Krishna Chemicals Vs Union of India (Madhya Pradesh High Court)
The Madhya Pradesh High Court dismissed a writ petition filed under Article 226 of the Constitution challenging a show-cause notice dated 31 December 2024 and the constitutional validity of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017. The petitioner, a proprietorship firm engaged in trading various industrial chemicals, questioned the legality of being proceeded against for alleged fraudulent availment of Input Tax Credit (ITC) and contended that Section 16(2)(c) imposed an impossible obligation on a purchasing dealer to ensure that the supplier had deposited tax with the exchequer.
According to the record, the CGST and Central Excise, Indore Commissionerate received specific intelligence that the petitioner and eleven other entities had availed fraudulent ITC during the financial years 2019–20 and 2020–21 on invoices issued by a particular supplier. In the petitioner’s case, ITC amounting to ₹27,22,284 was allegedly availed. The investigation revealed that while the petitioner dealt in industrial chemicals, the supplier was engaged in supplying FMCG goods, raising suspicion about the genuineness of transactions. Summons were issued, inspections were conducted at the petitioner’s premises, and representations were submitted. Thereafter, a detailed show-cause notice running into 82 pages was issued to twelve noticees, including the petitioner and the supplier, proposing action under various provisions of the CGST Act, including penalty proceedings against the supplier.
