The Delhi High Court has held that the administrative assignment of taxpayers to State GST authorities does not prevent the Directorate General of GST Intelligence (DGGI) from initiating intelligence-based enforcement proceedings involving transactions spread across several States.
The Bench of Justice Anil Kshetrapal and Justice Shail Jain rejected a jurisdictional challenge against a common adjudication order confirming input tax credit demands exceeding ₹5.67 crore against its separate GST registrations in Karnataka, Tamil Nadu and Telangana.
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The Court declined to examine the factual merits of the ITC dispute under Article 226 of the Constitution, observing that the adequacy of the adjudicating authority’s reasoning, the genuineness of the underlying supplies and the evidentiary documents relied upon by the taxpayer could be effectively examined in a statutory appeal under Section 107 of the Central Goods and Services Tax Act, 2017.
However, the Court permitted the company to file appeals within four weeks and directed that, if filed within this period with the required pre-deposit, they must be decided on merits without being rejected as time-barred.
The proceedings originated from an investigation conducted by the Kanpur Regional Unit of the DGGI into an alleged chain of invoices issued without corresponding supplies.
According to the department, ITC was passed through M/s Club Axe Clothing, M/s Footprints and M/s Disha Traders to M/s Univista Contractors Ltd., which subsequently passed the credit to several recipients, including the assessee. The common show cause notice dated April 29, 2022, was issued to 95 noticees.
The adjudication order dated February 4, 2025, confirmed the following ITC demands:
- ₹2,62,74,687 against the Karnataka GST registration for September and October 2017;
- ₹10,57,452 against the Tamil Nadu GST registration for September 2017; and
- ₹2,94,30,991 against the Telangana GST registration for September and October 2017.
The total disputed ITC demand against the three registrations was ₹5,67,63,130.
Each demand was accompanied by interest under Section 50 of the CGST Act, a penalty equal to the tax demand and an additional penalty of ₹50,000 under Section 122(3)(a), read with Section 20 of the Integrated Goods and Services Tax Act, 2017.
The company disputed the department’s description of the transactions as being part of a fake-invoice chain.
It submitted that M/s Sunil Hitech Engineers Ltd. had awarded construction work to it and that the work was subcontracted to Univista Contractors on a back-to-back basis. The company retained a margin of 5%.
According to the taxpayer, Univista had actually executed the construction work. It relied upon work orders, invoices, ledger accounts, banking records and other supporting documents to establish the genuineness of the services received and the resulting entitlement to ITC.
The company filed a common reply dated April 17, 2024, containing its factual and legal defence along with a large compilation of supporting documents. It subsequently submitted an additional reply dated January 13, 2025, questioning the allocation of the adjudication proceedings to Delhi North and seeking their transfer to Rangareddy.
Its advocate also appeared for a personal hearing on January 14, 2025, and reiterated the earlier written submissions.
One of the company’s principal objections was that its reply and supporting documents had not been considered by the adjudicating authority. It argued that the order consequently failed to satisfy the requirements of Sections 74(9) and 75(6) of the CGST Act.
The respondents acknowledged in their counter-affidavits that the taxpayer’s reply had inadvertently not been incorporated in the adjudication order. They nevertheless denied that the reply had not been considered.
The High Court held that the mere failure to reproduce a reply in an adjudication order would not, by itself, establish that the reply had been ignored.
What was material, the Court explained, was whether the order took note of the substance of the defence and disclosed the grounds on which the claim was rejected. At the same time, a general statement that all replies had been considered could not cure an order that otherwise contained no reasons.
The Bench noticed an apparent error in the adjudication order, which referred to written submissions dated October 10, 2025—a date falling after both the personal hearing and the adjudication order. The Court said this error did not negate the fact that a personal hearing had admittedly been conducted.
It also clarified that merely granting a personal hearing could not establish that every document filed by the taxpayer had been examined.
On examining the adjudication order, the Court found that it had held, in substance, that the invoices were not supported by actual supplies, that the statutory conditions for availing ITC had not been fulfilled and that the noticees had failed to discharge the burden imposed by Section 155 of the CGST Act.
Although the reasoning was common to various noticees and did not separately analyse the company’s work orders, invoices and ledgers, the order disclosed the basis on which its ITC claim had been rejected, the Court observed.
Determining whether the documents filed by the company established the receipt and execution of services would require the work orders issued by Sunil Hitech to be matched with the corresponding subcontracts, invoices, payments and evidence of execution in each State.
The Court held that this exercise involved examination of a voluminous factual record and could appropriately be undertaken by the statutory appellate authority.
“This is not a case where the Petitioners were denied notice or personal hearing, or where the Impugned Order discloses no reasons for the decision,” the Bench observed.
The grievance concerned the adequacy of the reasons and the correctness of the appreciation of evidence, both of which could be examined in an appeal, it added.
