Rajasthan High Court - Jodhpur

Jyoti Petro Chem Industries vs State Of Rajasthan on 27 August, 2025

Author: Pushpendra Singh Bhati

Bench: Pushpendra Singh Bhati

[2025:RJ-JD:36893-DB]

      HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
                       JODHPUR
                D.B. Civil Writ Petition No. 5695/2024

Jyoti Petro Chem Industries, Proprietor Mahaveer Mehta S/o Shri
Bhanwarlal Mehta Aged About 64 Years B-4, Uit Colony, Pratap
Nagar, Jodhpur-Rajasthan.
                                                                       ----Petitioner
                                       Versus
1.       State Of Rajasthan, Through Principal Secretary,
         Department Of Finance, Government Of Rajasthan, Jaipur.
2.       The Commissioner Of State Tax, Kar Bhawan, Bhawani
         Singh Road, Jaipur-302 005
3.       The Assistant Commissioner, Circle-E, State Gst, Kar
         Bhawan, Court Premises, Jodhpur-342010
                                                                    ----Respondents
                                 Connected With
                D.B. Civil Writ Petition No. 5718/2024
Jyoti Petro Chem Industries, Proprietor Mahaveer Mehta S/o Shri
Bhanwarlal Mehta Aged About 64 Years, B-4, Uit Colony, Pratap
Nagar, Jodhpur-Rajasthan.
                                                                       ----Petitioner
                                       Versus
1.       State Of Rajasthan, Through Principal Secretary,
         Department Of Finance, Government Of Rajasthan, Jaipur.
2.       The Commissioner Of State Tax, Kar Bhawan, Bhawani
         Singh Road, Jaipur - 302005.
3.       The Assistant Commissioner, Circle-E, State Gst, Kar
         Bhawan, Court Premises, Jodhpur - 342010.
                                                                    ----Respondents



For Petitioner(s)            :     Mr. Anil Bhansali
For Respondent(s)            :     Mr. Mahaveer Bishnoi, Additional
                                   Advocate General



     HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI

HON'BLE MR. JUSTICE SANDEEP TANEJA

Judgment

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Reserved on 28/07/2025 Pronounced on 27/08/2025

Per Dr. Pushpendra Singh Bhati, J:

1. The instant writ petitions under Article 226 of the

Constitution of India have been preferred claiming the following

reliefs:

D.B. Civil Writ Petition No. 5695/2024 "It is, therefore, in these circumstances humbly prayed that the Hon'ble Court may kindly be pleased to:

i) The present Writ Petition preferred by the humble petitioner may kindly be allowed by this Hon'ble Court.

ii) The show cause notice under section 74 dated 11.01.2024 (Ann.3) may please be declared as without jurisdiction and without satisfying the conditions of issuance of such notice and held to be illegal and contrary to legal provisions

iii) The show cause notice dated 11.01.2024 (Ann.3) and the proposed actions in the said notice may please be declared as illegal, arbitrary and any proceedings or steps taken after the filing of this petition also be declared as illegal and without force.

iv) The ITC in respect of purchases from Takaxian Trading Pvt. Ltd. Wrongly recovered kindly be directed to be allowed.

v) Any other appropriate order or directions which are deemed just and proper by this Hon'ble Court may also be passed in favour of the humble petitioner and in the interest of justice."

D.B. Civil Writ Petition No. 5718/2024 "It is, therefore, in these circumstances humbly prayed that the Hon'ble Court may kindly be pleased to:

i) The present Writ Petition preferred by the humble petitioner may kindly be allowed by this Hon'ble Court.

ii) The show cause notice under section 74 dated 11.01.2024(ann.3) may please be declared as without jurisdiction and without satisfying the conditions of issuance of

[2025:RJ-JD:36893-DB] (3 of 12) [CW-5695/2024]

such notice and held to be illegal and contrary to legal provisions.

iii) The show cause notice dated 11.01.2024 (Ann.3) and the proposed actions in the said notice may please be declared as illegal, arbitrary and any proceedings or steps taken after the filing of this petition also be declared as illegal and without force.

iv) The ITC in respect of purchases from Takaxion Trading Pvt. Ltd. Wrongly recovered kindly be directed to be allowed

v) Any other appropriate order or directions which are deemed just and proper by this Hon'ble Court may also be passed in favour of the humble petitioner and in the interest of justice."

