The Delhi High Court recently dismissed a petition filed by M/s Mahesh Fabrinox Pvt. Ltd., which challenged an order imposing a penalty for fraudulent availing of Input Tax Credit (ITC) under the Central Goods and Services Tax (CGST) Act, 2017. The Court not only rejected the plea but also imposed a cost of ₹1 lakh on the petitioner for misusing writ jurisdiction.
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Background
The case revolves around an order dated February 1, 2025, issued by the Additional Commissioner of Central Goods and Services Tax, which raised a demand against M/s Mahesh Fabrinox Pvt. Ltd. for fraudulent ITC claims. The Petitioner Firm argued that it had filed a reply to the show-cause notice but that it was not considered, and no personal hearing was granted before passing the impugned order.
- Petitioner’s Contention:
The Petitioner claimed that during the financial year 2017-18, it had not commenced its operations, and therefore, the question of availing ITC did not arise. They further alleged that they were not given an opportunity for a personal hearing. - Respondent’s Stand:
The Respondent, represented by the GST Department, asserted that three hearing notices were issued to the Petitioner Firm, but the firm failed to attend them. The Department also confirmed that no reply was uploaded on the portal before the impugned order was passed.
The division bench comprising Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta critically examined the case and highlighted the following:
“This Court also takes note, with some consternation, that such large scale fraudulent availment of ITC without actual passing of goods or services may, if left unchecked, can lead to severe damage to the GST framework itself.” – Delhi High Court.
The Court noted that fraudulent ITC claims have become a pattern, where firms involved in such fraudulent activities often misuse the writ jurisdiction of the Court to challenge penalties on technical grounds.
The Court observed that the Petitioner’s Director, Mr. Vishu Goyal, had admitted in his statement to having met one Mr. Karan Kumar Agarwal, who offered to supply fake invoices without actual goods. Despite denying any fraudulent transactions in its reply, the Petitioner’s Director admitted to availing fake ITC through commission payments.
The Delhi High Court concluded that there was no violation of natural justice or jurisdictional error in the case, as the Petitioner was given a fair opportunity to present its case. The Court further stated:
“In such cases, so long as there is no violation of natural justice or jurisdictional error, writ jurisdiction ought not to be exercised, especially if the Petitioner has not come with clean hands.” – Delhi High Court.
The petition was dismissed with a cost of ₹1 lakh, payable to the Delhi High Court Bar Association within two weeks. The Court also directed that if the cost was not paid, the Director of the Petitioner Firm, Mr. Vishu Goyal, must appear before the Court.
The decision highlights the judiciary's strict stance against the misuse of writ jurisdiction in cases of fraudulent ITC claims under GST. The Court’s observations and the imposition of costs serve as a warning to those attempting to challenge penalties through deceptive means.
Appearance: Mr. N.K. Sharma and Mr. Kapil Gautam, Advocates for Petitioner; Ms. Neha Rastogi, SPC with Mr. Animesh Rastogi, Mr. Vibhav Singh, Mr. Shashank Pandey and Mr. Rajat Dubey, Advocates for R-1. Mr. Akash Verma, Sr. SC, CBIC with Ms. Aanchal Uppal, Advocate.
Case title: M/S Mahesh Fabrinox Pvt. Ltd v. Union of India
Case no.: W.P.(C) 6006/2025