The company argued that its GST registrations were administratively assigned to State tax authorities in Karnataka, Tamil Nadu and Telangana. On this basis, it contended that the DGGI could neither issue the show cause notice nor have it adjudicated by the Additional Commissioner of Central GST, Delhi North.
The High Court rejected the objection.
It referred to Notification No. 14/2017-Central Tax dated July 1, 2017, which appoints specified DGGI officers as Central tax officers and authorises them to exercise the powers of corresponding officers throughout India.
The Court also relied on the Supreme Court’s ruling in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate, which explained that the administrative allocation of taxpayers does not exclude intelligence-based enforcement action by the other tax administration.
In the present case, the investigation arose from intelligence concerning an alleged chain of transactions extending across several States. Therefore, the fact that the company’s registrations were assigned to State authorities did not take away the DGGI’s jurisdiction, the Court held.
The company further argued that the adjudication proceedings should have been conducted in Chennai or Rangareddy instead of Delhi North.
The Court noted that Notification No. 02/2022-Central Tax dated March 11, 2022, authorised Additional and Joint Commissioners posted in specified Commissionerates, including Delhi North, to adjudicate DGGI notices throughout India.
Circular No. 169/01/2022-GST dated March 12, 2022, provided that a common show cause notice involving noticees located in more than one Commissionerate would be assigned based on the principal place of business of the noticee facing the highest tax demand. Where that noticee fell within the Delhi Zone, Delhi North was the designated Commissionerate.
The company had compared only the demands against its own three GST registrations and treated the Telangana demand as the highest. However, the Court found that the highest demand in the entire common show cause notice was ₹20,65,43,038 against Disha Traders, Delhi.
Accordingly, the show cause notice had correctly been made answerable to the Additional or Joint Commissioner, CGST Delhi North, including in relation to the company’s three registrations.
The Court further held that Notification No. 27/2024-Central Tax dated November 25, 2024, and Circular No. 239/33/2024-GST dated December 4, 2024, did not change this position.
Disha Traders’ registered address, bearing PIN code 110053, fell within the Delhi East Commissionerate. Under the revised allocation also, matters pertaining to Delhi East were mapped to the common adjudicating authority at Delhi North.
There was, therefore, no requirement to transfer the common proceedings to Chennai or Rangareddy through a corrigendum, the Court concluded.
The company also relied on Circular No. 171/03/2022-GST, which deals with the tax and penal consequences of fake-invoice transactions.
The Court explained that the circular distinguishes between two situations.
Where a person avails ITC on an invoice unsupported by an inward supply but utilises that credit for paying tax on a genuine outward supply, serial number 2 of the circular contemplates recovery under Section 74.
In contrast, where both the inward and outward invoices are unsupported by actual supplies, serial number 3 provides that recovery under Sections 73 or 74 may not be required, although penal action under Section 122 may still follow.
The company’s primary case was that both the subcontracted work received from Univista and the outward supply made to Sunil Hitech were genuine. Its reliance on serial number 3 of the circular was only an alternative submission and could not be treated as an admission that the transactions were not genuine, the Court clarified.
The adjudicating authority had declined to apply the circular on the ground that it was issued after the show cause notice. The High Court held that the correctness of this reasoning, the applicable category under the circular and the consequences for the demand and penalties depended upon the factual character of the inward and outward transactions.
These questions were within the scope of appellate examination and the mere invocation of the circular did not render either the show cause notice or the adjudication order without jurisdiction, the Bench said.
The Court noted that Section 107(11) empowers the appellate authority, after conducting any necessary inquiry, to confirm, modify or annul the decision appealed against.
Although the appellate authority cannot remand the proceeding to the original adjudicating authority, it can itself examine the company’s documents and decide whether it was entitled to ITC.
The receipt of services, discharge of the burden under Section 155, invocation of Section 74, applicability of Circular No. 171/03/2022-GST and legality of the penalties were all matters that could be effectively determined in the appellate proceedings.
Entertaining these disputed questions in writ jurisdiction would require the High Court to undertake the same factual scrutiny that the statutory appellate authority was empowered to perform, the Bench observed.
The High Court consequently disposed of the writ petitions and relegated the company to the remedy of appeal under Section 107 of the CGST Act.
Since the petitions had remained pending after the issuance of notice and the company had enjoyed protection against coercive action, the Court permitted it to file statutory appeals with the requisite pre-deposit within four weeks from September 16, 2026.
If filed within this period, the appeals must be entertained and decided on merits without being rejected on limitation grounds.
The interim protection granted on August 5, 2025, will continue for four weeks. If the appeals are filed within that period with the required pre-deposit, the statutory protection under Section 107(7) will thereafter operate. If the appeals are not filed within the stipulated period, the interim protection will cease.
The Court clarified that its order should not be construed as affirming the disputed findings against the company on merits. All grounds relating to the demands, interest and penalties were left open for consideration by the appellate authority.
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