Manoj Kumar Prop M K Steel Traders vs. Additional Commissioner, Central Goods And Services Tax & Anr.

Held

The Court held that while the Petitioner's objections regarding the validity of the show-cause notices and the imposition of penalty were noted, they did not warrant bypassing the statutory remedy of appeal. The Court found that the show-cause notices, particularly in W.P.(C) 50/2026, were extensive (nearly 80 pages) and contained details of alleged transactions and modus operandi, making it difficult to conclude they were entirely non-speaking without a full examination by the appellate authority. Regarding the penalty issue in W.P.(C) 2528/2026, the Court decided not to determine it in writ proceedings, relegating the Petitioner to raise this objection before the appellate authority. The Court clarified that its decision to remit the matter to the appellate forum did not imply acceptance of the Department's position or a final opinion on the merits of the penalty. The Court also considered the Supreme Court's judgment in M/s G.R. Infra Projects Limited but found that its application required a detailed examination of the specific notices, which was best left to the appellate authority. The ratio decidendi is that High Courts should generally relegate parties to statutory remedies unless exceptional circumstances justify interference under Article 226, and the sufficiency of show-cause notices and penalty imposition are matters for the appellate authority.

Facts

The Petitioner, Manoj Kumar, proprietor of M K Steel Traders, filed two writ petitions challenging orders-in-original dated 04.02.2025 passed by the Additional Commissioner, Central Goods and Services Tax. These orders stemmed from an investigation into alleged availment and passing on of ineligible Input Tax Credit (ITC) through invoices not supported by genuine supplies. The investigation involved a search under Section 67(2) of the CGST Act, seizure of documents, and recording of the Petitioner's statement where he admitted to assisting in the distribution of invoices not backed by actual supplies for a commission. The demands raised were Rs. 6,14,568/- in one petition and Rs. 2,93,53,860/- in the other, relating to alleged interconnected transactions involving multiple firms.

Key Issues

1. Whether the show-cause notice issued under Section 74 of the CGST Act in W.P.(C) 50/2026 is non-speaking and lacks sufficient particulars to justify its invocation against the Petitioner? The Petitioner argued that the notice failed to disclose the factual basis for attracting the statutory ingredients of Section 74 and that proceedings based on such a notice are unsustainable. 2. Whether the penalty imposed in W.P.(C) 2528/2026 is illegal, given that the show-cause notice and DRC-01 did not propose the recovery of penalty? The Petitioner contended that penalty could not be imposed without a prior proposal in the show-cause notice. 3. Whether the invocation of Section 74 of the CGST Act is sustainable based on general allegations of 'fraud', 'wilful misstatement', or 'suppression of facts' without disclosing specific factual particulars, as per the Supreme Court's ruling in M/s G.R. Infra Projects Limited? The Petitioner relied on this judgment to argue that the show-cause notices were insufficient. The Revenue did not record specific arguments on these points, but the Court considered the contents of the notices and the nature of allegations.