Treco Wire INDIA Private Limited vs. Additional Commissioner Central Tax Delhi North & Ors.

Facts

The Petitioner, Treco Wire India Private Limited, challenged an Order-in-Original dated January 15, 2024, passed by the Additional Commissioner, Central Tax, Delhi North, under Section 74 of the CGST Act, 2017. This order confirmed a demand of Rs. 3,34,21,261/- towards input tax credit (ITC), along with interest and an equivalent penalty. A further demand of Rs. 50,30,256/- towards interest under Section 50 was also confirmed. The demand arose from an audit for the period July 1, 2017, to March 31, 2021, where the authorities alleged ITC was availed on supplies from suppliers whose GST registrations were retrospectively cancelled. The Petitioner contended the transactions were genuine and suppliers were registered at the relevant time. The Petitioner also challenged the constitutional validity of Section 16(2)(c) and the proviso to Section 16(2) of the CGST Act.

Held

The Court held that the impugned Order-in-Original dated January 15, 2024, cannot be sustained. The primary issue was whether the order disclosed the necessary factual and statutory foundation for the demand under Section 74. The Court found that the order failed to provide essential particulars such as the names of the suppliers, relevant invoices, dates of registration cancellations, and the quantum of ITC attributable to each supplier. This omission deprived the Petitioner of an effective opportunity to contest the demand. The Court noted that the adjudication order did not record specific findings to sustain the invocation of Section 74 against the Petitioner. The Court also observed apparent inconsistencies in the dates of the order. Consequently, the Court set aside the impugned order and remanded the matter to the adjudicating authority for fresh adjudication. The adjudicating authority is directed to issue appropriate notice, provide a reasonable opportunity of hearing, consider the Petitioner's reply and material, and record specific findings on the factual basis of the demand, including identifying suppliers and transactions if the demand is based on retrospective cancellation of registrations. The Court clarified that it had not expressed any opinion on the merits of the ITC demand or entitlement to ITC under Section 16.

Key Issues

1. Whether the impugned Order-in-Original dated January 15, 2024, passed under Section 74 of the CGST Act, 2017, discloses the necessary factual and statutory foundation for fastening the tax, interest, and penalty liabilities upon the Petitioner? Petitioner's arguments: The Petitioner argued that the impugned order suffers from fundamental infirmities. Specifically, it failed to disclose the names of the suppliers, invoice dates, dates of GST registration cancellations, or the material basis for denying ITC. The Petitioner contended that the invocation of Section 74 was unjustified as the notice and order did not specify fraud, wilful misstatement, or suppression of facts attributable to the Petitioner. The Petitioner asserted that mere retrospective cancellation of supplier registrations does not, by itself, satisfy the ingredients of Section 74. Revenue's arguments: The Respondents sought to sustain the impugned proceedings based on the audit objections and the material on record. They also placed reliance on a previous order of the High Court in W.P.(C) 14428/2025 filed by the Petitioner.