Shared OTP, Faced Rs 50 Crore GST Fraud: Delhi HC Dismisses Trader’s Petition

The Delhi High Court recently dismissed a petition challenging a GST demand order, as the involved company tried cancelling its GST registration by sharing OTP with a third party. However, the GST number was only surrendered, not cancelled, which was then misused by multiple firms several times to claim fake ITC. Court ruled the petition is also fully innocent, as it shared its OTP with a third party, which is illegal.

The current writ petition (W.P.(C) 9371/2025 & CM APPL. 39636/2025) is being filed by a company named M/s Radhey Traders (registered under GST in India) in the Delhi High Court, before the benches comprising Honourable Justice Prathiba M. Singh and Justice Shail Jain. The company challenged two GST orders issued by the GST department, demanding large amounts of money from the company. The orders claimed that the company took advantage of Input Tax Credit (ITC), which they were not entitled to, and also owe a difference in tax payments due to discrepancies in their tax returns.

Previously, the company was issued with a show cause notice (SCN) dated December 15, 2023, by the GST department, alleging that the company fraudulently claimed ITC after the deadline for filing returns. Later, the GST department confirmed the demand of wrongly availed ineligible ITC of over Rs. 1.14 crore along with the imposition of interest and penalty via an Order-in-Original dated 5th April 2024 and then issued another Order-in-Original dated 27th August 2024 confirming the demand of Rs. 8.19 crore on the company due to the difference in tax liability as per GSTR-1 and GST-3B and a further demand of ineligible ITC of Rs. 19.5 Lakh from inward suppliers whose GSTINs have been cancelled retrospectively along with the imposition of interest and penalty.

The company argued that although they got their GST registration confirmed on 23rd November 2018, they never started their business or used that GST number for business purposes. Additionally, the company claimed that they were never served with any SCN or orders; they only became aware of the issue when the Income Tax Department sent them a notice in March 2024. Where the IT department alleged the company misused their GST registration number to carry out sales worth over Rs. 50 Crores in the financial year 2019-2020. Thereafter, the company filed police complaints and an FIR in the Special Cell of Delhi Police.

This FIR investigated the misuse of Radhey Traders’ GST number and concluded that the company had been trying for a long time to surrender the GST registration to avoid penalties for non-filing of returns. When visiting the GST office, they were told that if the firm was not operating, the GST number would be suspended automatically. Then, the company shared its OTP with an individual named Tara Chand Sagar, who promised to cancel the GST registration but only suspended it. After that, he misused the number several times to claim to carry out large transactions fraudulently. Police found that seven different firms issued bills in the name of Radhey Traders, and these firms are no longer operational. The investigation also revealed that the company’s registered mobile number and email ID were changed without their knowledge, indicating misuse by others.

When the court asked about the FIR, the police confirmed that an investigation is underway. The court also noted that the company admitted to giving the OTP to Tara Chand Sagar, which was used to suspend the GST registration and this enabled fraudulent use of the GST number by others. Considering all the facts of the case, the court said the company cannot claim to be completely innocent, as it shared its mobile OTP with a stranger, which is illegal as per the law. Since the matter involves a complex investigation about who misused the GST number, it should be dealt with by the police, not the court.

Therefore, the court refused to entertain the company’s writ petitions challenging the GST demands and dismissed the case. However, the Petitioner is free to pursue other legal remedies allowed under the law.