raised again vide the SCN-I which would amount to duplicate demands being raised.
11. There is however, no doubt that in the first order the other firms who were involved in the impugned order dated 03rd February, 2025 are not involved. Thus, insofar as the demand pursuant to impugned order dated 03rd February, 2025 is concerned, the same is quashed only qua the Petitioner.
12. The present order would not apply to any of the other noticees or the other demands which have been raised in terms of the impugned order dated 03rd February, 2025.
13. Accordingly, the GSTN portal may be amended to reflect the quashing of the demand under impugned order dated 03rd February, 2025 only in respect of the Petitioner.
14. The petition along with pending application is disposed of in these terms.
