Fraud Allegations Against CA Not Exceptional Ground To Invoke Writ Jurisdiction Against GST Demands: Punjab & Haryana High Court

The Punjab and Haryana High Court has declined to entertain a writ petition challenging GST demand orders raised against a manpower services firm, holding that its allegation that a Chartered Accountant misappropriated tax payments raised disputed questions of fact and did not constitute an extraordinary circumstance to bypass the statutory appellate remedy available under the GST law.

A Division Bench of Justice Lisa Gill and Justice Ramesh Chander Dimri noted that the petitioner had itself authorised the Chartered Accountant to handle its GST compliance.

“In that view of the matter, the said Chartered Accountant necessarily acts as an agent of the petitioner. It is settled position that anything done by an agent on behalf of his principal is to be treated as done by the principal himself,” the bench said.

The petition was filed by Knight Fly Boyz, a partnership firm engaged in manpower supply services. It challenged three demand orders issued by the Excise and Taxation Officer for the financial years 2017-18, 2018-19, and 2019-20. It also challenged rejection of its rectification application.

The demands were raised under Section 73 of the CGST Act and the corresponding State GST Act, which empowers tax authorities to determine unpaid or short-paid tax in cases not involving fraud or willful misstatement.

The firm claimed that it had transferred tax amounts to its Chartered Accountant for payment to the department. It alleged that the accountant deposited only part of the dues, misappropriated amounts exceeding Rs 1.83 crore, and manipulated GST returns by availing fake input tax credit before becoming untraceable.

It argued that the demand orders violated principles of natural justice. It said no effective hearing was granted. It also said penalties were imposed mechanically despite it being a victim of fraud.

The High Court rejected these contentions. It noted that the demand orders recorded issuance of show cause notices and scheduling of personal hearings. It found that repeated opportunities were granted, but no response was filed.

The Court noted that it was not the petitioner's case that it was not liable to pay the tax. It only claimed that the amounts were handed over to its Chartered Accountant. “If that be so, remedy of petitioner in respect thereof clearly lies elsewhere and not before this Court,” the Bench said.

The court held that allegations of fraud by the Chartered Accountant raised disputed questions of fact. Such issues could not be examined in writ proceedings. They did not constitute exceptional circumstances warranting interference under Article 226.

The bench also upheld the rejection of the rectification application. It held that the grievance did not disclose any “error apparent on the face of the record” under Section 161 of the GST Acts. The writ petition was dismissed.

For Respondent: Mamta Singla Talwar, DAG