Jain Cement Udyog Vs Union of India & Anr. (Delhi High Court)
Summary: The Delhi High Court declined to interfere under Article 226 with a show cause notice and consequential Order-in-Original confirming GST liability of Rs.7,26,59,252 against Jain Cement Udyog and relegated the petitioner to the statutory appellate remedy under Section 107 of the CGST Act.
The petitioner had also challenged the constitutional validity of Section 16(2)(c) of the CGST Act, insofar as ITC could be denied to a bona fide recipient because of non-payment of tax by the supplier. The Court held that the constitutional issue was no longer res integra in view of the Supreme Court’s decision in Bhandari Scrap Traders Vs Union of India & Ors., which upheld Section 16(2)(c) and rejected the contention that the provision should be read down merely because the supplier may default.
On facts, the impugned proceedings were based on the petitioner’s GSTR-3B, GSTR-1, GSTR-2A and e-way bill data, allegedly showing availment of ITC from suppliers whose registrations stood cancelled before the dates of invoices.
The Court observed that determining whether the petitioner had discharged the burden regarding actual receipt of goods and payment of tax required examination of evidence such as transport records, delivery challans and payment trails and was therefore appropriately undertaken by the Appellate Authority.
The Court similarly declined to decide the petitioner’s natural justice objection, observing that the record indicated that a hearing had been afforded and the reply considered, although not accepted. The petitioner’s contention based on Section 6(2)(b) of the CGST Act was also left for the appellate forum.
Earlier DGGI proceedings arose from alleged fraudulent availment and passing on of ITC through non-existent firms and culminated in penalties under Section 122, whereas the impugned Section 73 proceedings concerned allegedly wrongful ITC from suppliers whose registrations were subsequently cancelled.
Whether both concerned the same “subject matter”, and whether there was duplication or double taxation, were held to involve factual or mixed questions requiring examination by the Appellate Authority.
Consequently, the High Court disposed of the writ petition without expressing any opinion on merits and permitted the petitioner, if so advised, to seek exclusion under Section 14 of the Limitation Act, 1963 for the period during which the writ petition remained pending.
Cases Discussed
Bhandari Scrap Traders Vs Union of India & Ors., (2026) 161 GSTR 150 (Supreme Court of India) — Relied upon for the proposition that Section 16(2)(c) of the CGST Act is constitutionally valid and is not required to be read down merely because the supplier may default in payment of tax.
