The Delhi High Court has declined to entertain writ petitions filed by two company directors challenging penalties of ₹27.11 crore each under Section 122(1A) of the Central Goods and Services Tax Act, 2017, holding that disputes concerning the service of show-cause and personal-hearing notices should first be examined by the statutory appellate authority.
A Division Bench comprising Justice Anil Kshetrapal and Justice Shail Jain observed that the alleged failure to provide an effective personal hearing was a curable defect and did not constitute a jurisdictional error justifying the bypassing of the appellate remedy available under Section 107 of the CGST Act.
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The Court clarified that the appellate authority’s inability to remand a case for fresh adjudication does not make the appellate remedy ineffective. The authority remains competent to independently examine the record, consider the grounds raised by the appellants and decide the appeal on merits.
The petitions were filed by two former directors of a company engaged in trading mobile phones and electronic goods. The company was registered under the GST law at different places of business in Delhi, Maharashtra, West Bengal, Telangana and Karnataka.
The directors challenged a common Order-in-Original dated March 31, 2026, through which the Commissioner of CGST, Delhi West Commissionerate, imposed a penalty of ₹27,11,59,404 upon them under Section 122(1A) of the CGST Act.
Section 122(1A) provides for the imposition of a penalty on a person who retains the benefit of specified transactions and at whose instance such transactions are conducted.
The proceedings arose from an investigation initiated by the Directorate General of GST Intelligence’s Gurugram Zonal Unit after receiving information regarding the alleged fraudulent availment and passing of input tax credit through invoices issued without any corresponding supply of goods or services.
During the investigation, the authorities allegedly found that several firms shown as suppliers to the company did not exist at their declared places of business. According to the department, the firms had no genuine inward supplies and had allegedly been created merely to pass on fraudulent ITC without the actual movement of goods.
The investigation was consequently extended to the company as an alleged beneficiary of the disputed input tax credit.
Summons issued in February and March 2022 at the company’s Delhi address were reportedly returned undelivered. Another summons was subsequently issued at the company’s registered address in Karnataka.
In response, the company furnished ledgers, purchase orders, bank details and other documents concerning its stated suppliers. The department claimed that the account details submitted during the investigation belonged to a different supplier, suggesting that no genuine payment had been made against the invoices on which ITC was claimed.
The DGGI also traced the International Mobile Equipment Identity numbers of the mobile phones through manufacturers and authorised distributors, including Apple India, Samsung India Electronics, Savex Technologies and Infiniti Retail, which operates Croma stores.
According to the investigation, the goods mentioned in the disputed invoices had either been supplied to other entities or sold directly to business-to-consumer customers. The department alleged that the goods had not passed through the suppliers shown in the company’s records.
One of the directors was subsequently arrested on June 7, 2023. Statements of the two directors were recorded in June 2023, following which a show-cause notice dated March 21, 2025, was issued to the company and the directors individually.
The company informed the adjudicating authority that it was undergoing the Corporate Insolvency Resolution Process and that a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, was in operation.
Personal hearings were scheduled on January 28, February 16 and March 23, 2026. However, according to the record considered by the High Court, only the company’s resolution professional attended the hearings. No separate reply or appearance was recorded on behalf of the two directors in their individual capacities.
The adjudicating authority thereafter passed the impugned order imposing the penalties, prompting the directors to approach the High Court under Article 226 of the Constitution.
The directors acknowledged the availability of an appeal under Section 107 of the CGST Act. It was nevertheless argued that the entire adjudication was without jurisdiction because no show-cause notice had been served on the directors.
The petitioners also contended that directing them to approach the appellate authority would not provide an effective remedy because the authority did not possess the power to remand the matter for fresh consideration.
On the question of personal hearing, the directors claimed that the first hearing notice was never served upon them, while the second notice was addressed only to the company. Although the third notice was received, it allegedly carried the same subject line and referred to the company’s email addresses, leading the directors to believe that the hearing concerned only the company.
The High Court reiterated that the mere existence of an alternative statutory remedy does not completely bar the exercise of writ jurisdiction, particularly where there is a breach of natural justice or an absence of jurisdiction.
However, the exceptions permitting the Court to entertain a writ petition despite an appellate remedy must be applied sparingly. They cannot ordinarily be invoked where the controversy is predominantly factual and can be examined by the appellate authority.
The Bench noted that the show-cause notice identified both directors as individual noticees and called upon them to explain why penalties should not be imposed. Whether the notice was actually served upon them, and the manner in which it was served, would require an examination of the departmental records and supporting material.
Similarly, deciding whether the directors were effectively denied an opportunity of personal hearing would require scrutiny of the hearing notices, the mode of service and the timeline of their issuance and receipt.
The Court held that such disputed factual questions should not be decided for the first time in writ proceedings.
Tthe High Court observed that even if the directors’ grievance concerning the denial of a personal hearing were accepted, the defect would be curable.
Such an infirmity, the Court said, would not necessarily go to the root of the adjudicating authority’s jurisdiction so as to permit the petitioners to bypass the statutory appellate mechanism.
The appellate authority was better placed to call for and examine the underlying notices, service records and related documents before deciding whether a proper opportunity had been afforded to the directors.
Rejecting the argument regarding the appellate authority’s lack of power to remand the case, the High Court drew a distinction between the power to remand and the power to decide an appeal on merits.
The absence of a statutory power to send the matter back for fresh adjudication does not prevent the authority from entertaining the appeal, examining the objections and independently appreciating the evidence.
“The power to decide an Appeal on merits, upon a fresh and independent appreciation of the record, is distinct from the power to remand, and the want of the latter does not translate into an incapacity to exercise the former,” the Court observed.
The High Court disposed of the writ petitions and relegated the directors to the statutory remedy of appeal under Section 107 of the CGST Act.
The Court granted them liberty to file an application under Section 14 of the Limitation Act, 1963, seeking exclusion of the period during which their writ petitions remained pending before the High Court. The appellate authority was directed to consider any such application in accordance with law.
The Bench clarified that its observations were confined to the maintainability of the writ petitions and should not be treated as an expression of opinion on the merits of the allegations. The appellate authority would remain free to examine all objections raised by the directors independently.
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