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Delhi High Court Dismisses Plea Challenging GST Demand, Cites Lack of Bona Fide and Available Appeal Remedy

New Delhi: The Delhi High Court, in a significant ruling on procedural rights in tax matters, has dismissed a writ petition challenging a GST demand order, holding that the right to cross-examination is not absolute and financial inability to make a pre-deposit for an appeal cannot be a ground to invoke the court's writ jurisdiction.

The division bench of Justice Prathiba M. Singh and Justice Shail Jain affirmed that a party seeking to cross-examine witnesses must provide specific reasons, and a blanket request cannot be used to turn show-cause proceedings into "mini-trials."

Background of the Case

The case revolves around petitioner Raj Kumar Gupta, who was implicated in the clandestine manufacture and sale of pan masala. In 2016, the Directorate General of GST Intelligence (DGGI) conducted raids at multiple premises linked to Gupta, seizing goods, raw materials, and Rs. 70 lakh in cash. Following investigations and the issuance of several show-cause notices (SCNs), the DGGI passed a demand order on June 18, 2025.

Gupta challenged this order directly before the High Court under Article 226 of the Constitution, primarily on the ground that he was denied the opportunity to cross-examine several witnesses, which he claimed was a violation of the principles of natural justice.

Arguments from Both Sides

Petitioner's Stance: Mr. Rachit, counsel for the petitioner, argued that the demand order was unsustainable due to a "serious infraction of the principles of natural justice." He contended that the adjudicating authority passed the order without allowing his client to cross-examine key witnesses whose statements formed the basis of the demand, thereby prejudicing his case.

Respondent's Stance: Representing the tax authorities, Mr. Aggarwala, ld. SSC, countered that the writ petition was not maintainable. He submitted that the impugned order was an appealable order under Section 35B of the Central Excise Act, 1944 , and the petitioner had an effective alternative remedy before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT).

Court's Analysis and Legal Precedents

The High Court meticulously examined the petitioner's conduct and the legal principles surrounding the right to cross-examination. The bench noted that Gupta had failed to file a reply to the main SCN dated June 8, 2020, had sought repeated adjournments, and had only made a "casual" request for cross-examination in 2025 without providing any justification.

The Court heavily relied on its own precedent in _ M/s Vallabh Textiles v. Additional Commissioner Central Tax GST, Delhi East and Ors _ (2025:DHC:2559-DB) , reinforcing the principle that the right to cross-examination is not unfettered.

> "The provision of the opportunity to cross-examine depends on the facts and circumstances of each case and is warranted only when the party seeking such an opportunity is able to demonstrate that prejudice would be caused in the absence thereof," the Court reiterated from its earlier judgment.

The bench observed that the petitioner's actions, including non-cooperation and last-minute requests, suggested a lack of bona fides and an attempt to "completely wash its hands of the entire clandestine operation."

The judgment highlighted key findings from the investigation: - Clandestine Factory: Evidence strongly linked Gupta to an unregistered factory in Dabri where eight pouch packing machines and large quantities of unaccounted goods were found. - Witness Statements: Multiple individuals, including transporters and employees, had given detailed statements on the illicit trade. - Petitioner's Non-cooperation: The order recorded that Gupta had sought numerous adjournments and failed to respond to the SCN, which undermined his claim of being denied a fair hearing.

The Final Verdict

The Court concluded that there was no violation of the principles of natural justice, given that the petitioner had been given repeated opportunities to participate in the proceedings but had failed to cooperate.

When the bench offered the petitioner an opportunity to pursue the statutory appeal, his counsel stated that Gupta could not afford the mandatory pre-deposit required for filing an appeal. The Court unequivocally rejected this as a valid reason to entertain the writ petition.

> "The mere adverse financial condition of the Petitioner, for not making the pre-deposit, cannot be a reason to entertain a writ petition on these facts," the Court firmly stated.

Finding the petition without merit and an attempt to bypass the statutory appellate process, the High Court dismissed it, directing the petitioner to avail the appropriate appellate remedy if he so chose.