M/S Maa Narmada Aluminiumextrusion Private Limited vs The State Of Madhya Pradesh

NEUTRAL CITATION NO. 2026:MPHC-JBP:89798
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IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR

BEFORE
HON'BLE SHRI JUSTICE ALPESH Y. KOGJE,
CHIEF JUSTICE
&
HON'BLE SHRI JUSTICE VIVEK JAIN
th
ON THE 4 OF NOVEMBER, 2026
WRIT PETITION No. 20309 of 2026
CNR No.: MPHC010386132026
M/S MAA NARMADA ALUMINIUMEXTRUSION PRIVATE LIMITED
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri Nitin Agrawal - Advocate for the petitioner.
Shri Rajvardhan Dutt Pararha - Government Advocate for the
respondents/State.
ORDER
Per: Hon'ble Shri Justice Alpesh Y. Kogje, Chief Justice
The present writ petition assails the arbitrary, illegal and arbitrary
exercise of power by the Respondents in blocking the Petitioner’s Electronic
Credit Ledger (ECL) to the extent of Rs. 23,78,030/- under Rule 86A of the
CGST/MPGST Rules, without recording valid reasons to believe and
without considering the material available on record or affording the
Petitioner any opportunity of hearing.
2. It is submitted that the Petitioner duly cooperated with the
departmental proceedings and, pursuant to summons issued under Section 70
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 06-11-2026
18:28:02

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of the CGST Act, appeared before the authorities and furnished all relevant

documents, including tax invoices, e-way bills, bank statements, books of
accounts and ledgers. Further, during the Financial Year 2025-26, the Central
GST authorities conducted search and inspection proceedings under Section
67 of the CGST Act at the Petitioner’s business premises, wherein the entire
stock was physically verified and the books of accounts, purchase records,
stock registers and GST returns were duly examined. Upon pointing out
certain discrepancies, the Petitioner deposited the amount determined by the
department through Form GST DRC-03, pursuant to which the proceedings
were concluded.
3. It is further submitted that the suppliers themselves categorically
admitted before the department that aluminium scrap had actually been
supplied to the Petitioner, thereby establishing the actual movement and
receipt of goods. Despite the availability of such material and evidence, the
Respondents proceeded mechanically on vague and unsubstantiated
allegations, without considering the documents and explanations already
furnished by the Petitioner.
4. The petitioner further contends that once the Central GST
authorities had initiated proceedings, conducted physical verification,
examined the relevant records and concluded the proceedings in respect of
the same subject matter and tax period, the initiation of parallel proceedings
by the State GST authorities is impermissible in view of the statutory scheme
of cross-empowerment under Section 6 of the CGST Act and the
corresponding provisions of the MPGST Act.
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 06-11-2026
18:28:02

NEUTRAL CITATION NO. 2026:MPHC-JBP:89798
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5. It is also contended that the impugned action is in gross violation of

Rule 86A, as the Respondents have failed to record any valid, independent
and objectively founded reasons to believe before blocking the Petitioner’s
Electronic Credit Ledger. The allegation that the Petitioner availed input tax
credit without invoices or debit notes is vague, cryptic and devoid of
particulars concerning the relevant invoices, transactions, suppliers, tax
periods or alleged discrepancies. Such bald allegations cannot satisfy the
mandatory statutory requirement of formation of reasons to believe.
6. The impugned action is, therefore, vitiated by non-application of
mind, absence of cogent material, violation of the principles of natural
justice and arbitrary exercise of statutory power The blocking of the
Electronic Credit Ledge, without due compliance with the statutory
safeguards under Rule 86A, has also caused grave prejudice to the petitioner
by adversely affecting its business operations and working capital.
Accordingly, the petitioner seeks quashing of the impugned action and
restoration of the blocked Electronic Credit Ledger amounting to
Rs.23,78,030/-.
7. Learned counsel for the respondents vehemently opposed the writ
petition, contending that the same is misconceived, devoid of merit and
liable to be dismissed. It was submitted that the impugned action dated
10.03.2026 has been taken strictly in accordance with the provisions of the
MPGST/CGST Act, 2017 and the Rules framed thereunder. The respondents
contended that the earlier proceedings initiated by the Central Authorities
pertained to a distinct issue and were based on separate facts and
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 06-11-2026
18:28:02

