Lack of Diligence in Responding to GST Show Cause Notices Bars Writ Interference: Delhi High Court - 2025-05-05

Delhi High Court Rejects Writ Plea: Taxpayer’s Lack of Diligence Leads to Dismissal of GST Challenge

In a recent order that underscores the importance of procedural compliance, the Delhi High Court has declined to interfere with a Goods and Services Tax (GST) demand order, citing a significant lack of diligence on the part of the petitioner, M/s Pret Study by Janak Fashions Private Limited.

The Backdrop: A Timeline of Missed Opportunities

The dispute arose from a demand order dated January 28, 2025, passed by the Assistant Commissioner, CGST Delhi East Commissionerate, confirming an Input Tax Credit (ITC) demand of Rs 34,92,903/-. The Department’s action was rooted in findings that the petitioner had availed or utilized ITC without the actual receipt of goods.

The petitioner had approached the High Court under Article 226 of the Constitution, arguing that they were denied a fair opportunity to be heard. Specifically, counsel for the petitioner claimed that they had attempted to join a virtual personal hearing on January 15, 2025, but were not granted access to the digital platform.

Judicial Scrutiny: A Question of Diligence

Upon reviewing the record, the division bench comprising Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta found the petitioner’s narrative unsubstantiated by actual efforts. The Court noted that the Department had issued two separate Show Cause Notices (SCNs) in July 2022 and August 2024. Despite specific notifications for personal hearings scheduled across three consecutive days—January 13, 14, and 15, 2025—the petitioner failed to file any response to the SCNs.

The Court pointed out that the petitioner only attempted to surface on the final day of the hearing, not with requested documents or a filed response, but with a request for a four-week extension.

Key Observations

The High Court emphasized that the Department had fulfilled its obligation to provide adequate notice to the assessee. The bench observed:

• "From the above circumstances it is clear that the Petitioner has not been diligent in filing the reply and attending the hearings."
• "The Department has given the show cause notice and the personal hearing notices to the Petitioner; the Petitioner has not been diligent."
• "The Department cannot be held to blame for not giving a proper hearing."

The Road Ahead: Availability of Appellate Remedies

While the Court dismissed the writ petition, it maintained a path for the taxpayer through the statutory framework. The order provides the petitioner with the liberty to pursue appellate remedies under Section 107 of the Central Goods and Service Tax Act, 2017 .

To ensure the taxpayer is not left without recourse, the High Court stipulated that if the petitioner files an appeal within 30 days, accompanied by the requisite pre-deposit, the appellate authority must decide the matter on its merits, rather than dismissing it on the grounds of limitation.

Implications for Taxpayers

This judgment serves as a stern reminder to commercial entities regarding the necessity of responding to departmental notices within the prescribed timelines. As the Court noted, the administrative machinery cannot be blamed for passing orders when taxpayers fail to engage with the show cause process, emphasizing that the burden of diligence remains squarely with the assessee.