S.74 CGST Act | Consolidated SCN For Multiple Financial Years Necessary To Establish Wrongful Availment Of ITC: Delhi High Court

A division bench of Justices Prathiba M. Singh and Rajneesh Kumar Gupta observed,

“The nature of ITC is such that fraudulent utilization and availment of the same cannot be established on most occasions without connecting transactions over different financial years. The purchase could be shown in one financial year and the supply may be shown in the next financial year. It is only when either are found to be fabricated or the firms are found to be fake that the maze of transactions can be analysed and established as being fraudulent or bogus.

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. The language in the abovementioned provisions i.e., the word `period' or `periods' as against `financial year' or `assessment year' are therefore, significant.”

The judgment is a contrast to Apex Court's Constitution Bench decision in State of Jammu and Kashmir and Others v. Caltex (India) Ltd (1966) which in the context of Sales Tax Act held that where an assessment encompasses different assessment years, each assessment year could be easily split up and dissected and the items can be separated and taxed for different periods.

The Petitioner firm claimed to be dealing in metal scrap. It assailed the order raising demand to the tune of Rs. 83,76,32,528/ on alleged ground of fraudulent availment of Input Tax Credit during financial years 2017-2018, 2018-2019, 2019-2020, 2020-2021 and 2021-2022.

One of the primary contentions raised by the Petitioner before the High Court was that a consolidated demand cannot be raised for multiple financial years.

Disagreeing, the High Court pointed that Section 74 would itself show that at least insofar as fraudulently availed or utilized ITC is concerned, the language used in Section 74(3) of the CGST Act and Section 74(4) of the CGST Act is “for any period” and “for such periods” respectively.

This, the Court said, contemplates that a notice can be issued for a period which could be more than one financial year.

The Court further pointed that this is in contrast with the language used in Sections 73(10) and 74(10) of the CGST Act where the term “financial year” is used.

“The Legislature is thus, conscious of the fact that insofar as wrongfully availed ITC is concerned, the notice can relate to a period and need not to be for a specific financial year,” the Court said.

In the present case the Court noted that more than Rs.83 Crores fraud is alleged for transactions between the years 2017 to 2021. A consolidated notice is, therefore, not merely permissible but, in fact, required in such cases in order to establish the illegal modality adopted by such businesses and entities, the Court said.

As such, relief was denied and Court imposed costs of Rs.25,000/- on the Petitioner.

Appearance: Mr. Rajesh Jain, Mr. Rishabh Jain, Mr. Virag Tiwari, Mr. Ramashish and Ms. Tanya Saraswat, Advocates for Petitioner; Mr. R. Ramachandran, Sr. Standing Counsel with Mr. Prateek Dhir, Advocate for Respondent

Case title: Ambika Traders Through Proprietor Gaurav Gupta v. Additional Commissioner, Adjudication DGGSTI, CGST Delhi North

Citation: 2025 LiveLaw (Del) 927

Case no.: W.P.(C) 4853/2025

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