The Delhi High Court has strongly criticised the recurring trend of individuals who either fraudulently claimed Input Tax Credit (ITC) or facilitated such claims, and then sought to challenge penalty orders under Section 74 of the CGST Act, 2017, by misusing the Court’s writ jurisdiction on technical grounds.
A division bench of Justices Prathiba M. Singh and Rajneesh Kumar Gupta said that,
“This Court also takes note, with some consternation, that such large scale fraudulent availment of ITC without actual passing of goods or services may, if left unchecked, can lead to severe damage to the GST framework itself, which is meant to encourage legally entitled persons and businesses to avail of ITC and other similar facilities such as drawbacks etc.”
Consequently, the Court imposed a penalty of ₹1 lakh on a firm accused of generating invoices through fictitious entities to fraudulently claim Input Tax Credit (ITC), and later challenging the GST Department’s penalty proceedings by approaching the High Court.
The firm of the applicant said that the reply to SCN was furnished by it, but it was not regarded, and no personal hearing was provided before the passing of the impugned order asking for the demand.
Before the firm, three hearing notices were issued, but the said hearings were not attended by the applicant firm. It said that before passing the impugned order, the related authority has validated from the portal that no response has been uploaded via the applicant firm.
Read Also: GST Officials Uncover ₹61,545 Crore ITC Fraud for AY 2025–26
Hearing this, the Court said that, “so long as there is no violation of natural justice or jurisdictional error, writ jurisdiction ought not to be exercised, especially if the Petitioner has not come with clean hands. In the present case, there is no infraction, as the show cause notice was duly issued to the Petitioner Firm, and the personal hearing notices have also been provided. There is also no arbitrary exercise of power by the Department, which would require exercising of writ jurisdiction.”
Therefore, it moved to dismiss the petition with Rs 1 lakh costs, subject to being filed with the Delhi High Court Bar Association within two weeks.
| Case Title | M/S Mahesh Fabrinox PVT. LTD vs. Union of India & ANR |
| Case No.: | W.P.(C) 6006/2025 |
| For The Petitioner | Mr. N.K. Sharma and Mr. Kapil Gautam |
| For The Respondents | Ms. Neha Rastogi, Mr. Vibhav Singh, Mr. Shashank Pandey and Mr. Rajat Dubey |
| Delhi High Court | Read Order |
