Big Relief: Chhattisgarh HC Bars Coercive Action in Fake GST ITC Investigations if Taxpayers Cooperate

The Chhattisgarh High Court ruled that no coercive measures will be taken against taxpayers if they cooperate with the GST investigation into bogus ITC claims.

Harsh Wadhwani, proprietor of Vijay Laxmi Trade Company, and his authorised representative, submitted a writ petition, contesting the proceedings begun by the Directorate General of GST Intelligence (DGGI). The applicants were in trading and submitted the returns in Form GSTR-3B for the FY 2024-2025.

U/s 70 of the Central Goods and Services Tax Act, 2017, DGGI issued a notice on 2 July 2025 alleging that, based on the fake invoices issued by Taj Enterprises and Agastya Enterprises, the applicants had claimed ITC. The applicants filed their written response dated 28 July 2025, refusing the allegations.

On 11 September 2025 and 23 September 2025, the department issued summons asking the applicants to appear and furnish oral proof. The counsel of the applicant claimed that the summonses were vague since it does not cite the objective or the scope of the oral examination.

Also Read: Orissa HC Dismisses Petition on GST ITC Claims for a Non-Existent Entity and Fake Invoices

The counsel of the department cited that the investigation of the GSTR-3B returns of the applicant shows that ITC was taken based on bogus invoices issued via the two firms. They filed that the summons was valid and that if the applicants cooperated in the investigation, there would be no reason for any coercive measures.

The bench, including Justice Naresh Kumar Chandravanshi, cited that the inquiry was limited to the alleged bogus GST ITC claims that involve Taj Enterprises and Agastya Enterprises. The court, the applicants had earlier submitted their responses and specified their readiness to participate in the investigation.

The court, as authorities were qualified for summon and record oral proof, like power should be exercised fairly and without excessive force when the taxpayers were cooperating. The court mentioned that the objections of the applicant must be dealt with by passing a speaking order as per the law.

For recording the applicants’ statements and to adhere to the future summons as needed, the court asked the applicants to appear before the DGGI, Raipur, on 28 October 2025. It requested that no coercive measures be taken against the applicants in relation to the inquiry, provided they continued to cooperate.

Also, the court asked the department to dispose of the objections of the applicant via a reasoned order. As per that, the writ petition was disposed of without any order as to costs.