High Court Declines Writ in Rs 18.55 Cr Fake ITC Case: Petitioner Directed to File Appeal under Section 107

Recently, a company was accused of being a part of a fake invoice scam under GST. Concerned authorities issued a demand order of Rs. 18 crore against the company. The company approached the High Court, saying they were not provided the opportunity to be heard before the issuance of the final order. However, the court dismissed the petition, saying it would not interfere in this case, as this is a fraud case. The business had opportunities to reply and attend hearings. There’s a proper legal appeal process available, which they should use. The court has given the company time till September 30, 2025, to file the appeal with the required pre-deposit.

The current appeal (W.P.(C) 8804/2025) is being filed in the Delhi High Court before the benches comprising judges Justice Prathiba M. Singh and Justice Shail Jain. M/S Samarth Traders is the petitioner, and the Additional Commissioner of Central GST, Delhi North, is the respondent.

M/s Samarth Traders is a proprietorship firm engaged in trading goods and is GST registered. While running the business, the company claimed Input Tax Credit (ITC). However, an investigation was started by the DGGI (Directorate General of GST Intelligence), Jaipur unit, against one Mr. Ashutosh Garg, who is alleged to be operating a network of shell companies. These firms were reportedly created only to issue fake invoices (bills) without actual movement of goods, just to illegally pass on ITC. The authorities found that Samarth Traders was one of these fake firms engaged in claiming tax credit without a genuine business. When the DGGI, Jaipur unit, discovered this, they issued a Show Cause Notice (SCN) dated 30th July, 2025, to the company. Thereafter, on 16th December 2024, the Petitioner filed a reply to the said notice. However, soon after that, the Additional Commissioner issued a demand order of Rs. 18.55 crore against the firm.

Petitioner, dissatisfied with the order, approached the High Court, asking the court to cancel or interfere with the order. The petitioner claimed that the department did not give them the opportunity to be heard before issuing the final demand order. The respondent in its opposition raised the case that it is not just about one company but about a large network of 294 shell companies created by Mr. Ashutosh Garg, and the total ITC that has been passed is more than a thousand crores. Since the case is related to the fraudulent ITC, the High Court should not interfere.

The High Court cited previous judgments, such as the case of Standard Cartons Pvt. Ltd. and Mukesh Kumar Garg, in which serious fraud or fake ITC fraud was involved. In these cases, the courts highlighted the principle that fraud cases need to be dealt with by appellate and trial bodies, not writ courts. The High Court should not normally use its special powers under Article 226. A proper appeal process is available under Section 107 of the CGST Act, and the company should follow that route. Additionally, factual matters like whether goods were actually supplied or not, or whether firms are genuine, require detailed examination, which is not suitable for a writ petition.

The court also reviewed the original order passed by the GST department. It was discovered that the company was given multiple opportunities to be heard on 11th Nov, 26th Nov, and 10th Dec 2024, and also on 16th Dec, as requested by them. However, the petitioner did not appear for any of them. They were also sent a reply via email on the last date. Therefore, the claim made by the petitioner was not true.

In the final decision, the court ruled that the company, i.e., Samarth Traders, should file an appeal under Section 107 of the CGST Act before the Appellate Authority. The company has been given time till 30th September, 2025, to file the appeal, even if the regular deadline has passed. If they pay the required pre-deposit, the appeal will be heard on its merits, meaning it will be fully considered. In the end, the court dismissed the appeal, saying it would not interfere at this stage.