Ambika Traders Through Proprietor Gaurav Gupta vs. Additional Commissioner, Adjudication Dggsti, CGST Delhi North

Facts

The Petitioner, Ambika Traders, a firm dealing in metal scrap, challenged an Order-in-Original dated January 23, 2025, and a related DRC-07 form issued by the Additional Commissioner, Adjudication (DGGSTI), CGST Delhi North. A search at the proprietor's premises led to the proprietor's arrest in August 2021, followed by his release on bail. A Show Cause Notice (SCN) was issued in May 2023 for financial years 2017-2018 to 2021-2022, proposing a demand of Rs. 83,76,32,528/- for alleged fraudulent availment and passing on of Input Tax Credit (ITC). The Petitioner filed replies to the SCN, but the impugned order affirmed the demand and imposed an equivalent penalty on the firm and a penalty on the proprietor. A corrigendum later rectified the proprietor's penalty amount.

Held

The Court held that the writ petition was not liable to be entertained due to the availability of an alternative, effective, and efficacious remedy of appeal. The Court noted that all contentions raised by the Petitioner could be raised before the Appellate Authority. Although the limitation period for filing the appeal had expired, the Court granted the Petitioner time until August 31, 2025, to file the appeal, subject to pre-deposit. If filed within this period, the appeal would not be dismissed on grounds of limitation and would be adjudicated on its merits. The Court also imposed costs of Rs. 25,000/- on the Petitioner, payable to the Delhi High Court Bar Association, citing the principle that writ jurisdiction is extraordinary and equitable, and petitioners must approach the court with clean hands, as established in cases like K.D. Sharma v. SAIL and Ramjas Foundation v. Union of India. The Court explicitly stated that its observations would not affect the final adjudication by the Appellate Authority.

Key Issues

1. Whether the Adjudicating Authority failed to consider the Petitioner's replies to the Show Cause Notice, thereby violating principles of natural justice and the mandatory obligation under Section 74(9) of the CGST Act? 2. Whether the demand raised in the impugned order is vitiated by non-consideration of the Petitioner's replies and whether the Adjudicating Authority failed to adhere to the mandatory requirement of considering the representation under Section 74(9) of the CGST Act? 3. Whether the Adjudicating Authority erred in not considering the Circular No. 171/03/2022-GST dated July 6, 2022, which suggests that entities not procuring or supplying goods would not be liable for tax under Sections 73 or 74, and that only penalties under Section 122 could be invoked? 4. Whether the demand confirmed in the impugned order is based on grounds not specified in the Show Cause Notice, contrary to Section 75(7) of the CGST Act? 5. Whether the Show Cause Notice, covering multiple financial years (2017-18 to 2021-22), is impermissible under Section 74 of the CGST Act? 6. Whether the rejection of the Petitioner's application for cross-examination of witnesses by the Adjudicating Authority was justified? Petitioner's arguments: The Adjudicating Authority failed to consider the Petitioner's replies, violating natural justice and Section 74(9) of the CGST Act. The Circular No. 171/03/2022-GST should have been considered. Demands were raised on grounds not in the SCN, violating Section 75(7). The SCN covering multiple years is impermissible. The rejection of cross-examination was erroneous. Respondent's arguments: The Petitioner has an alternative and efficacious remedy of appeal. The writ petition is not maintainable as the Petitioner has not approached the court with clean hands, citing precedents like Mukesh Kumar Garg v. Union of India.