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

Case Name

Standard Cartons Pvt Ltd vs. Office of the Commissioner Central Tax Delhi West and Ors.

W.P.C 7186/2025 & CM APPL. 32365/2025 & CM APPL. 32366/2025

Date of Decision: 26th May, 2025

Key Takeaways

• Writ jurisdiction is not the preferred remedy in cases involving allegations of fraudulent ITC under GST; the proper course is to file an appeal under Section 107 of the CGST Act, 2017.
• The court emphasized the seriousness of fake ITC cases and the potential harm to the GST regime if such practices are not curbed.
• The petitioner’s procedural grievances (like delayed supply of relied-upon documents) do not justify bypassing the statutory appellate process.
• The court referenced its own prior decision in Mukesh Kumar Garg vs. Union of India & Ors. (W.P.© 5737/2025), reinforcing that writs are not to be entertained in complex factual disputes involving GST fraud.
• The petitioner is allowed to file an appeal by 15th July, 2025, and the appeal will not be dismissed as time-barred if filed by then.

Issue

Should the High Court exercise its writ jurisdiction under Articles 226 and 227 of the Constitution to quash a penalty order for alleged fraudulent availment of ITC, or should the petitioner be directed to pursue the statutory appellate remedy under Section 107 of the CGST Act, 2017?

Facts

• Parties:
• Petitioner: Standard Cartons Pvt Ltd
• Respondents: Office of the Commissioner Central Tax Delhi West and others
• Background:
• The petitioner was penalized for allegedly availing fake ITC by receiving invoices without actual supply of goods/services from firms linked to the late Mrs. Aaurti Kapoor.
• The penalty imposed was Rs. 1,03,80,024/- under Section 122(1)(vii) and Section 122(2)(b) of the CGST Act, 2017, read with corresponding SGST and IGST provisions.
• The total alleged fake ITC involved was Rs. 172 crores, with 34 parties issued show cause notices (SCNs).
• The petitioner claimed that relied-upon documents (RUDs) were not provided in time, hampering their defense.
• The petitioner had previously filed a writ (W.P.© 15360/2024) challenging the SCN, which was disposed of with directions to supply RUDs.
• RUDs were eventually supplied on 14th May, 2025.

Arguments

Petitioner (Standard Cartons Pvt Ltd)

• Challenged the penalty order, arguing that:
• There was no actual connection between the petitioner and Mrs. Aaurti Kapoor or her firms.
• The statement of Mr. Vinod Pahwa (in the RUDs) showed no link to the petitioner.
• The RUDs were not supplied in time, violating their right to a fair defense.

Respondent (Tax Department)

• Argued that:
• The GSTR-1M filings of Mrs. Aaurti Kapoor’s firms showed outward supplies via invoices without actual goods, solely to pass on ITC.
• The petitioner’s address matched the address on the invoices from Satyam Associates, one of the alleged fake firms.
• The petitioner did not file a reply on merits to the SCN, instead challenging it directly in writ proceedings.

Key Legal Precedents

• Mukesh Kumar Garg vs. Union of India & Ors. (W.P.© 5737/2025):
• The court held that in cases involving fraudulent ITC, writ jurisdiction under Article 226 should not be exercised, especially when complex factual issues are involved and an appellate remedy exists.
• Section 122(1)(vii) and Section 122(2)(b) of the CGST Act, 2017:
• These sections deal with penalties for issuing invoices without actual supply of goods/services and for fraudulent ITC claims.
• Section 107 of the CGST Act, 2017:
• Provides the statutory right to appeal against orders passed under the Act.

Judgment

• The Delhi High Court dismissed the writ petition, holding that:
• The petitioner was aware of the proceedings and had the opportunity to respond.
• The matter involves serious allegations of GST fraud and requires factual determination, which is not suitable for writ jurisdiction.
• The proper remedy is to file an appeal under Section 107 of the CGST Act, 2017.
• The petitioner is allowed to file an appeal by 15th July, 2025, and it will not be dismissed as time-barred if filed by then.
• The department is to upload the rectified DRC-07 on the GST portal within a week.

FAQs

Q1: Why didn’t the court quash the penalty order?

A: The court found that the case involved complex factual issues and serious allegations of GST fraud, which are better addressed through the statutory appellate process rather than writ jurisdiction.

Q2: What should the petitioner do next?

A: The petitioner should file an appeal under Section 107 of the CGST Act, 2017, by 15th July, 2025. The appeal will be heard on merits and not dismissed as time-barred if filed by this date.

Q3: What is the significance of the Mukesh Kumar Garg case?

A: It established that writ jurisdiction should not be exercised in GST fraud cases involving factual disputes, and parties should use the appellate remedy provided by law.

Q4: What about the delay in providing relied-upon documents (RUDs)?

A: The court acknowledged the delay but held that this did not justify bypassing the appellate process, especially since the documents were eventually provided.

Q5: What does this mean for other GST fraud cases?

A: The judgment reinforces that parties accused of GST fraud should pursue appeals rather than writ petitions, especially when factual disputes are involved.