Madhya Pradesh High Court Refuses To Interfere With ₹1.78 Crore GST Demand Over Bogus ITC

The Madhya Pradesh High Court, on 4 November, declined to interfere with a GST demand of Rs. 1.78 crore, holding that disputes involving alleged fraudulent availment of Input Tax Credit (ITC) and disputed questions of fact should be examined through statutory appellate proceedings.

A Division Bench of Chief Justice Alpesh Y. Kogje and Justice Vivek Jain dismissed a writ petition filed by Maa Narmada Aluminium Extrusion Private Limited, challenging the GST proceedings initiated against it. It said:

“Section 6 of the MPGST Act prohibits parallel proceedings only in respect of the same subject matter. Since the present proceedings relate to a separate transaction and a fresh cause of action, the provisions of Section 6 are not attracted”.

Maa Narmada Aluminium Extrusion Private Limited had challenged an order dated 10 March 2026, blocking its Electronic Credit Ledger to the extent of Rs. 23,78,030 under Rule 86A of the Central Goods and Services Tax (CGST)/Madhya Pradesh Goods and Services Tax (MPGST) Rules.

It contended that it had cooperated with the department and furnished tax invoices, e-way bills, bank statements, books of accounts and other relevant documents. It also argued that the Central GST authorities had already conducted inspections and examined its records, making subsequent proceedings by the State authorities impermissible under Section 6 of the CGST Act.

However, the State submitted that its proceedings concerned an independent investigation into alleged fraudulent availment and utilisation of ITC involving three suppliers.

During the pendency of the petition, the department passed an order under Section 74A of the CGST/MPGST Act, raising a demand of Rs. 1,78,66,416 towards tax, interest and penalty. The company subsequently challenged this order through an amendment to its writ petition.

The Court noted that the departmental investigation had found the three suppliers to be non-genuine entities that had neither actually received nor supplied the goods covered by the invoices. No physical stock of the goods was found at their premises, and the transactions were allegedly part of circular trading to facilitate the passing of bogus ITC.

It observed that the statutory conditions under Sections 16(2)(b) and 16(2)(c) of the CGST/MPGST Act, requiring actual receipt of goods and payment of tax to the Government, were not fulfilled. It also rejected the contention that the existence of invoices, e-way bills and banking transactions, by themselves, established the genuineness of the supplies.

On the objection concerning parallel proceedings, the Bench held that Section 6 of the MPGST Act bars such proceedings only when they concern the same subject matter. Since the State authorities were investigating a separate transaction involving an independent cause of action, the provision was not attracted.

Further, it rejected the company's contention that the suppliers' ITC alone was bogus while the credit availed by it was genuine. It said:

“The petitioner's claim that the suppliers' ITC alone was bogus while the ITC availed by it was genuine is therefore untenable. Since the petitioner availed and utilised ITC without actual receipt of goods, the provisions of Section 122(1)(vii) of the CGST/MPGST Act, 2017 stand attracted. Consequently, the petitioner's contention is devoid of merit and is liable to be rejected by the department.”

Moreover, the judges held that the disputed factual issues and the availability of a statutory appellate remedy did not warrant interference under Article 226 of the Constitution.

Accordingly, it dismissed the writ petition.

For Petitioner: Advocate Nitin Agrawal

For Respondent: Government Advocate Rajvardhan Dutt Pararha