The Delhi High Court has held that a common show-cause notice issued to several noticees does not, by itself, become deficient when it sets out the department’s allegations concerning the transactions and the alleged mechanism for availing and passing on ineligible input tax credit (ITC).
The Bench of Justice Anil Kshetarpal and Justice Bharat Parashar declined to interfere with two adjudication orders challenged through writ petitions and directed the taxpayer to pursue the statutory appellate remedy under the Central Goods and Services Tax Act, 2017.
Buy Now: 160+ GST E-Magazine September 2026
The bench expressly left open the merits of the demands, the applicability of Section 74, and the legality of a penalty allegedly imposed without being proposed in the show-cause notice.
The proceedings arose from an investigation into several firms allegedly involved in availing and passing on ITC through invoices unsupported by actual supplies of goods.
According to the department, a search conducted under Section 67(2) of the CGST Act at the premises of an individual allegedly connected with the network resulted in the seizure of stamps, letterheads and invoices relating to multiple firms.
The department alleged that the firms formed an interconnected arrangement through which invoices were generated and circulated without corresponding receipt or supply of goods.
The judgment also referred to the petitioner’s statement recorded on May 19, 2023. As recorded in the proceedings, he stated that he assisted in distributing invoices that were not backed by actual supplies and were made available through brokers against commission.
The investigation covered transactions involving several firms. One allegation concerned ITC of ₹2,94,04,610 availed by M/s Metal Tech on invoices received from M/s Shree Shyam Enterprises, which had received inward supplies from other firms.
These were allegations forming part of the department’s case; the High Court did not finally determine their correctness or the petitioner’s liability.
The petitioner challenged two separate orders-in-original dated February 4, 2025, passed by the Additional Commissioner, Central Goods and Services Tax.
The order challenged in Writ Petition required payment of ₹6,14,568, while the other order raised a demand of ₹2,93,53,860.
Although a statutory appeal was available, the petitioner approached the High Court on grounds concerning the validity of the show-cause notices and the legality of the resulting orders.
In the first petition, the principal argument was that the notice lacked the particulars necessary to invoke Section 74 of the CGST Act. In the second, the petitioner argued that the adjudicating authority imposed a penalty even though the show-cause notice had not proposed it.
Examining the first petition, the Court noted that the common show-cause notice ran into nearly 80 pages of the paper book and described the alleged transactions and modus operandi involving multiple firms.
The Bench found that the notice contained a detailed account of how invoices unsupported by genuine supplies were allegedly used to avail and pass on ineligible ITC.
It therefore declined to accept the alleged omission of vital particulars as sufficient grounds for exercising writ jurisdiction at that stage.
The Court observed: “The fact that the notice is common to several noticees does not, by itself, render it deficient.”
The Bench also noted that the adjudicating authority had considered the petitioner’s reply before passing the order.
However, the Court did not conclusively hold that the notice established liability or fulfilled every requirement of Section 74. It preserved the petitioner’s right to challenge the notice, the evidence relied upon, and the adjudicating authority’s conclusions before the appellate authority.
In the second petition, the taxpayer specifically contended that the show-cause notice dated August 1, 2024, accompanied by DRC-01 dated August 2, 2024, did not propose a penalty against him, but the subsequent adjudication order directed its payment.
The Court recognised that this objection concerned the scope of the notice and the legality of the consequential penalty.
It held that the statutory appellate authority could examine whether the notice, read as a whole and alongside the applicable provisions, contained a proposal capable of sustaining the penalty.
For this purpose, the appellate authority could consider the notice, the taxpayer’s reply, the statement recorded during investigation, the adjudication findings and the relevant provisions of the CGST Act.
The High Court expressly clarified that relegating the petitioner to appeal did not amount to accepting the department’s position on the penalty. Its legality remains open for independent adjudication.
The petitioner relied on the Supreme Court’s decision in M/s G.R. Infra Projects Limited, Ratlam v. State of Madhya Pradesh & Others, Civil Appeal No. 11277/2026.
As explained in the High Court judgment, that decision requires a show-cause notice invoking Section 74 to disclose the factual particulars supporting allegations of fraud, wilful misstatement or suppression. Merely reproducing those statutory expressions is insufficient.
The High Court recognised that principle but held that its application depended on the contents of the particular notice.
Here, the notices described an alleged network of firms, transactions and the roles attributed to the noticees. The Court therefore found insufficient grounds to bypass the appellate process.
Significantly, although the proceedings reportedly involved as many as 158 noticees, the Bench clarified that the number of persons involved did not establish the liability of any individual noticee.
The Court further emphasised that its decision neither diluted the Supreme Court’s principle nor finally established that Section 74 had been validly invoked.
The High Court directed the petitioner to pursue the statutory appeals against the respective orders.
It clarified that no final opinion had been expressed on the demands, the applicability of Section 74, the sufficiency of the department’s material or the disputed penalty. The appellate authority must consider the available grounds independently and in accordance with law.
The Court also directed that, if the petitioner files an application under Section 14 of the Limitation Act, 1963, seeking exclusion of the period during which the writ petitions remained pending, the competent appellate authority must consider it according to law. The judgment did not itself grant an automatic exclusion of that period.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
