Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(Del) 9879

IN THE HIGH COURT OF DELHI AT NEW DELHI
Prathiba M. Singh, Renu Bhatnagar, JJ
MANPAR EXIM INC – Appellant
Versus
ADDITIONAL DIRECTOR DGGI AND ORS – Respondent
W.P.(C)-18204/2025

Advocates:
For the Appellants/Petitioners: Chinmaya Seth, A.K. Seth, Palak Mathur
For the Respondents: Nancy Jain, Alpana Pandey

Pre-SCN consultation notice under Rule 142(1A) of GST Rules is not mandatory after the amendment replacing 'shall' with 'may'; writ petition dismissed as alternative remedy of appeal exists.

Headnote:(A) Central Goods and Services Tax Act, 2017 - Sections 74, 122, 50, 75(13), 107 - State Goods and Services Tax Act, 2017 - Integrated Goods and Services Tax Act, 2017 - Section 20 - Central Goods and Services Tax Rules, 2017 - Rule 142(1A) - Notification No.79/2022-Central Tax dated 15th October, 2020 - Pre-show cause notice consultation - Amendment replacing 'shall' with 'may' - Mandatory vs directory - Writ jurisdiction - Alternative remedy of appeal.

(B) The pre-SCN consultation notice under Rule 142(1A) is not mandatory after the amendment vide Notification 79/2022; the proper officer 'may' issue such notice, not 'shall'. In cases of large-scale fraudulent availment of input tax credit involving multiple entities and crores of rupees, the pre-consultation notice may have no impact and would be meaningless.

(C) A writ petition challenging an order-in-original under GST is not maintainable when an effective alternative remedy of appeal under Section 107 of the CGST Act is available, especially when the limitation period has not expired and the challenge to the constitutional validity of the notification is already pending before the court.

Facts of the case:
The petitioner, a firm engaged in readymade garments and leather goods, challenged an Order-in-Original dated 22nd October, 2025 confirming a demand of Rs.9,60,15,714/- (CGST and SGST) along with interest and penalty for fraudulent availment of input tax credit. The show cause notice was issued on 12th March, 2025 after the amendment to Rule 142(1A). The petitioner argued that no pre-SCN consultative notice under Rule 142(1A) was issued, rendering the SCN and order invalid, and also challenged the constitutional validity of Notification No.79/2022. The respondent relied on precedents holding such notice not mandatory post-amendment.

Findings of Court:
The court, relying on Gulati Enterprises and Banson Enterprises, held that after the amendment, the issuance of pre-SCN consultation notice is not mandatory. In cases of large-scale fraudulent ITC with multiple entities, such notice would have no impact. The court also noted that the petitioner has deposited Rs.1.66 crores which may be adjusted toward pre-deposit in appeal. The challenge to Notification No.79/2022 is already pending in another matter.

Issues: Whether the pre-show cause notice consultation under Rule 142(1A) is mandatory after the amendment changing 'shall' to 'may'; whether a writ petition is maintainable when an alternative remedy of appeal exists; and the constitutional validity of Notification No.79/2022.

Ratio Decidendi: The pre-SCN consultation notice under Rule 142(1A) is directory and not mandatory after the amendment. In complex fraud cases, the absence of such notice does not invalidate proceedings. The writ petition is not entertained when an effective appellate remedy is available; the petitioner is directed to file an appeal under Section 107 of the CGST Act.

Result: Writ petition disposed of. Petitioner is free to avail appellate remedy. Observations made shall not have any bearing on merits. All pending applications disposed of.

JUDGMENT

Prathiba M. Singh, J.

1. This hearing has been done through hybrid mode.

CM APPLs.75278/2025 & 75279/2025 (for exemption)

2. Allowed, subject to all just exceptions. Applications are disposed of.

W.P.(C) 18204/2025 & CM APPL. 75277/2025 (for stay)

3. The present petition, inter alia, raises a challenge to the Order-in- Original dated 22^nd October, 2025 by which a demand to the tune of Rs.9,60,15,714/- crores has been confirmed against the Petitioner in respect of fake ITC, which is passed on/availed by the Petitioner.

