Case 1: No refund can be granted if GST registration is cancelled: Delhi HCDisposing of the writ petition filed by Shree Radhe Vallabh Traders (Petitioner) against the Commissioner of Central Goods and Services Tax, Delhi East Commissionerate (Respondent), the Delhi High Court, on 24th July, denied the refund claim of ₹1,19,29,742. The Court held that no refund can be granted once the trader’s GST registration is cancelled, especially when the cancellation was not disclosed to the Court.The company, despite having a valid GST number and Import-Export Code (IEC) since 2019, had its registration cancelled after being flagged as a “risky exporter” by the CGST Audit-1 Commissionerate on 6th February 2020. This followed a letter from the Superintendent identifying potential irregularities. The company did not participate in the proceedings leading to the cancellation.
Nonetheless, it applied for a refund without establishing its bona fides as a genuine exporter. As the Court noted, GST exemptions on exports are often misused by unscrupulous entities posing as exporters. Authorities remain vigilant against two major forms of GST abuse: fake exports and fraudulent input tax credit claims.Case 2: Show cause notice for excess input credit valid if issued within 3 monthsIn Tata Play Ltd. v. GST Authorities, the Delhi High Court upheld the validity of a show cause notice (SCN) for ₹10.41 crore (including interest and penalty) issued for alleged excess availing of input tax credit. Tata Play challenged the SCN on the grounds that it was time-barred, asserting it should have been issued within 90 days of the claim.
However, the Court clarified that “three months” under Section 73 of the CGST Act refers to three calendar months, not 90 days, thereby rejecting the time-bar argument and siding with the department.The Court also observed that the petitioner raised a procedural objection instead of contesting the substantive allegation—i.e., the alleged fictitious input credit claim—suggesting the challenge rested on weak footing.Case 3: Consolidated SCN valid for multi-year GST fraudIn Ambika Traders v. Additional Commissioner, GST Delhi, the Delhi High Court ruled on 29th July that a consolidated show cause notice under Section 74 of the CGST Act is valid and appropriate when dealing with frauds spanning more than one financial year.The Court recognized that fraudulent claims of input tax credit often constitute an ongoing scheme, not confined to a single assessment year. Hence, a consolidated approach is both logical and necessary for effective enforcement. This aligns with the principle seen in income tax law, where block assessments are permitted for up to six years following a search operation due to the serial and concealed nature of such crimes.The judgment reiterates that fake input tax credit is a persistent challenge under GST law. While input credit was introduced to eliminate the cascading effect of tax on tax, the system has been exploited by fraudsters using fabricated purchase invoices to claim illegitimate credits.—Legal Digest is a weekly column that brings readers the latest tax-related legal developments, primarily court rulings. The author, S. Murlidharan, is a Chartered Accountant and tax law expert. The views expressed are personal.(Edited by : Unnikrishnan)First Published: Aug 20, 2025 1:10 AM IST
