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

Held

The Court held that while the Petitioner raised objections concerning the validity of the show-cause notices and the imposition of penalty, these issues warranted consideration by the statutory appellate authority rather than bypassing the appellate remedy through writ jurisdiction. The Court noted that the show-cause notices in question were extensive, with the notice in W.P.(C) 50/2026 running to nearly 80 pages and containing details of alleged transactions and modus operandi. The Court acknowledged the Supreme Court's ruling in M/s G.R. Infra Projects Limited, emphasizing that the factual basis for invoking Section 74 must be discernible from the show-cause notice. However, the Court found that the present case, involving allegations against a large network of firms and detailed notices, did not sufficiently warrant interference under Article 226. The Court explicitly stated that it was not expressing a final opinion on the merits of the demands, the applicability of Section 74, the sufficiency of material, or the legality of the penalty. The Petitioner was relegated to the statutory appeal, with liberty to raise all available grounds, and the appellate authority was directed to consider any application for exclusion of time spent in pursuing the writ petitions.

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 arose from an investigation into alleged availment and passing on of ineligible Input Tax Credit (ITC) through invoices not supported by genuine supplies. The investigation, initiated after a search under Section 67(2) of the CGST Act, alleged a network of firms created to facilitate ineligible ITC. The Petitioner's statement recorded on 19.05.2023 indicated his involvement in distributing invoices not backed by actual supplies for commission. One order demanded Rs.6,14,568/- (W.P.(C) 50/2026), and the other demanded Rs.2,93,53,860/- (W.P.(C) 2528/2026). The Petitioner argued that the show-cause notices were invalid and the consequential orders were illegal, despite the availability of a statutory appeal.

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 the invocation of the provision against the Petitioner? 2. Whether the penalty imposed by the order-in-original in W.P.(C) 2528/2026 is unsustainable as the show-cause notice did not propose recovery of penalty? Petitioner's Contentions: The Petitioner argued that the writ petitions were maintainable despite the statutory appeal remedy due to the fundamental objections regarding the validity of the show-cause notices and the legality of the orders. Specifically, in W.P.(C) 50/2026, the Petitioner contended that the show-cause notice was non-speaking and failed to disclose the factual basis for invoking Section 74. In W.P.(C) 2528/2026, the Petitioner argued that penalty could not be imposed without a proposal in the show-cause notice. The Petitioner relied on the Supreme Court judgment in M/s G.R. Infra Projects Limited v. The State of Madhya Pradesh & Ors., asserting that mere use of terms like 'fraud' or 'wilful misstatement' without factual particulars is insufficient to sustain proceedings under Section 74. Revenue's Contentions: The judgment does not record specific contentions from the Revenue beyond their role as respondents.