Writ petition restored as dismissal was reconsidered in light of similar cases where interim relief was granted on the issue of circular trading under GST

Case Title: M/s Rahul Steels v. Union of India & Others
Court: High Court of Madhya Pradesh, Indore Bench
Petition Number: Review Petition No. 15 of 2025
Date of Judgment: 13 March 2025
Relevant Sections: Sections 74 and 122 of the CGST Act, 2017; Rule 142 of CGST Rules, 2017
Category: Adjudication and Natural Justice – Circular Trading, Review and Restoration of Petition

Facts (Paras 1–3):

M/s Rahul Steels and other assessees were issued a common show cause notice under Sections 74 and 122 of the CGST Act, 2017, alleging tax evasion through “circular trading.” The petitioner initially filed W.P. No. 8015/2024, which was dismissed on 17.12.2024 since the Court held that one assessee could not be singled out for relief in a collective proceeding involving multiple entities. Subsequently, four other assessees, who received the same notice, filed separate writ petitions (W.P. No. 40867/2024 and connected matters) challenging the notice and the final adjudication order dated 21.01.2025. The Court admitted their petitions and granted interim relief on 10.02.2025.

Questions before the Court:

Whether the earlier dismissed writ petition of M/s Rahul Steels deserved to be restored in light of the changed circumstances where similarly placed assessees had been granted interim protection and their matters were pending before the same Court (Para 4–5).

Observations (Paras 3–9 of extracted W.P. order):

In the connected petitions, the Court noted multiple grounds of challenge:

• Violation of Rule 142 of CGST Rules: Show cause notice and its summary were not uploaded on the GST portal in electronic form, rendering it invalid.

• Lack of jurisdiction under Section 74: Allegations pertained to circular trading, with GST paid at each step—thus, no “tax evasion” existed to justify invoking Section 74. Reliance was placed on CBIC Instruction No. 05/2023-GST dated 13.12.2023 following the Northern Operating Systems Pvt. Ltd. ruling.

• Violation of natural justice: Denial of opportunity to cross-examine witnesses relied upon by the department.
  These contentions led the Court to stay the operation of the final order dated 21.01.2025.

Judgment (Paras 4–6):

The Bench observed that since the issue of circular trading involves all five assessees and identical questions of law, it is appropriate that the petitioner be allowed to participate in the adjudication alongside others. Considering the changed circumstances and parity with connected matters, the Court recalled its earlier order dated 17.12.2024 and restored W.P. No. 8015/2024 to its original number for joint adjudication.

Between Fine Lines:

This decision underscores that consistency and parity of judicial treatment are essential when multiple assessees are involved in a common adjudication. Once interim relief was granted in identical matters, dismissal of one petitioner could not stand in isolation. The ruling also reinforces that Rule 142 compliance and procedural fairness are mandatory prerequisites for a valid GST show cause notice.

Summary of Cases Referred:

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