NEUTRAL CITATION NO. 2026:MPHC-JBP:89798
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transactions. During the said proceedings, the petitioner's stock, books of

accounts, purchase records, stock registers and GST returns were examined,
and certain discrepancies were noticed, resulting in the raising of an
appropriate demand. The said proceedings have already attained finality, as
evident from Annexure P-8, whereby the issue concerning alleged
clandestine removal of goods for FY 2025-26 stood concluded.
8. It was further submitted by the learned counsel for respondents that
the present proceedings are entirely independent and relate to the alleged
fraudulent availment and utilisation of Input Tax Credit (ITC) during FY
2025-26. The same are founded upon a separate investigation conducted by
the Joint Commissioner, State Tax, Anti-Evasion Bureau, concerning alleged
passing of bogus ITC by M/s Unique Trade and Company. In this regard,
reliance has been placed upon the letter dated 19.02.2026 issued by the Joint
Commissioner, State Tax, Anti-Evasion Bureau, Jabalpur, communicating
the findings of the investigation and furnishing the basis for initiating
proceedings against the petitioner.
9. The respondents also controverted the petitioner's contention that
the blocking of the Electronic Credit Ledger without issuance of a show-
cause notice or grant of an opportunity of personal hearing violates Rule
86A of the CGST Rules. It was contended that Rule 86A does not mandate
the issuance of a prior show-cause notice or grant of a pre-decisional
personal hearing before taking action thereunder. Lastly, it was submitted
that the investigation conducted under Section 67(2) of the Act revealed that
M/s Unique Trade and Company had issued invoices to the petitioner
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 06-11-2026
18:28:02

NEUTRAL CITATION NO. 2026:MPHC-JBP:89798
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showing outward supply of aluminium scrap, whereas the investigation

allegedly established that the said supplier had neither actually purchased the
aluminium scrap nor discharged its liability towards Reverse Charge
Mechanism (RCM). Accordingly, the respondents sought to justify the
impugned action on the ground that the ITC availed on the basis of such
transactions was prima facie fraudulent.
10. The Court heard the rival submissions and has gone through
relevant material on record.
11. The case of the petitioner is that the Petitioner is a private limited
company duly registered under the CGST/MPGST Act, bearing GSTIN
23AAPCM7429M1ZV, and is engaged in the business of manufacturing and
trading of aluminium extrusion and allied products. Respondent No. 3 issued
summons dated 27.12.2025 and 05.01.2026 under Section 70 of the GST
Act, requiring the Petitioner to furnish documents concerning transactions
with certain suppliers. In compliance thereof, the Petitioner furnished all
relevant documents, including GSTR-2A, purchase and sale invoices, party-
wise ledgers, bank statements, e-way bills, TDS details and transportation
records, thereby extending full cooperation with the departmental inquiry.
12. According to the petitioner, despite such compliance, Respondent
No. 2, vide order dated 10.03.2026, blocked the Petitioner's Electronic Credit
Ledger (ECL) to the extent of Rs.23,78,030/- under Rule 86A of the GST
Rules, alleging availment of Input Tax Credit without valid invoices or debit
notes. Subsequently, on 06.05.2026, Respondent No. 2 issued a Summary
Show Cause Notice in Form GST DRC-01A, bearing Reference No.
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 06-11-2026
18:28:02

NEUTRAL CITATION NO. 2026:MPHC-JBP:89798
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ZD2305260052080, for FY 2025-26, proposing a demand of tax, interest and

penalty aggregating to Rs. 1,78,66,416/-, alleging wrongful availment of
ITC amounting to Rs. 81,95,604/- from three suppliers, namely, M/s Unique
Trade & Company, M/s Madhushree Metal and M/s Mahakal Metal. The
proposed action is primarily founded on the allegation that the aforesaid
suppliers had availed irregular ITC, and consequently, the ITC availed by the
Petitioner was liable to be denied under Section 122(vii) read with Section
74A of the CGST/MPGST Act.
13. The Respondents have sought to justify the blocking of the
Electronic Credit Ledger by invoking Rule 86A, contending that the
competent authority had formed the requisite reason to believe on the basis
of an investigation report received from the Joint Commissioner, State Tax,
Anti-Evasion Bureau. As per respondents, Section 6 of the MPGST Act does
not operate as a bar against the present proceedings, as the same concern a
distinct transaction and an independent cause of action, rather than parallel
proceedings in respect of the same subject matter. Thus, the impugned action
is sought to be sustained by the Respondents on the basis of the investigation
report and the alleged irregular availment of ITC by the Petitioner's
suppliers.
14. Section 6 of the MPGST Act prohibits parallel proceedings only in
respect of the same subject matter. Since the present proceedings relate to a
separate transaction and a fresh cause of action, the provisions of Section 6
are not attracted. Rule 86A empowers the proper officer to block the
Electronic Credit Ledger where he has reasons to believe that the Input Tax
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 06-11-2026
18:28:02

NEUTRAL CITATION NO. 2026:MPHC-JBP:89798
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Credit has been fraudulently availed or is otherwise ineligible. In the present

case, Respondent No.3 formed such belief on the basis of the investigation
report received from the Joint Commissioner, State Tax, Anti-Evasion
Bureau.
15. During the pendency of the petition, the Joint Commissioner, State
Tax, Jabalpur Division No. 1, vide order dated 28.09.2026 (Annexure P/11),
after considering the petitioner's reply to the show cause notice and
examining the relevant facts and supporting documents, held that the Input
Tax Credit (ITC) availed by the petitioner from the three suppliers, namely,
M/s Trade & Company, M/s Madhushree Metal and M/s Mahakal Metal, was
bogus and inadmissible and came to the conclusion that on account of
submission of a bogus ITC claim under Section 74A(5)(ii) read with Section
50 and section 122 of the MPGST/CST Act, directed the petitioner to pay an
additional demand of Rs.1,78,66,416/-, which includes the tax equivalent to
claim ITC, interest and penalty. This order has been challenged by the
petitioner by way of an amendment.
16. The authority while passing the order dated 28.09.2026 considered
the fact that the above dealers have issued invoices for outward supply of
aluminum scrap to the petitioner, the details of which for financial year
2025-26 upto December, are as follows:-
From GSTIN From Fealer YEAR To GSTIN To Dealer Taxable
IGST
CGST
SGST
Value ( ₹ )
( ₹ )
( ₹ )
( ₹ )
23EZDPKO419M1ZF UNIQUE
2025-26 UP
23AAPCM7429M1ZV MAA
23291924 0 20962732096273
TRADE AND
to
NARMADA
COMPANY
DECEMBER
ALUMINIUM
EXTRUSION
PRIVATE
LIMITED
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 06-11-2026
18:28:02

NEUTRAL CITATION NO. 2026:MPHC-JBP:89798
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23BGPPKSS49C1ZD MADHUSHREE
2025-26 UP
23AAPCM7429M1ZV MAA
17486084 0 15737481573748
METAL
to
NARMADA

DECEMBER
ALUMINIUM
EXTRUSION
PRIVATE
LIMITED
23ELKPK6940L1Z0 MAHAKAL
2025-26 UP
23AAPCM7429M1ZV MAA
47531229 0 427781 427781
METAL PROP-
to
NARMADA
JASMEET
DECEMBER
ALUMINIUM
KOTWANI
EXTRUSION
PRIVATE
LIMITED
4097802
45531130 0 4097802

17. The finding was based on the investigation conducted by the Anti-
Evasion Bureau, Jabalpur under Section 67(2) of the MPGST Act, 2017,
which revealed that the aforesaid suppliers were non-genuine entities and had
neither actually received nor supplied the goods purportedly covered by the
invoices. They had allegedly availed ITC on the strength of fictitious
invoices relating to medicines, mobile phones, gold, garments, etc., and
utilised such credit to discharge tax liability on purported outward supplies
of aluminium scrap and other goods, without any actual movement or supply
of goods.
18. Accordingly, the authority held that the essential conditions
prescribed under Sections 16(2)(b) and 16(2)(c) of the MPGST/CGST Act,
2017, namely, actual receipt of goods and actual payment of tax to the
Government, stood unfulfilled. Consequently, the ITC availed by the
petitioner was held inadmissible, resulting in an additional demand of
Rs.1,78,66,416/-, comprising tax, interest and penalty under Section 74A(5)
(ii), read with Sections 50 and 122 of the Act. The aforesaid order has
subsequently been challenged by the petitioner by way of amendment to the
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 06-11-2026
18:28:02

NEUTRAL CITATION NO. 2026:MPHC-JBP:89798
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present petition.

