Delhi High Court Refuses Writ in GST ITC Fraud Case, Directs Appeal Route

Case Name

Superb Industries through Proprietor Sanjeev Kumar v. Additional Commissioner CGST Delhi North

(W.P.C 6789/2025 & CM APPLs. 30777/2025, 30778/2025)

Key Takeaways

• Writ Jurisdiction Limited: The Delhi High Court reiterated that writ petitions under Article 226 should not be entertained in cases involving allegations of fraudulent ITC claims, especially when a statutory appeal is available.
• Seriousness of ITC Fraud: The court highlighted the significant impact of ITC fraud on the GST regime and the exchequer, justifying a stricter approach.
• Alternative Remedy: The petitioner was directed to file an appeal under Section 107 of the CGST Act, and the court ensured that the appeal would not be dismissed on limitation grounds if filed by the specified date.
• Precedents Cited: The court relied on its own previous decisions and the Supreme Court’s ruling in “The Assistant Commissioner of State Tax and Others vs. M/s Commercial Steel Limited” (Civil Appeal No. 5121 of 2021) regarding the maintainability of writ petitions when alternative remedies exist.

Issue

Should the High Court exercise its writ jurisdiction under Article 226 to entertain a challenge against an order alleging fraudulent availment of Input Tax Credit, or should the petitioner be directed to pursue the statutory appellate remedy under Section 107 of the CGST Act?

Facts

• Parties: Superb Industries (petitioner) vs. Additional Commissioner, CGST Delhi North (respondent).
• Dispute: The petitioner challenged an order dated 4th February 2025 (uploaded on 20th February 2025) alleging fraudulent ITC claims.
• Petitioner’s Claim: The petitioner argued that they never received the show cause notice (SCN) or a notice for personal hearing, and thus could not respond before the order was passed.
• Order’s Scope: The impugned order was passed against 428 parties, all accused of fraudulent ITC claims.
• Court Proceedings: The hearing was conducted in hybrid mode on 20th May 2025.

Arguments

Petitioner (Superb Industries)

• Claimed non-receipt of the show cause notice and lack of opportunity for a personal hearing.
• Argued that the impugned order was passed without following principles of natural justice.

Respondent (CGST Delhi North)

• Emphasized the seriousness of the allegations—fraudulent ITC claims involving multiple non-existent firms.
• Pointed out that the order is appealable under Section 107 of the CGST Act, and the petitioner should pursue that remedy.

Key Legal Precedents

1- Mukesh Kumar Garg v. Union of India & Ors. (W.P. © 5737/2025)

• The court held that in cases of fraudulent ITC, writ jurisdiction should not be exercised due to the complexity and seriousness of the allegations.

2- Sunny Jagga v. Union of India & Ors. (W.P. © 6443/2025)

• Reiterated the above principle.

3- The Assistant Commissioner of State Tax and Others vs. M/s Commercial Steel Limited (Civil Appeal No. 5121 of 2021)

• Supreme Court held that writ petitions should only be entertained in exceptional circumstances (breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to vires of statute/delegated legislation) when an alternative remedy exists.

4- Section 16 of the CGST Act

• Governs the concept of Input Tax Credit.

5- Section 107 of the CGST Act

• Provides the statutory appellate remedy against orders passed under the Act.

Judgement

• Court’s Decision: The Delhi High Court refused to entertain the writ petition, citing the seriousness of the allegations and the availability of an alternative remedy.
• Reasoning: The court found that the case involved complex factual questions and serious allegations of fraud, which are better suited for adjudication by the appellate authority rather than in writ proceedings.
• Order: The petitioner was granted liberty to file an appeal under Section 107 of the CGST Act by 15th July 2025, with the assurance that the appeal would not be dismissed on limitation grounds if filed within this period. The court made it clear that its observations would not affect the merits of the appeal.

FAQs

Q1: Why did the court refuse to entertain the writ petition?

A: The court refused because the case involved serious allegations of fraudulent ITC claims, which require detailed factual analysis. The court also noted that an alternative statutory remedy (appeal under Section 107 of the CGST Act) was available, and writ jurisdiction should not be used in such cases unless exceptional circumstances exist.

Q2: What should the petitioner do next?

A: The petitioner should file an appeal before the appellate authority under Section 107 of the CGST Act by 15th July 2025. The court assured that the appeal would not be dismissed as time-barred if filed within this period.

Q3: What are the exceptional circumstances where a writ petition can be entertained despite an alternative remedy?

A: According to the Supreme Court in “The Assistant Commissioner of State Tax and Others vs. M/s Commercial Steel Limited,” a writ can be entertained if there is a breach of fundamental rights, violation of natural justice, excess of jurisdiction, or a challenge to the vires of the statute or delegated legislation.

Q4: Does this judgment affect the merits of the petitioner’s case?

A: No, the court specifically stated that its observations would not impact the final adjudication by the appellate authority.

Q5: What is the significance of Section 16 and Section 107 of the CGST Act in this case?

A: Section 16 deals with the eligibility and conditions for availing Input Tax Credit, which is central to the allegations. Section 107 provides the statutory right to appeal against orders passed under the CGST Act, which the court directed the petitioner to utilize.