Treco Wire India Private Limited v. Additional Commissioner Central Tax Delhi North & Ors.

01 · Facts of the case and issues

Treco, a registered copper-wire manufacturer, underwent a GST audit for 1 July 2017 to 31 March 2021. An audit memo dated 23 July 2023 alleged ITC of ₹3,34,21,261 on supplies from suppliers whose registrations were retrospectively cancelled, and ₹50,30,256 interest for alleged payment to suppliers beyond 180 days. The ADT-02 audit report followed on 27 July 2023, then a DRC-01A intimation and a section 74 show-cause notice dated 22 September 2023. Treco disputed the allegations, claimed genuine transactions with suppliers registered at the relevant time and contested the ingredients for section 74. These were its defences, not findings that the transactions were proved genuine.

Order-in-Original No. 45/ADC/D.N./Bhavan Meena/2024, described as dated 15 January 2024, confirmed the ₹3,34,21,261 ITC demand with interest and an equal penalty, plus the separate ₹50,30,256 interest demand. Treco challenged that order, consequential DRC-07, the notice/proceedings, section 16(2)(c), and the section 16(2) proviso insofar as interest arose after 180-day supplier-payment delay.

Source: Paragraphs 1–11, physical pp. 1–4; paragraphs 12–14, pp. 4–5. The full audit period is in paragraph 5; the audit objection quoted in paragraph 27, pp. 7–8, lists 2017–18, 2019–20 and 2020–21.

02 · Discussion and reasoning of the Hon’ble Court

The Court rejected the constitutional/read-down attack on section 16(2)(c), relying on the Supreme Court decision it cited as Bhandari Scraps Traders v. Union of India, SLP(C) 23931/2026, decided 24 July 2026, concerning the Gujarat High Court decision cited as Maruti Enterprises. The independently checked Supreme Court record is titled Bhandari Scrap Traders v. Union of India & Ors. It is a reasoned dismissal of SLP(C) 23931/2026 with 24088/2026 and 24103/2026, expressly affirming and upholding the Gujarat decision. It distinguishes the CGST and Delhi VAT schemes and discusses re-availment after supplier tax discharge. It is not a merits judgment on a civil appeal after recorded grant of special leave.

That rejection did not relieve the authority of establishing section 74 requirements in this case. The Court found that the adjudication omitted supplier names/GSTINs, invoice dates, effective registration-cancellation dates, supplier-wise ITC amounts and supporting material. It also lacked specific findings of fraud, wilful misstatement or suppression with intent to evade tax, and did not demonstrate consideration of Treco’s defence. General assertions or repetition of statutory wording were insufficient. These omissions undermined both the factual basis of the quantified demand and an effective opportunity to respond.

The Court did not determine the legal consequences of inconsistent adjudication dates. It also held that the separate order dated 24 September 2025 in W.P.(C) 14428/2025 was not determinative of this proceeding: this adjudication had to be assessed against its own notice, material and findings.

Source: Treco paragraphs 17–26, pp. 5–7; paragraphs 28–41, pp. 8–11. Bhandari official order: p. 1 case metadata; pp. 2–3 reasons and disposal, unnumbered paragraphs.

03 · Judicial decision and operative relief

The Court set aside the identified Order-in-Original and consequential proceedings and remanded for fresh adjudication according to law. The authority must issue appropriate notice, afford a reasonable and effective hearing, consider Treco’s reply/material, identify relevant suppliers and transactions if relying on retrospective cancellations, address its supporting evidence and independently record findings on the section 74 requirements. Paragraph 46 expressly leaves the proposed ITC demand’s merits and Treco’s section 16 entitlement open.

The authority was directed to endeavour to make a fresh order within eight weeks of Treco’s appearance. Counsel was directed to appear on 8 October 2026 at 2:30 p.m. This is a past direction as at the 17 October 2026 review; attendance and any fresh order have not been verified. The eight-week period runs from actual appearance, and is expressed as an endeavour, not a verified fixed disposal date.

The section 16(2)(c) constitutional/read-down prayers were rejected. No further consequential orders were considered necessary at that stage. The writ petition and pending application were disposed of. The judgment does not separately invalidate the 180-day-payment proviso or declare the related interest universally unlawful.

Source: Paragraphs 42–51, physical pp. 11–13; paragraph 2, p. 2 (scope of proviso challenge).

04 · In favour of

Final writ disposal with substantive rejection of the section 16(2)(c) challenge and procedural/adjudicatory relief by quashing and remand. This is neither an unqualified taxpayer merits victory nor a dismissal leaving the impugned demand intact. The fresh authority may determine liability only after the directed lawful adjudication.

Source: Paragraphs 23–26, pp. 6–7; paragraphs 42–51, pp. 11–13, especially paragraph 46.