In a significant ruling reinforcing the enforcement architecture of the GST regime, the Delhi High Court has upheld a penalty of approximately ₹285.66 crore imposed on a GST consultant for aiding and abetting fraudulent availment and passing of Input Tax Credit (ITC). The decision in Bhupender Kumar v. Additional Commissioner Adjudication CGST Delhi North & Ors. affirms the expanding scope of liability under Section 122(1A) of the CGST Act, 2017, particularly in cases involving facilitators and intermediaries.
Factual Matrix and Proceedings
The petitioner, Bhupender Kumar, a GST consultant, challenged an adjudication order dated 1 February 2025, which arose from a show cause notice issued on 8 March 2024 by the Directorate General of GST Intelligence (DGGI). The investigation revealed the creation of 63 non-existent firms, of which 54 were actively used for issuance of invoices without any underlying supply of goods or services, resulting in fraudulent ITC of ₹285 crore.
The petitioner was alleged to have facilitated GST registrations, arranged PAN cards, SIM cards, login credentials, and enabled operational control of fake entities, while being fully aware of their fictitious nature.
Statutory Basis of Penalty
The adjudicating authority imposed:
- Penalty equivalent to the fraudulently availed ITC under Section 122(1A)
- Additional penalties under Sections 122(3)(a), (d), (e) and Section 125 of the CGST Act
Section 122(1A), inserted to widen the net of liability, specifically targets persons who retain benefits arising from transactions involving fake invoices or fraudulent ITC, even if they are not the principal beneficiaries.
Core Legal Issues Before the Court
The writ petition raised three principal legal contentions:
- Absence of specific notice under Section 122(1A)
- Non-applicability of Section 122(1A) to consultants, as the alleged mastermind was another individual
- Retrospective application of Section 122(1A) to transactions preceding its insertion
Court’s Analysis and Findings
The High Court rejected the petitioner’s arguments, holding as follows:
- The show cause notice, read holistically, clearly alleged aiding, abetting, and conscious facilitation of fraudulent ITC, sufficient to sustain penalties under Section 122, including sub-section (1A).
- The petitioner’s own statements recorded under Section 70 demonstrated knowledge, participation, and facilitation in creating bogus firms and enabling paper transactions.
- Crucially, the petitioner failed to file any reply to the show cause notice, thereby not rebutting allegations of having derived commission-based benefits from the fraudulent scheme.
The Court emphasised that professional designation does not dilute statutory liability where knowledge and intent are established.
On Retrospective Applicability of Section 122(1A)
The Court held that Section 122(1A) was applicable from the date of issuance of the SCN and could validly apply to continuous and ongoing fraudulent conduct, even if parts of the transaction pre-dated the amendment.
The ruling clarifies that the provision is remedial and deterrent, aimed at addressing systemic abuse of ITC mechanisms, and cannot be neutralised by technical arguments on retrospectivity where fraud is continuing in nature.
Limits of Writ Jurisdiction in GST Fraud Cases
A key jurisprudential takeaway is the Court’s reiteration that writ jurisdiction under Article 226 is ill-suited for adjudicating complex factual disputes, especially in cases involving:
- Large-scale ITC fraud
- Multiple entities and layered transactions
- Evidentiary analysis of statements, documents, and digital trails
The Court stressed that the statutory appellate remedy under Section 107 is the appropriate forum for such disputes.
Relief Limited to Appellate Remedy
While dismissing the writ petition, the Court exercised discretion to allow the petitioner to file an appeal under Section 107 of the CGST Act, notwithstanding expiry of limitation, directing that the appeal be heard on merits, subject to statutory pre-deposit.
Broader Implications for GST Professionals
This ruling has far-reaching implications for GST consultants, accountants, and intermediaries:
- Aiding and abetting attracts penalties equal to the quantum of ITC fraud, not merely nominal penalties
- Consultants cannot rely on “limited role” defences where knowledge and facilitation are established
- Failure to respond to SCNs may be construed as acquiescence to allegations of benefit
- Courts are inclined to prioritise systemic protection of GST over procedural leniency
Conclusion
The Delhi High Court’s decision underscores a strict judicial approach towards ITC fraud, particularly against enablers operating behind the scenes. By upholding the ₹285 crore penalty and endorsing the application of Section 122(1A), the judgment reinforces the principle that GST is a trust-based tax system, and its abuse, whether by beneficiaries or facilitators, will invite severe civil consequences.
Delhi HC Judgement dated 07/07/2025: ₹285 Cr Penalty upheld under Section 122(1A) on GST Consultant for Aiding Fake ITC Fraud