🚨 Landmark Delhi HC Judgment in GST Penalty Case: A Cautionary Tale for Tax Consultants

🧾 Case: Bhupender Kumar vs. Additional Commissioner Adjudication CGST Delhi North & Ors.

The Delhi High Court has dismissed a writ petition filed by Bhupender Kumar, a GST consultant, who was slapped with a staggering penalty of over ₹285 crores under Section 122(1A) of the CGST Act, 2017. The court not only upheld the penalty but made strong observations on the growing menace of fake ITC rackets, reinforcing the principle that writ jurisdiction should not be used to short-circuit proper appellate remedies in serious GST fraud cases.

🧠 Key Takeaways:

🔹 Background:

Bhupender Kumar, a GST consultant and former data entry operator in the VAT Department, was accused of facilitating GST registrations for 63 bogus firms at the behest of one Sanjay Sehgal—allegedly the mastermind of the racket. These entities were involved in fraudulent Input Tax Credit (ITC) claims without actual supply of goods or services.

🔹 Core Allegations:

• Creation of fake firms using identity documents provided by Sanjay Sehgal.

• Providing login credentials to these fake firms.

• SIM cards and documents found at Kumar's premises were used in GST registration frauds.

• Recorded statements and WhatsApp chats supported his active role in the conspiracy.

🔹 Legal Grounds Raised by Petitioner:

1. No separate SCN under Section 122(1A) was served.

2. He was “merely a consultant,” while the fraud was orchestrated by Sehgal.

⚖️ High Court’s Observations:

• The Show Cause Notice (SCN) was found to clearly outline the allegations and contemplated penalties under Section 122 and other relevant provisions.

• Petitioner did not reply to the SCN and later claimed lack of procedural compliance.

• The court emphasized that the petitioner, having admitted to enabling fake firm registrations and earning commissions, cannot plead ignorance or seek relief under Article 226.

• The court cited its own earlier decision in Mukesh Kumar Garg vs. Union of India, reiterating that serious frauds involving ITC misuse should not be entertained under writ jurisdiction.

🧾 Important Legal Principles:

1. No Relief Without Response: Failure to respond to SCN disables the right to challenge findings later.

2. Writ Jurisdiction Not a Substitute: Writ petitions are not meant to bypass statutory appellate mechanisms, especially in cases involving factual complexity and ITC fraud.

3. Section 122(1A) Has Prospective Application: Since the SCN was issued after its enactment, the provision was held applicable.

📌 Final Outcome:

The court refused to entertain the petition but granted liberty to file an appeal under Section 107 of the CGST Act within 30 days. The appeal will be heard on merits if filed with the requisite pre-deposit.

⚠️ Professional Lessons for GST Practitioners:

• Always respond to Show Cause Notices, even if the penalty seems minor.

• If involved in backend activities like registrations or filings, ensure you're not enabling non-compliance.

• Stay updated with penal provisions like Section 122(1A), which now covers not just taxpayers but also facilitators of fraud.