Delhi High Court Allows Consolidated Show Cause Notices in GST ITC Fraud Cases
Case: Ambika Traders v. Additional Commissioner, Adjudication DGGSTI, CGST Delhi North
Court: Delhi High Court (Justices Prathiba M. Singh & Rajneesh Kumar Gupta)
Date of Decision: 29th July 2025
Introduction
One of the hotly debated issues in Goods and Services Tax (GST) litigation is whether the Department can issue a single, consolidated Show Cause Notice (SCN) covering multiple financial years in cases of fraudulent Input Tax Credit (ITC).
In a landmark judgment, the Delhi High Court in Ambika Traders v. Additional Commissioner, Adjudication DGGSTI has held that “bunching of SCNs” is permissible in ITC fraud cases, given the nature of fake invoice rackets that span across years. This ruling has significant implications for both taxpayers facing GST investigations and authorities tackling fake ITC frauds.
Background of the Case
• Petitioner: Ambika Traders (proprietorship dealing in metal scrap).
• Allegation: Fraudulent availment and passing on of ITC worth ₹83.76 crore through invoices from 20 non-existent/fake suppliers.
– Proceedings:
• Search and arrest of proprietor in 2021.
• SCN dated 29th May 2023 covering five years (2017–18 to 2021–22).
• Adjudicating Authority confirmed the demand along with equal penalty (total demand + penalty over ₹167 crore).
– Petitioner’s Argument:
• SCN could not club multiple years.
• Replies were not considered.
• Cross-examination was denied.
• Violation of natural justice.
Delhi High Court’s Key Findings
1. Consolidated SCN for Multiple Years is Valid
• Sections 73(3)/(4) and 74(3)/(4) of CGST Act use the terms “for any period” and “for such periods”.
• Fraudulent ITC often spans across financial years, making consolidated SCNs necessary.
• Issuing year-wise notices would defeat the objective of tackling organized ITC fraud networks.
2. No Violation of Natural Justice
• Court found that the assessee’s replies were duly considered in the 100-page adjudication order.
• The assessee raised only technical objections without proving actual business transactions.
• Cross-examination is not an absolute right in GST proceedings; it can be denied if not essential.
3. Burden of Proof on Assessee
• Under Section 155 of CGST Act, the burden lies on the person claiming ITC.
• Since Ambika Traders could not prove genuine receipt of goods, denial of ITC was justified.
4. Appealable Order
• The High Court observed that the order was appealable under Section 107 of CGST Act.
• Writ jurisdiction is not meant to bypass the appellate remedy unless there is a clear jurisdictional error.
Why This Judgment Matters
1. Strengthens GST enforcement – Fake ITC frauds often involve layers of bogus firms across years. This ruling validates the Department’s approach of issuing consolidated notices.
2. Clarity on cross-examination rights – Taxpayers cannot demand unlimited cross-examination in SCN proceedings.
3. Burden on taxpayers – Genuine businesses must maintain documentary proof of goods movement, suppliers, and payments to safeguard ITC claims.
4. Precedent for similar cases – Other High Courts may now follow Delhi HC’s reasoning, creating uniformity in GST litigation.
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Practical Takeaways for Businesses
• Verify suppliers: Always check GST registration, filing status, and genuineness of vendors.
• Maintain strong documentation: Proof of movement of goods, e-way bills, invoices, and payments is critical.
• Be cautious in ITC claims: A wrong claim may not only invite tax demand but also equal penalty and prosecution.
• Timely response to SCNs: Instead of raising only technical objections, provide transactional evidence to defend ITC claims.
Conclusion
The Delhi High Court has made it clear that in fraudulent ITC cases, the Department can issue a single consolidated SCN covering multiple years. This judgment strengthens the anti-evasion drive and puts taxpayers on notice that compliance and documentation are non-negotiable in GST.
For businesses, the message is loud and clear: deal with genuine suppliers, keep proper records, and claim ITC cautiously — because fake invoices can cost you dearly.
The copy of the order is as under:
