GST: Delhi HC Refuses Writ Relief to Consultant in Rs. 285 Cr Fake ITC Case; Permits Belated Appeal

GST: Delhi HC Refuses Writ Relief to Consultant in Rs. 285 Cr Fake ITC Case; Permits Belated Appeal

In a recent ruling, the Delhi High Court has refused to provide immediate relief to a GST consultant, Mr. Bhupender Kumar, who was accused of being involved in a huge Rs 285 crore Fake GST ITC case. However, the court allowed him another chance to file a belated appeal.

Mr. Bhupender Kumar, a GST consultant, along with three others (Sh. Naveen Monga, Sh. Anoop Kumar and Sh. Sanjay Sehgal), were issued a show-cause notice on March 8, 2024, by the Central GST Delhi North. In the show-cause notice, it was claimed that Sh. Sanjay Sehgal and his associates were operating 44 fake firms, and the petitioner was one of the consultants involved by Sehgal, who was the mastermind in the creation of these firms.

After the investigation was conducted, it was found that there were actually 63 fake firms, out of which 54 firms were used illegally for claiming and passing Input Tax Credit (ITC). The Tax Department conducted searches at four premises, including the residential address of the petitioner.

However, the petitioner submitted that no notice was issued under Section 122(1A) of the CGST Act, so the penalty cannot be levied under this provision until the other conditions under Section 122(1A) of the CGST Act are fulfilled. He also submitted that he was just a consultant and Sanjay was the mastermind of the alleged transactions. The petitioner relied on the decision of the Allahabad High Court, M/s Samsung India Electronics Private Limited v. State of U.P. & Ors, contending that if the allegations are not mentioned in the show cause notice, the final order cannot be passed on something which is not mentioned in the SCN.

The Delhi High Court, after observing the show-cause notice, found that the petitioner knew that he was helping Sanjay in creating fake entities. His exact role needs factual analysis, which cannot be undertaken in a writ petition. The court stated that since the petitioner was a former GST department employee, he used his knowledge to operate this fraud. The petitioner also claimed that he was paid a commission of Rs 10,000 to Rs 15,000, but gave no reply to the show cause notice and did not deny getting these benefits.

The court also observed that the manner of the fraud, which involved availing ITC illegally, was a continuous process and not a one-time act. Therefore, in this case, Section 122(1A) of the CGST Act was applicable here.

Accordingly, the court dismissed the writ petition, but gave another chance to the petitioner to file a belated appeal before the appellate authority under section 107 of the CGST Act, 2017, within one month along with the pre-deposit. The petitioner’s appeal will not be rejected if it is filed within one month.