Mastermind Behind 100+ Fake GST Firms Is the ‘Taxable Person’: Delhi High Court Dismisses Writ, Says Fraud Cannot Be Shielded Behind Legal Technicalities

In a significant ruling delivered on 6th November 2025, the Delhi High Court firmly rejected the writ petition filed by Devender Singh—allegedly the key conspirator behind a massive GST input tax credit fraud involving more than 100 fake and non-existent firms. The Court, while upholding the impugned adjudication order passed under the CGST Act, categorically held that “in the case of fake, non-existent and fraudulent firms, the ‘taxable person’ would be the person who has got such firms created and used the same for availment of ITC”. Dismissing Singh’s claim that he was merely a director and not a taxable person, the Court observed that accepting such an argument would allow fraudsters to “escape liability despite fraudulently cheating the exchequer of crores of rupees.”

The Court ruled that there was no violation of natural justice, no unfettered right to cross-examination, and no merit in questioning the competence of the officer issuing the show cause notice. It relegated the petitioner to the alternative statutory appellate remedy under Section 107 of the CGST Act, 2017, noting that the writ petition was an attempt to bypass legal procedures due to the petitioner’s admitted inability to pay the mandatory pre-deposit for appeal.

"A Web of 116 Bogus Firms, Circular Transactions, Forged Invoices and Fake IDs": Court Details Evidence of Orchestrated GST Fraud

The writ petition, titled Devender Singh v. Additional Commissioner, CGST Delhi West, challenged the Order-in-Original dated 28.07.2025, which imposed tax demands and penalties under Section 122 of the CGST Act based on detailed findings by the DGGI. The investigation revealed the creation and operation of 116 fake firms with common mobile numbers, IP addresses, email IDs, and fictitious business premises. The firms were found issuing invoices for goods that were never supplied, claiming massive fraudulent ITC and refunds.

The Court noted that “multiple firms were registered from the same IP address or from devices traced to the same geolocation primarily Azadpur and Civil Lines premises” and bank accounts in the name of these firms were operated for credit and immediate withdrawal, indicating circular flow of funds. The firms, according to the investigation, existed only on paper.

Significantly, statements from various individuals including Tinku Yadav, Govind Sharma, Rinku Sharma, and Customs House Agents Rakesh Dogra and Satish Jain, all corroborated the petitioner’s role in actively controlling backend operations, creating fake firms, and managing transactions. The Court recorded, “All of them have specific roles … but crucially, these operatives identified Sh. Pawandeep Sachdeva and Sh. Devender Singh as significant members of this fraud.”

The petitioner’s mobile phones contained export-related documents connected to the fake firms, and documents recovered from his premises matched the descriptions of goods in invoices raised for refund claims. The forensic links and documentary evidence were found sufficient by the adjudicating authority and the Court to establish the petitioner’s deep involvement in the fraudulent scheme.

"In Fraud Cases, the Shield of Procedural Rights Cannot Be Used to Derail Justice": Cross-Examination Not Absolute Right, Says High Court

One of the main grounds raised by the petitioner was the denial of cross-examination of key witnesses whose statements were used against him. The Court rejected this plea, noting that the petitioner was well aware of the statements from the beginning and had failed to request cross-examination during the first adjudication.

The Court held that “cross-examination is not an absolute right under the CGST Act … it must be shown that prejudice has been caused by its denial.” Referring to the Supreme Court decision in Telestar Travels Pvt. Ltd. v. Special Director of Enforcement (2013) 9 SCC 549, the Court noted that unless prejudice is demonstrated, failure to allow cross-examination does not automatically vitiate proceedings.

The judgment reiterated the reasoning in Vallabh Textiles (2025 DHC 2559-DB) and Annai Poly Packs (2024) to hold that “the adjudicating authority must decide on its necessity, especially when sufficient documentary evidence supports the case without requiring witness examination.”

The Court also stressed that “parties cannot convert show cause notice proceedings into mini-trials”, and that a blanket request to cross-examine all persons whose statements are recorded without specific reasons is legally unsustainable.

“Fraud on the Exchequer Cannot Be Protected by Writ Jurisdiction”: High Court Directs Petitioner to Statutory Remedy

The Court was emphatic in its view that writ jurisdiction under Article 226 should not be invoked in matters involving allegations of fraudulent ITC and complex factual findings. It cited the Supreme Court decision in The Assistant Commissioner of State Tax v. Commercial Steel Ltd. (2021), which held that where statutory remedies are available, writ petitions should not be entertained unless exceptional circumstances exist.

Rejecting the petitioner’s plea that he was unable to afford the pre-deposit required under Section 107 for an appeal, the Court observed:
“The inability to comply with statutory appeal requirements cannot be a ground to invoke writ jurisdiction. Fraudulent conduct disentitles discretionary relief.”

The High Court further reinforced the precedent set in MHJ Metal Techs (2025 DHC)—a decision upheld by the Supreme Court in SLP (C) 27411/2025—that cases involving circular trading, fake invoices, and fabricated ITC claims must be subjected to full statutory adjudication rather than short-circuited through writs. It noted that “the Petitioner and his son are alleged to have floated various firms and businesses only for the purposes of availing ITC without there being any supply of goods or services.”

The Court also rejected the argument that the show cause notice was issued by an unauthorised officer. Referring to Circular No. 254/11/2025-GST dated 27.10.2025, the Court held that the Additional Commissioner who issued the SCN was already empowered to do so under the CGST Act, and the circular merely clarified the designation of proper officers, not conferred it for the first time.

“A Web of Fraud, Forged Documents, and Bogus Firms Cannot Be Washed Away in Writ Jurisdiction”: Petition Dismissed

The Court ultimately held that the serious nature of the allegations, the volume of material collected by the department, and the statutory availability of appellate remedies under Section 107 of the CGST Act were sufficient to reject the petition. The Court concluded:

“Under these circumstances, this Court is not inclined to entertain the present writ petition. The petitioner is granted liberty to avail the appellate remedy.”

It further clarified that no observations made in the judgment would influence the appellate authority on merits. The petition and pending applications were dismissed.

Date of Decision: 6 November 2025