Mhj Metaltechs Private Limited Vs Central Goods And Services Tax Delhi South (Delhi High Court)
Delhi High Court has dismissed a writ petition filed by MHJ Metaltechs Private Limited, challenging an order that raised a demand against the company for allegedly availing fraudulent Input Tax Credit (ITC) amounting to over ₹155 crores. The court’s decision, delivered in a hybrid hearing, underscores the judiciary’s firm stance on cases involving significant financial irregularities impacting the Goods and Services Tax (GST) regime and the public exchequer.
The case originated from a show cause notice (SCN) issued on August 1, 2024, followed by an impugned order dated February 3, 2025. The core allegation revolved around an individual identified as Mohit Jain, who is accused of orchestrating a widespread network of suppliers to generate invoices without the corresponding supply of goods. This alleged scheme facilitated the fraudulent availment of ITC by various firms, including M/s Ferrite Alloys Inc, M/s BM Metalloys, M/s Trump Iron, M/s SSR Impex LLP, M/s Metal Tech, and M/s MHJ Metal Tech Pvt. The total GST involved in this alleged fraud exceeded ₹155 crores, with the ITC passed on stated to be ₹7.08 crores.
During the proceedings, senior counsel for the petitioners, Mr. Anurag Ahluwalia, contended that the impugned order inaccurately recorded that three personal hearings were granted to the petitioners, asserting that only one hearing took place on January 3, 2025. He further argued that the relied upon documents (RUDs) provided by the department were illegible, thereby violating the principles of natural justice.
The court, however, reviewed the record, noting that the reply filed by the petitioners on January 6, 2025, primarily raised technical objections without substantially addressing the central allegation of goods not being supplied and ITC being fraudulently availed. Regarding the legibility of RUDs, the court observed that the department collects these documents from various firms under investigation and cannot be expected to provide re-typed copies, especially given their potentially bulky nature.
On the contention of denied personal hearings, the court referred to Section 75(5) of the Central Goods and Service Tax Act, 2017 (CGST Act), which stipulates a maximum of three adjournments for personal hearings. The court noted that the impugned order itself recorded that opportunities for being heard were accorded on November 5, 2024, December 18, 2024, and January 3, 2025. While admitting to attending one hearing on January 3, 2025, the petitioners’ mere plea of not being granted all three opportunities was not accepted, particularly as it is common practice for SCNs to list multiple hearing dates. The court emphasized that so long as a proper hearing is granted, allegations of natural justice violation are not sustained. It was also highlighted that the investigation involved 146 entities, and very few firms filed replies to the SCN.
Judicial Precedents and Reasoning:
A significant aspect of the court’s decision relied on its own precedent in the case of Mukesh Kumar Garg vs. Union of India & Ors. (W.P.(C) 5737/2025). In that judgment, the Delhi High Court had previously held that in cases involving fraudulent availment of ITC, especially considering the substantial burden on the exchequer and the potential negative impact on the GST regime, writ jurisdiction under Article 226 of the Constitution of India should generally not be exercised.
The Mukesh Kumar Garg judgment, extensively quoted in the current order, elucidated that the extraordinary writ jurisdiction is not meant to support “unscrupulous litigants.” It highlighted the serious nature of allegations in such cases, often involving complex webs of transactions between non-existent firms to facilitate fraudulent ITC claims. The court underscored that the ITC facility, enshrined in Section 16 of the CGST Act, is designed to promote ease of doing business by preventing cascading taxes. However, its misuse by various entities, as observed in a large number of writ petitions, poses a grave threat to the integrity of the GST framework.
The court in Mukesh Kumar Garg also stressed that factual analyses required in such cases, concerning the role of parties, justification of penalties, and proportionality of demands, cannot be effectively undertaken in writ jurisdiction. Allowing litigants to pursue different remedies in multiple forums would lead to a multiplicity of litigation and potentially contradictory findings.
Applying this established precedent, the Delhi High Court in the MHJ Metaltechs case found no compelling reason to deviate from the principle that writ jurisdiction should not be invoked in matters involving grave allegations of fraudulent ITC. The impugned order, being an appealable order under Section 107 of the CGST Act, provides an adequate alternative remedy for the petitioners to raise their contentions.
Consequently, while dismissing the writ petition, the court granted the petitioners the liberty to file an appeal under Section 107 of the CGST Act by July 15, 2025, along with the mandated pre-deposit. The court clarified that such an appeal, if filed, would be adjudicated on its merits and not be dismissed on grounds of limitation. The court also explicitly stated that any observations made in its current order would not influence the final adjudication by the appellate authority.
The dismissal of the petition serves as a reaffirmation of the judiciary’s commitment to upholding the integrity of the GST system and safeguarding public revenue against fraudulent activities.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
