GST Fake Firms Case: Court Dismisses Writ Petition And Imposes
Penalty For Non-Participation Despite Multiple Hearing Opportunities
Introduction
Fraudulent availment of
Input Tax Credit (ITC) has been one of the most debated issues under the Goods
and Services Tax (GST) regime. While the law provides for strict action against
fake firms and bogus billing, courts have consistently emphasized that taxpayers
must be given proper opportunity to defend themselves before adverse orders
are passed.
The case of Ganpati
Polymers vs. Commissioner of Central Goods and Service Tax & Another
before the Delhi High Court sheds light on what happens when a taxpayer
fails to effectively participate in departmental proceedings despite being
issued notices and granted personal hearings.
The Court, in its
decision dated 8th August 2025, dismissed the writ petition filed by
Ganpati Polymers, imposed a cost of ₹50,000, and directed the petitioner
to avail the statutory appellate remedy.
This article analyses the
case in detail, including its background, submissions, observations of the
Court, and the lessons it holds for taxpayers and practitioners.
Case
Details
- Case Title:
Ganpati Polymers through Proprietor Ankur Jain vs. Commissioner of
Central Goods and Service Tax & Another
- Court:
High Court of Delhi at New Delhi
- Case No.:
W.P.(C) 11906/2025 & CM APPL. 48520/2025 & CM APPL. 48521/2025
- Date of Order:
8th August 2025
- Legal Provision Involved:
Section 73, Section 74 of the CGST Act, 2017 (Fraudulent ITC), Section 107
(Appeals)
Summary of
the Case
The petitioner, Ganpati
Polymers, was alleged to have fraudulently availed and utilized ineligible
ITC to the tune of ₹50.33 crores. The case was part of a larger
investigation against two individuals, Mr. Rajesh Jindal and Mr. Adesh Jain,
who were accused of creating multiple fake firms and issuing invoices without
actual supply of goods.
Show Cause Notices were
issued to several entities, including Ganpati Polymers. Multiple opportunities
for personal hearing were provided on 21st November 2024, 16th December
2024, and 26th December 2024. While some noticees attended, Ganpati
Polymers neither filed a reply nor appeared for hearings.
Ultimately, an Order-in-Original
dated 1st February 2025 was passed confirming demand, followed by DRC-07
uploaded on 9th February 2025. The petitioner challenged this order before the
Delhi High Court, primarily on the grounds of delay in passing the order and
non-consideration of their submissions.
The Court, however, found
that the petitioner had been negligent in not participating in proceedings,
upheld the departmental order, dismissed the writ petition with ₹50,000 cost,
but granted liberty to file an appeal under Section 107 of the CGST Act.
Facts of
the Case
1. Genesis
of the Case
o Investigation
against Rajesh Jindal and Adesh Jain revealed that they had floated
multiple fake firms to pass on fraudulent ITC.
o These
firms issued invoices without actual supply of goods.
2. Search
and Seizure
o On
31st July 2018, searches were conducted at various premises of the
accused individuals.
o Documents,
digital devices, and statements were seized.
3. Modus
Operandi Identified
o The
alleged transport vehicles used were two-wheelers and three-wheelers (scooters,
autos), clearly incapable of transporting the quantities of goods claimed.
o ITC
worth ₹50.33 crores was found to have been fraudulently availed by
multiple entities.
4. Proceedings
Against Ganpati Polymers
o Ganpati
Polymers was identified as one of the beneficiary firms.
o It
was served with Show Cause Notice dated 5th August 2024.
o The
GST registration of the petitioner had been suspended since 3rd February
2022.
5. Personal
Hearings
o Hearings
were fixed on 21.11.2024, 16.12.2024, and 26.12.2024.
o Ganpati
Polymers (noticee no. 15) did not appear on any of these dates nor file a
reply.
6. Order-in-Original
o A
detailed Order-in-Original dated 1st February 2025 was passed by the
Additional Commissioner, CGST (North), confirming the demand.
o DRC-07
was issued on 9th February 2025.
7. Writ
Petition before High Court
o The
petitioner argued that the order was belated and that due consideration
was not given to their submissions.
Submissions
by the Petitioner
The petitioner advanced
the following arguments:
- Suspension of GST Registration:
Since the GST registration had been suspended from 3rd February 2022, the
petitioner claimed difficulty in filing a reply on the portal.
- Ignorance of Notices:
Counsel submitted that the petitioner was not a frequent visitor to the
GST portal and thus could not respond in time.
- Recording of Statement:
The statement of proprietor Ankur Jain was recorded, which showed
cooperation.
- Belated Order:
The petitioner alleged that the Order-in-Original was passed belatedly
beyond the prescribed limitation.
Defence by
the Respondent
The Department argued
strongly against the petitioner:
- Adequate Opportunities Given:
Multiple notices and personal hearing opportunities were provided. The
petitioner deliberately chose not to attend.
- Callous Conduct:
Non-participation in proceedings amounted to negligence. The Court should
not condone such conduct.
- Timely Order:
The OIO was dated 1st February 2025, within the limitation period.
The DRC-07 upload on 9th February 2025 did not invalidate the order.
- Fraudulent ITC:
The case involved fraudulent availment of ITC worth ₹50.33 crores,
and strong departmental action was justified.
Observations
of the Court
The Delhi High Court made
the following key observations:
1. On
Non-Participation by Petitioner
o The
petitioner had deliberately failed to file a reply or attend hearings
despite being aware of the investigation.
o Claiming
ignorance of notices on the GST portal was not acceptable.
2. On
Procedural Fairness
o The
Department had granted multiple opportunities for hearing. Thus, principles
of natural justice were not violated.
3. On
Limitation
o The
OIO was signed and dated 1st February 2025. Upload of DRC-07 on 9th February
2025 did not mean the order was belated.
4. On
Petitioner’s Conduct
o The
Court described the petitioner’s conduct as “callous”, noting that it
cannot be condoned in a serious matter of fraudulent ITC.
Judgment of
the Court
The Delhi High Court
held:
- The writ petition was not
maintainable as the petitioner had an alternate statutory remedy of
appeal under Section 107 of the CGST Act.
- The writ petition was dismissed with
a cost of ₹50,000, payable to the Delhi High Court Bar Association
within two weeks.
- However, the Court allowed liberty to
the petitioner to file an appeal by 31st August 2025, and directed
that if such appeal is filed with requisite pre-deposit, it shall not be
dismissed on limitation grounds and should be decided on merits.
Conclusion
The ruling in Ganpati
Polymers vs. Commissioner of CGST is a strong reminder for taxpayers that non-participation
in GST proceedings can prove fatal. The Court refused to intervene where
the taxpayer failed to file replies or attend hearings despite opportunities.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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