2. Brief facts of the case were that the petitioner is engaged in

the business of trading and refining of used fuel oil and lubricant

oil in the name and style of Jyoti Petro Chem Industries, which is

duly registered under the provisions of the Goods and Services

Tax Act, 2017. In the ordinary course of its business, the

petitioner availed Input Tax Credit (ITC) on purchases made from

Suppliers on the basis of tax invoices and corresponding entries

duly reflected in the GST returns.

2.1. An authorization in Form INS-01 was issued on 11.07.2023

by the Additional Commisioner. In compliance thereof, the

Assistant Commissioner, along with other team members,

conducted an inspection at the factory premises of the petitioner

on 12.07.2023, during which business records and documents

were examined. On 23.08.2023, the petitioner addressed a letter

to the respondent authorities seeking copies of the panchnama,

the summons, the INS-01 authorization, as well as other relevant

documents pertaining to the inspection.

2.2. Subsequently, on 11.01.2024, show cause notices were

issued to the petitioner under Section 74 of the RGST Act,

2017/CGST Act, 2017, read with Section 20 of IGST Act 2017 for

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the tax periods 01.04.2022 to 31.03.2023 (F.Y. 2022-23) and

01.04.2023 to 12.07.2023 (F.Y. 2023-24) (Annexure-3). The

notices stated that on perusal of the petitioner's GSTR-3B return

for the month of July, 2023, the reversal of Input Tax Credit was

found to be duly reflected, thereby substantiating the allegation of

ineligible ITC availed earlier. However, it was alleged that the

petitioner failed to discharge the corresponding liability towards

interest under Section 50 of the CGST/RGST Act, 2017.

2.3. The notices stated that on 19.07.2023, summons were

issued to the petitioner directing production of outbound and

inbound invoices, consignment notes, and bank account

statements. In response thereto, on 30.06.2023, the petitioner

furnished certain details; however, the same pertained only to the

Financial Year 2021-22. Along with the said documents, a written

reply was also furnished wherein the petitioner himself accepted

that ineligible Input Tax Credit availed in respect of purchases

from Takaxian Trading Company had been reversed.

2.3.1.The notices further stated that on perusal of the petitioner's

GSTR-3B return for July 2023, the reversal of ITC was found duly

reflected, thereby establishing the fact of earlier wrongful

availment. However, the corresponding liability towards interest

under Section 50 of the CGST/RGST Act, 2017, had not been

discharged.

2.4. The notices also recorded that despite issuance of summons

on 11.09.2023, no authorized person appeared on behalf of the

petitioner.

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2.5. The notices further stated that upon examination of material

available on record, as well as details uploaded on the GST portal

and other documents, it was revealed that certain suppliers from

whom the petitioner claimed ITC were in fact cancelled ab initio.

Notwithstanding such cancellation, invoices were raised and ITC

was availed by the petitioner, which, according to the respondents,

amounted to contravention of the conditions stipulated under

Section 16(2)(a), 16(2)(b), and 16(2)(c) of the CGST/RGST Act,

2017.

2.6. In response, the petitioner submitted a detailed reply dated

29.02.2024 to the show cause notices dated 11.01.2024. In the

said reply, the petitioner categorically denied the allegations made

by the respondents.

3. Mr. Anil Bhansali, learned counsel on behalf of the petitioner

submitted that the impugned show cause notices dated

11.01.2024 are without jurisdiction, as the preconditions for

invoking Section 74 of the CGST/RGST Act, 2017 have not been

satisfied. It was urged that Section 74 can only be invoked in

cases of fraud, wilful misstatement, or suppression of facts,

whereas in the present case, there is no such allegation

substantiated by any material.

3.1. Learned counsel further submitted that the inspection

conducted on 12.07.2023 pursuant to INS-01 was arbitrary and in

violation of the petitioner's statutory rights, as copies of the

panchnama, summons, and other relevant documents were never

supplied despite repeated requests, including the letter dated

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23.08.2023. Hence, the petitioner was denied a fair and

reasonable opportunity to respond.

