In a recent legal development, the Supreme Court upheld the Delhi High Court's decision regarding the issuance of a consolidated Show Cause Notice (SCN) against Ambika Traders. The case involved allegations of fraudulent Input Tax Credit (ITC) claims based on invoices from 20 non-existent firms. The proprietor, Mr. Gaurav Gupta, was arrested but later released on bail. Despite the petitioner's requests for cross-examination being denied, the Adjudicating Authority confirmed the tax demand and imposed penalties on both the firm and its proprietor.
Ambika Traders contested the High Court's decision to allow a combined SCN for multiple financial years by filing a Special Leave Petition (SLP) with the Supreme Court. The central issue was whether a SCN issued for a consolidated period was valid. The Delhi High Court had previously noted that a single instance of ITC availment in one financial year might not reveal fraudulent patterns. It emphasized the importance of analyzing a series of transactions to establish consistent fraudulent activity, thereby justifying the issuance of a combined SCN.
The Supreme Court dismissed the SLP after the petitioner expressed a desire not to pursue the petition further. This decision reinforces the validity of consolidated SCNs in cases where a pattern of fraudulent ITC claims emerges over multiple financial years, aligning with the High Court's reasoning that a comprehensive investigation is necessary to uncover fraudulent activities.
Order Date - 01 September 2025
Parties: Ambika Traders Vs Additional Commissioner, Adjudication, DGGSTI, CGST Delhi North
Facts -
- The Petitioner, Ambika Traders, was issued a consolidated Show Cause Notice alleging fraudulent availment and passing of ITC based on invoices from 20 fake/non-existent firms. Proprietor Mr. Gaurav Gupta was arrested and later released on bail.
- Despite filing replies and seeking cross-examination, which was denied, the Adjudicating Authority confirmed the entire tax demand with an equivalent penalty on the firm and an additional penalty on the proprietor.
- Petitioner filed writ petition before Delhi Court, wherein High Court allowed issuance of combined show cause notice in this case.
- Being aggrieved, Petitioner filed SLP before Supreme Court challenging the High Court decision.
Issue -
- Whether the SCN issued for consolidated period is valid?
Order -
- Earlier the Division Bench of the Hon’ble High Court observed that a solitary availment or utilization of ITC in one financial year may actually not be capable of by itself establishing the pattern of fraudulent availment or utilization. It is only when the series of transactions are analysed, investigated, and enquired into, and a consistent pattern is established, that the fraudulent availment and utilization of ITC may be revealed. Accordingly, High Court allowed issuance of combined show cause notice.
- Supreme Court now have dismissed the special leave petition filed by the Petitioner and held that as the petitioner states that he does not want to press this petition.