19. On going through the order dated 26.09.2026, it is revealed that the
aforesaid dealers are merely paper entities and have not undertaken any
genuine purchase or sale of goods, including aluminium scrap, TMT bars,
medicines, mobile phones, gold, garments, etc. Further, they have neither
actually received nor supplied any goods, nor discharged the applicable GST
liability under RCM/FCM on the purported outward supply of aluminium
scrap, either in cash or through admissible ITC. Accordingly, the ITC
availed by such dealers is inadmissible under Sections 16(2)(b) and 16(2)(c)
of the CGST/MPGST Act, 2017, as the statutory conditions of actual receipt
of goods and actual payment of tax to the Government have not been
fulfilled. Therefore, the purported transactions are fictitious and the ITC
claimed thereon is liable to be disallowed.
20. The order dated 26.09.2026 which has been challenged by way of
amendment shows that the petitioner’s contention that ITC availed by it is
genuine merely because the proprietors of M/s Unique Trade & Company,
M/s Madhushree Metal and M/s Mahakal Metal admitted having made actual
supplies to the petitioner M/s Maa Narmada Aluminium Extrusion Private
Limited is not acceptable in view of the findings of the departmental
investigation. During investigation, the proprietors of the concerned firms,
including Nikhil Kotwani and Ashok Kotwani, categorically stated that they
neither purchased nor sold aluminium scrap, TMT bars, medicines, mobile
phones, gold, garments, etc. Further, no physical stock of the aforesaid goods
was found at the business premises of the four firms on 26.12.2025. The
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 06-11-2026
18:28:02

NEUTRAL CITATION NO. 2026:MPHC-JBP:89798
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investigation also revealed that the firms had neither made any genuine

inward purchases of aluminium scrap nor discharged the applicable
RCM/FCM tax liability. The transactions were found to be part of circular
trading undertaken to facilitate the passing on of bogus ITC without any
actual movement or supply of goods. It was further observed that Ashish
Kotwani, an advocate and accountant, facilitated the creation of documentary
evidence, including e-way bills and banking transactions, to lend apparent
legitimacy to the circular transactions and concealed the underlying tax
evasion. Accordingly, the authority was of the view that the mere existence
of tax invoices, e-way bills, banking transactions and statements of the
suppliers cannot establish the genuineness of the transactions in the absence
of actual receipt and supply of goods. The petitioner’s claim that the
suppliers' ITC alone was bogus while the ITC availed by it was genuine is
therefore untenable. Since the petitioner availed and utilised ITC without
actual receipt of goods, the provisions of Section 122(1)(vii) of the
CGST/MPGST Act, 2017 stand attracted. Consequently, the petitioner's
contention is devoid of merit and is liable to be rejected by the department.
21. It appears that pending the petition, the show case notice has been
decided and an order on show cause notice under Section 74A has already
been passed, which the petitioner has indicated by way of an amendment in
the writ petition and has also prayed for quashing the order under Section
74A of the Act. As the Court has on merits found no reason to interfere with
the show cause notice and considering the fact that a statutory remedy of
appeal is available to the petitioner and as the issue involved would entail
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 06-11-2026
18:28:02

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examination of the facts pertaining to the allegations which the department

has in its order under Section 74A of the Act found to be substantiated by
evidence, the Court may refrain from exercising the power under Article 226
of the Constitution of India.
22. Accordingly, the petition stands dismissed. However, the
observations made in this order are only for the purpose of deciding the
present petition and may not be treated as an observation on merits as the
statutory proceedings are yet to be undertaken by the petitioner.
(ALPESH Y. KOGJE)
(VIVEK JAIN)
CHIEF JUSTICE
JUDGE
C

Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 06-11-2026
18:28:02