4. There are various allegations in the petition against one Mr. Parag Garg who is stated to be the master mind of the operation and involved in incorporation of several firms and non-existent entities only to avail/pass on the Input Tax Credits (hereinafter “ITC”). Shri Parag Garg, who is the partner of the Petitioner firm, has in fact filed the present petition as well.

5. The Petitioner was engaged in the business of readymade garments and leather goods at Kirti Nagar, Delhi, which is stated to be still a running business. As per the impugned Order-in-Original, searches were conducted at various premises related to Mr. Parag Garg who is also a partner in various other firms with the same addresses.

6. The Order-in-Original sets out the factual background and the manner in which ITC was availed/passed on to various entities. The total demand raised in the impugned Order-in-Original against the Petitioner and other entities is as under:

“Order

(i) I confirm the demand of ITC availed/utilized in excess, amounting to CGST= Rs.4,80,07,857/-and SGST=Rs. 4,80,07,857/-collectively Rs. 9,60,15,714/- (Rupees Nine Crore Sixty Lakhs Fifteen Thousand Seven Hundred and Fourteen Only) and I hold it recoverable from the Noticee No. 1 under Section 74(1) of CGST Act, 2017 and corresponding provisions of SGST Act, 2017 read with Section 20 of IGST Act, 2017.

(ii) I confirm the demand and order for recovery of interest, from the Noticee No. 1, on the amount demanded above, under the provisions of Section 50 of the CGST Act, 2017 and SGST Act, 2017, read with relevant provisions of the IGST Act, 2017, from the due date till the date of actual payment.

(iii) I impose and order for recovery of penalty of CGST=Rs. 4,80,07,857/-and SGST = Rs. 4,80,07,857/- collectively Rs. 9,60,15,714/- (Rupees Nine Crore Sixty Lakhs Fifteen Thousand Seven Hundred and Fourteen Only), from the Noticee No. I, under Section 74(1) of the CGST Act, 2017 read with Section 122 of CGST Act, 2017, read with relevant provisions of the SGST Act 2017 and Section 20 of the IGST Act, 2017, for their various acts of omission and commission as discussed supra.

(iv) I refrain from imposing any another penalty on the Noticee No. 1 as Section 75 (13) of the CGST Act, 2017 clearly states that Where any penalty is imposed under section 73 or section 74 [or section 74A], no penalty for the same act or omission shall be imposed on the same person under any other provision of this Act.

(v) I order appropriation of Rs. 1,66,00,000/- paid vide DRC03 by the Noticee No. 1 during the investigation against the proposed demand.

(vi) I impose and order for recovery of penalty of CGST= Rs. 4,80,07,857/-and SGST = Rs. 4,80,07,857/- collectively Rs. 9,60,15,714/- (Rupees Nine Crore Sixty Lakhs Fifteen Thousand Seven Hundred and Fourteen Only), from the Noticee No. 2, under Section 122(1A) of the CGST Act, 2017, read with relevant provisions of the SGST Act 2017 and Section 20 of the IGST Act, 2017, for their various acts of omission and commission as discussed supra.

(vii) I impose and order for recovery of penalty equivalent to Rs. 50,000/- (CGST-Rs.25,000/- and SGST-Rs. 25,000/- ) from the Noticee 2, under section 122(3)(a) of CGST Act, 2017, read with relevant provisions of the SGST Act 2017 and Section 20 of the IGST Act, 2017, for their various acts of omission and commission as discussed supra.

(viii) I impose and order for recovery of penalty equivalent to amount as mentioned in column

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2025 Supreme(Online)(Del) 9879

IN THE HIGH COURT OF DELHI AT NEW DELHIPrathiba M. Singh, Renu Bhatnagar, JJMANPAR EXIM INC – AppellantVersusADDITIONAL DIRECTOR DGGI AND ORS – RespondentW.P.(C)-18204/2025

Pre-SCN consultation notice under Rule 142(1A) of GST Rules is not mandatory after the amendment replacing 'shall' with 'may'; writ petition dismissed as alternative remedy of appeal exists.

IN THE HIGH COURT OF DELHI AT NEW DELHI
Prathiba M. Singh, Renu Bhatnagar, JJ
MANPAR EXIM INC – Appellant
Versus
ADDITIONAL DIRECTOR DGGI AND ORS – Respondent
W.P.(C)-18204/2025