2026-VIL-1136-DEL
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SGST High Court Cases

GST - Constitutional validity of Section 16(2)(c) of the CGST Act - Petitioner challenge to order under Section 74 confirming demand of input tax credit with interest and equivalent penalty, and sought that Section 16(2)(c) be struck down or read down so as to exclude bona fide recipients who have undertaken genuine transactions with duly registered suppliers, where the supplier has failed to discharge its tax liability - HELD - The issue no longer survives in view of the judgment of the Division Bench of the Gujarat High Court in Maruti Enterprises case, which was considered by the Supreme Court and not interfered with. The Supreme Court examined the distinction between the scheme under the Delhi VAT Act and the CGST Act, noticing that there is no parity between a purchasing dealer under the CGST Act and a purported bona fide purchasing dealer under the Delhi VAT Act where the supplier fails to pay the requisite tax, and took note of Section 41 and Sections 73 and 74 of the CGST Act concerning re-availment of reversed ITC upon discharge of tax liability by the supplier. The Supreme Court held that no grounds were made out for declaring Section 16(2)(c) unconstitutional or for reading it down - The challenge to the constitutional validity of Section 16(2)(c) cannot be accepted and the reliefs seeking striking down or reading down of the provision are declined - GST - Validity of adjudication order under Section 74 of the CGST Act confirming ITC demand on retrospective cancellation of supplier registrations - Whether the order passed under Section 74 discloses the necessary factual and statutory foundation for fastening tax, interest and penalty liability on the Petitioner - HELD - Where an authority invokes Section 74, the adjudication order must disclose the factual basis on which the statutory ingredients of fraud, wilful misstatement or suppression of facts to evade tax are said to be satisfied, and mere reproduction of the statutory language without particulars does not demonstrate the application of mind necessary to sustain the order - The audit objection made only a general assertion. The order did not disclose the names or GSTINs of the suppliers, the supplier-wise invoice dates, the dates from which registrations were cancelled. These omissions are not a mere technical defect, as they are the factual foundation of the demand and their absence deprives the Petitioner of an effective opportunity to meet the case - The order also records no specific finding on how the Petitioner committed fraud, made wilful misstatement or suppressed any material fact, and does not show that the Petitioner's defence was considered - The conclusion on the Constitutional challenge to Section 16(2)(c) does not dispense with the requirement that the adjudicating authority invoking Section 74 must satisfy itself that the statutory conditions are met in the facts of the particular case. The deficiencies go to the root of the adjudication - The O-in-O and consequential proceedings are set aside and the matter is remanded for fresh adjudication after opportunity of hearing, with specific findings identifying the suppliers and transactions and an independent examination of the requirements of Section 74 - The Petition is disposed of
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