Must Consider Burden On State Exchequer & Balance It Against Interest Of Party In ITC Fraud Cases: Delhi High Court

The Delhi High Court has held that the Courts must, while dealing with cases involving fraudulent availment of Input Tax Credit, balance the interest of trader with that of burden on State exchequer due to tax evasion.

A division bench of Justices Prathiba M. Singh and Shail Jain observed,

“in cases involving fraudulent availment of ITC…there are complex transactions involved which require factual analysis and consideration of voluminous evidence, as also the detailed orders passed after investigation. In such cases, it would be necessary to consider the burden on the exchequer as also the nature of impact on the GST regime, and balance the same against the interest of the Petitioners, which is secured by availing the right to statutory appeal.”

The remarks were made while dealing with an electrical company's plea against Rs.9,81,070/- demand.

The Department alleged that the Petitioner had transferred substantial amounts of ITC through GSTR filing whereas there was hardly any inward ITC from its declared suppliers. This led to the suspicion that the company did not actually exist.

The Petitioner primarily argued that it was not granted any personal hearing before passing of demand order and hence, there is violation of principles of natural justice.

The Court however observed that the matter is linked to fraudulent availment of ITC by several (79) firms, to the tune of more than Rs.122 crores.

Reliance was placed on M/s MHJ Metal Techs v. Central Goods and Services Tax Delhi South (2025) where it was held that in cases involving fraudulent availment of ITC, considering the burden on the exchequer and the nature of impact on the GST regime, writ jurisdiction ought not to be exercised.

The Court also noted that the Petitioner was well aware of several notices, but in its reply, it failed to take a stand on merits.

As such the Court refused to interfere in the matter.

Appearance: Mr. A.K. Babbar and Mr. B.K. Triapthi, Advs. for Petitioner; Mr. Shashank Sharma, SSC with Ms. Malika Kumari, Advs. for R-1 & 2. Ms. Vaishali Gupta, Panel Counsel (Civil), GNCTD for R-3 & 4.

Case title: Toshniwal Electricals Pvt Ltd Through Its Director Mukund Maheshwari v. The Principal Commissioner Of Central Tax Delhi North & Ors.

Citation: 2025 LiveLaw (Del) 1501

Case no.: W.P.(C) 16455/2025

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