Delhi High Court Refuses Writ Pleas Against GST Order Covering 629 Firms In Fake Invoice Case

The Delhi High Court on 21 August declined to entertain petitions challenging an adjudication order passed against 629 firms and individuals in connection with an alleged large-scale fake invoice racket, holding that disputed factual issues concerning their individual roles should be examined by the statutory Appellate Authority.

A Division Bench of Justices Anil Khetarpal and Shail Jain relegated the petitioners to the statutory remedy of appeal, holding that whether their replies to the Show Cause Notice were duly considered and what role they played in the transactions required examination by the Appellate Authority. It held:

“In a case of the present nature, where detailed and disputed questions of fact are required to be examined and adjudicated, exercise of writ jurisdiction, thereby permitting the Petitioners to bypass the efficacious statutory remedy of appeal, would not be appropriate.”

The case arose from information received by the Goods and Services Tax (GST) Department that Vikrant Singhal, Sachin Singhal and Pradeep Kumar were allegedly arranging invoices without actual supply of goods.

The Department conducted a search at their premises on 9 October 2024 and seized documents, electronic data, invoices and other records. Cash amounting to Rs. 22.96 lakh was also seized. According to the it, various firms managed by these persons were involved in large-scale issuance and availment of fake purchase and sale invoices.

The common adjudication order covered 629 firms and individuals and recorded allegations of availment of ineligible input tax credit on the basis of fake invoices or invoices issued without actual supply of goods.

Petitioners contended that the Show Cause Notice did not attribute any specific role to them and that, despite submitting detailed replies, the adjudicating authority had failed to consider their submissions.

They further contended that they were not involved in the alleged racket and that their cases ought to have been considered separately, particularly as they were allegedly involved in only a single transaction with Sahuwala Exports Pvt. Ltd.

Relying on the Supreme Court's judgment in ASP Traders v. State of Uttar Pradesh, they argued that the principles of natural justice require an adjudicating authority to consider a taxpayer's response to a Show Cause Notice and pass a reasoned order.

The High Court, however, distinguished ASP Traders, noting that it concerned an order against an individual taxpayer, whereas the present case involved a common order concerning more than 600 firms and individuals.

It observed that whether the petitioners' replies had been duly considered, as well as their precise role in the transactions, were matters that could appropriately be examined by the Appellate Authority.

The Bench also noted that the impugned order was based on statements of various persons and examination of accounts, invoices and transactions of different firms. It recorded that the adjudicating authority had found Vikrant Singhal and Sachin Singhal, along with others, to be the masterminds behind the alleged racket involving the creation of 107 fake firms for availing ineligible input tax credit.

Accordingly, the High Court declined to exercise its writ jurisdiction and relegated the petitioners to the statutory remedy of appeal.