3.2. Learned counsel contended that the reversal of Input Tax

Credit in respect of Takaxian Trading Pvt. Ltd. had already been

voluntarily made by the petitioner in GSTR-3B for July 2023 owing

to the fact that petitioner was advised by the respondent authories

to claim it in the forecoming period when the suppliers return

would reflect the same, which is duly reflected in the electronic

records. Therefore, initiation of proceedings under Section 74 for

the same transaction is unsustainable in law.

3.3. Learned counsel submitted that non-payment of interest

under Section 50 cannot, by itself, justify invocation of Section 74.

It was urged that interest liability is automatic and compensatory,

but it is not penal in nature, and therefore, the proceedings under

Section 74 are wholly misconceived.

3.4. Learned counsel further submitted that the suppliers' GST

registrations were "ab initio cancelled" retrospectively, much after

the supplies in question were made. At the time of the purchases,

the suppliers were reflected as active on the GST portal, and tax

invoices were issued in due compliance with law. It was urged that

the petitioner, being a bona fide purchaser, cannot be penalised for

subsequent retrospective cancellation of the suppliers'

registration, an event wholly beyond the petitioner's control. The

petitioner further submitted that retrospective cancellation of

registration cannot nullify bona fide transactions already executed.

Denial of Input Tax Credit on this basis would amount to punishing

the purchasing dealer for no fault of his.

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3.5. Learned counsel on behalf of the petitioner lastly submitted

that the detailed reply dated 29.02.2024 furnished by the

petitioner has not been duly considered, and the proceedings

initiated by the impugned notices are therefore liable to be

quashed as being without jurisdiction, arbitrary, and in violation of

principles of natural justice.

4. Per contra, Mr. Mahaveer Bishnoi, learned Additional

Advocate General, appearing on behalf of the respondents

submitted that the show cause notices dated 11.01.2024 have

been validly issued under Section 74 of the CGST/RGST Act, 2017,

as the petitioner wrongfully availed Input Tax Credit on the

strength of invoices issued by suppliers who were found to be

non-existent and cancelled ab initio. Such wrongful availment of

ITC clearly amounts to wilful misstatement and contravention of

Section 16(2).

4.1. It was submitted that the inspection carried out pursuant to

the authorization in Form INS-01 and subsequent examination of

documents available revealed that the petitioner had availed ITC

on the strength of invoices issued by suppliers whose GST

registrations were cancelled ab initio. Such cancellation, though

retrospective, was done because the suppliers were non-genuine

entities, and thus, the ITC availed on their invoices was clearly

ineligible.

4.2. It was also submitted that the petitioner selectively reversed

ITC pertaining to one supplier while withholding reversal with

respect to the other two. This conduct evidences a conscious

attempt to suppress the full extent of ineligible ITC availed in

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contravention of Section 16(2)(a), (b), and (c) of the RGST/CGST

Act, 2017.

4.3. It was further submitted that despite issuance of multiple

summons on 19.07.2023 and notice dated 11.09.2023, the

petitioner failed to appear before the authorities, thus the show

cause notices dated 11.01.2024 have been issued by a proper

officer having jurisdiction as per law. It was submitted that prior

to issuance of the show cause notices dated 11.01.2024, the

petitioner was also duly intimated regarding discrepancies in

availment of Input Tax Credit. Intimations in Form DRC-01A were

issued on 13.12.2023 and 29.12.2023.

4.4. It was also submitted that the show cause notices dated

11.01.2024 have been issued in strict compliance with Section 74

of the CGST/RGST Act, 2017, after considering the material

available on record, the GSTR filings, and the reply filed by the

petitioner. The notices are neither vague nor mechanical but is

founded upon specific allegations of contravention of Sections 13,

16, 50, and 74(5) of the Act.

4.5. It was further submitted that the present writ petition is

liable to be dismissed on the ground of alternative remedy. It was

argued that the Act provides a complete adjudicatory framework

under which the petitioner can contest the show cause notices

before the adjudicating authority, and if aggrieved by the final

order, the petitioner has a statutory right of appeal under Section

107 of the CGST/RGST Act, 2017. It was further submitted that

the Hon'ble Apex Court in Commissioner of Income Tax and

Ors. v. Chhabil Dass Agarwal (Civil Appeal No.6704/2013,

[2025:RJ-JD:36893-DB] (9 of 12) [CW-5695/2024]

decided on 08.11.2013) has categorically held that where the

statute provides a complete machinery for assessment,

reassessment, imposition of penalty, and obtaining relief with

respect to any improper order passed, such machinery cannot be

abandoned by the assessee to directly invoke the extraordinary

jurisdiction of the High Court under Article 226 of the Constitution

of India.

