2025 (4) TMI 1165 - HC - GST

Fraudulent availment of Input Tax Credit - issuance of fake invoices without actual receipt of goods and services - HELD THAT - This Court is of the opinion that both these orders are appealable orders before the concerned Appellate Authority under Section 107 of the Central Goods and Services Tax Act 2017. The question of duplication if any shall be examined and adjudicated by the Appellate Authority. However on a prima facie perusal it appears that the amount pertaining to M/s Nivaran Enterprises has been reflected in both orders indicating a possible instance of duplication. The Petitioner is permitted to avail of its Appellate remedies in respect of both orders - considering the possibility of duplication insofar as the second order is concerned i.e. 10th January 2025 the pre-deposit shall only be in respect of the amount pertaining to M/s Radhey Enterprises i.e. Rs. 14, 12, 730/- at the initial stage. The Appellate Authority may examine the matter and pass directions in accordance with law. Let the appeal be filed by the Petitioner before the Appellate authority within a period of 30 days.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

• Whether there exists a duplication of demand amounts in two separate orders issued by the Assistant Commissioner, CGST Delhi North, dated 10th January, 2025 and 21st January, 2025, respectively, relating to the same alleged fraudulent availment of Input Tax Credit (ITC) by the Petitioner's firm;
• Whether the Petitioner is entitled to have the proceedings clubbed or consolidated to avoid multiplicity and duplication of demands;
• The appropriate course of action regarding the pre-deposit requirement for appeals filed against these orders, particularly in light of the alleged duplication;
• The scope of judicial intervention in the present writ petition challenging the impugned orders under Article 226 of the Constitution of India, vis-`a-vis the statutory appellate remedy under Section 107 of the Central Goods and Services Tax Act, 2017;
• The correctness and validity of the demand and penalty imposed on the Petitioner's firm for allegedly availing fraudulent ITC through fake invoices issued by non-existent or fake firms.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Duplication of Demand Amounts in Two Separate Orders

Relevant legal framework and precedents: The GST regime provides for issuance of Show Cause Notices and subsequent orders confirming demands and penalties for fraudulent availment of ITC. The statutory appellate mechanism under Section 107 of the CGST Act allows aggrieved parties to challenge such orders. The principle against double recovery or duplication of demands is fundamental in tax jurisprudence.

Court's interpretation and reasoning: The Court noted that the two impugned orders-dated 10th January, 2025 and 21st January, 2025-both confirm demands against the Petitioner's firm. The first order confirms a demand of Rs. 55,15,011/- pertaining to ITC availed from M/s Nivaran Enterprises and Rs. 14,12,730/- from M/s Radhey Enterprises. The second order confirms a demand of Rs. 55,15,012/-, which appears to be the same amount (with a difference of Re. 1/-) relating to the ITC availed from M/s Nivaran Enterprises.

The Court observed that this prima facie indicates a duplication of the demand amount related to M/s Nivaran Enterprises across both orders.

Key evidence and findings: The Petitioner's firm was made a co-noticee in the proceedings arising from an investigation into fraudulent ITC claims involving multiple fake firms. The DGGI's incident report and subsequent Show Cause Notices form the factual matrix. The identical demand amounts in both orders form the basis for the claim of duplication.

Application of law to facts: The Court emphasized that the statutory appellate authority is the appropriate forum to examine and adjudicate the issue of duplication. The writ jurisdiction is not the proper forum to delve into the merits or technicalities of the demand but can direct procedural relief where prima facie duplication is noticed.

Treatment of competing arguments: The Petitioner argued that the duplication is a clear error warranting setting aside of the demands. The Respondent did not dispute the existence of the two orders but relied on the appellate mechanism for resolution. The Court sided with the procedural correctness of allowing the appeal process to address the duplication.

Conclusions: The Court held that the question of duplication shall be examined by the Appellate Authority, permitting the Petitioner to file appeals against both orders.

Issue 2: Clubbing or Consolidation of Proceedings

Relevant legal framework and precedents: The CGST Act and rules provide for appeals against orders passed by tax authorities. While consolidation of proceedings is not expressly mandated, principles of judicial economy and avoidance of multiplicity are recognized.

Court's interpretation and reasoning: The Petitioner sought directions to club the proceedings arising from the two orders. The Court, however, did not expressly order consolidation but permitted the Petitioner to avail appellate remedies. The Court implicitly recognized that the appellate authority has the power to examine the issue of duplication and may pass appropriate directions, which could include consolidation.

Application of law to facts: Given that the demands arise from related factual matrices and overlapping issues, the Court's direction to approach the Appellate Authority preserves the Petitioner's right to seek clubbing.

Conclusions: The Court refrained from ordering consolidation at the writ stage but allowed the Petitioner to pursue the remedy before the Appellate Authority.

Issue 3: Pre-deposit Requirement for Appeal

Relevant legal framework and precedents: Section 107 of the CGST Act mandates pre-deposit of a specified percentage of the disputed tax amount before filing an appeal. Courts have discretion to reduce or modify pre-deposit conditions in appropriate cases.

Court's interpretation and reasoning: Considering the prima facie duplication of the Rs. 55,15,012/- demand in both orders, the Court directed that the Petitioner's pre-deposit for the appeal against the order dated 10th January, 2025 be limited to the amount relating to M/s Radhey Enterprises (Rs. 14,12,730/-) only. This reduces the financial burden on the Petitioner pending adjudication of the duplication issue by the Appellate Authority.

Application of law to facts: The Court's direction balances the need to ensure compliance with statutory pre-deposit requirements while safeguarding against unjust enrichment by the revenue through duplicated demands.

Conclusions: The Petitioner is required to make a pre-deposit only for the non-duplicated portion of the demand at the initial stage of appeal.

Issue 4: Scope of Judicial Intervention in Writ Petition Challenging Tax Demands

Relevant legal framework and precedents: Article 226 of the Constitution empowers High Courts to issue writs for enforcement of fundamental rights and for any other purpose. However, writ jurisdiction is generally not exercised to reappraise factual or technical issues where efficacious alternative remedies exist.

Court's interpretation and reasoning: The Court acknowledged that the Petitioner's challenge to the impugned orders is subject to the statutory appellate mechanism. The Court declined to examine the merits of the demands or penalties, restricting its intervention to the procedural issue of duplication and pre-deposit directions.

Application of law to facts: The Court emphasized that the Petitioner must exhaust the appellate remedies provided under the CGST Act before seeking judicial review on merits.

Conclusions: The writ petition was disposed of without delving into substantive merits, preserving the appellate route