4.6. Learned Additional Advocate General contended that

interference at the stage of show cause notice is premature and

not warranted in exercise of writ jurisdiction under Article 226 of

the Constitution of India. The writ petition, without exhausting the

statutory remedy, is therefore not maintainable and deserves to

be dismissed in limine.

5. Heard learned counsel for the petitioner and learned

Additional Advocate General for the respondents and perused the

material available on record.

6. This Court finds that the controversy raised in the instant

writ petitions essentially pertains to the validity of the show cause

notices dated 11.01.2024 issued under Section 74 of the

CGST/RGST Act, 2017 read with Section 20 of the IGST Act, 2017.

The allegations levelled therein relate to wrongful availment of

Input Tax Credit, non-discharge of interest liability under Section

50, and contravention of Section 16(2)(a), (b) and (c) of the Act.

The petitioner has already submitted a detailed reply dated

29.02.2024 to the said notice, which is presently pending

adjudication.

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7. It is well-settled that a writ petition under Article 226 of the

Constitution of India, challenging a mere show cause notice, is

ordinarily not maintainable unless the case involves a patent lack

of jurisdiction or mala fides. The Hon'ble Supreme Court in M/s

Techno Prints v. Chhattisgarh Textbook Corporation and

Anr. (Civil Appeal arising out of SLP (C) No.10042/2023,

decided on 12.02.2025) has reiterated this settled principle in the

in the following words:

"ordinarily, a Writ Court should not entertain any petition seeking to challenge a show cause notice unless the Court is convinced that the same has been issued by an authority having no jurisdiction, or the same is tainted with mala fides."

8. This Court further observes that the impugned show cause

notices cannot be said to suffer from any patent lack of

jurisdiction. The respondents were well within their authority

under Section 74 of the CGST/RGST Act, 2017 to issue the said

notices upon noticing alleged wrongful availment of Input Tax

Credit. The question as to whether the allegations are factually or

legally sustainable is a matter falling within the domain of the

adjudicating authority, and cannot be pre-emptively gone into by

this Court in its writ jurisdiction. Furthermore, this Court also

observes that no malafide by the petitioner has been

demonstrated so as to warrant interference under Article 226 of

the Constitution.

9. The Hon'ble Supreme Court in Commissioner of Income

Tax and Ors. (Supra) has categorically held that when a statute

provides a complete machinery for assessment, reassessment,

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imposition of penalty and for obtaining relief against improper

orders, such mechanism cannot be bypassed to directly invoke the

writ jurisdiction.

10. This Court also notes that a Division Bench of this Court in

Power and Instrumentation (Guj) Ltd. v. Addl.

Commissioner of CGST (D.B. Civil Writ Petition No.

7766/2024, decided on 08.07.2024) has reiterated the principle

that a writ petition at the stage of a show cause notice under the

GST regime is premature, since it is for the adjudicating authority

to first determine whether the case falls under Section 73 or

Section 74, after due consideration of the reply furnished by the

taxpayer. The relevant portion of the said judgement reads as

follows: -

"8. The second ground which has been raised by learned counsel for the petitioner, in our opinion, is premature at this stage. The contents of notice dated 30.04.2024 show that the respondents have invoked power under Section 74 of the Act on prima facie consideration of it being a case of suppression. Though, learned counsel for the petitioner disputes this aspect, we do not see any reason why writ court should interdict at this stage when the petitioner is only asked to show cause against proposed action. The authority, undoubtedly has jurisdiction to issue notice under Section 74. Whether or not present is a case of suppression of fact, warranting invocation of jurisdiction under Section 74 of the Act, is an issue of fact and not of law."

11. In the present case, the show cause notices impugned

contains specific allegations, supported by reference to statutory

provisions, and the petitioner has been afforded an opportunity to

file reply, which it has in fact availed. The contention of the

petitioner regarding retrospective cancellation of suppliers'

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registration, the plea of bona fide availment of ITC, and the

grievance regarding non-supply of documents, are all issues which

necessarily fall for adjudication before the proper officer in the

course of proceedings under Section 74. In the peculiar factual

matrix of the present case, no interference of this Court is

warranted.