Court emphasizes availability of statutory remedy under Section 107 of CGST Act, 2017 and refrains from interfering in factual and procedural issues at writ stage
In a significant decision dated September 24, 2026, the Delhi High Court (Division Bench comprising Justices Anil Kshetarpal and Bharat Parashar) dismissed a batch of three writ petitions filed by Siya Seth Proprietor of Spherion Solutions and Spherion Solutions Private Limited challenging a common adjudication order passed by the Additional Commissioner, Adjudication, CGST Delhi North. The impugned order imposed penalties under Section 122 of the Central Goods and Services Tax Act, 2017 (CGST Act) related to alleged involvement in a large-scale Input Tax Credit (ITC) fraud involving fake firms.
The petitioners had sought to quash the penalty order, contending multiple grounds including violation of principles of natural justice, absence of a statutory limitation period under Section 127 of the CGST Act, initiation of proceedings by an improper officer, and the claim that liability should be confined to the "mastermind" identified under Section 122(1A) rather than the petitioners. They also challenged the imposition of identical penalties on multiple entities for the same transactions, alleging it was disproportionate and violative of the doctrine of proportionality.
The Court, after hearing submissions, observed that all such contentions required a detailed examination of facts, records, and statutory provisions which were appropriately within the purview of the Appellate Authority under Section 107 of the CGST Act. It emphasized that when an efficacious statutory remedy of appeal exists, the High Court should ordinarily not exercise writ jurisdiction as a first resort, especially in matters involving complex factual and legal questions.
Regarding allegations of denial of natural justice, the Court noted the petitioners failed to point to any specific instance of hearing denial or non-consideration of material and held that adequacy of opportunity can be examined by the Appellate Authority. Similarly, the question of limitation under Section 127, which does not prescribe a fixed period, was held to be fact-specific and suitable for appellate scrutiny.
The Court also dealt with pre-deposit requirements for appeals under Section 107(6) of the CGST Act. It granted the petitioners the liberty to avail of the benefit of a recent judgment in Gaurav Jain v. Joint Commissioner (Appeals-II), CGST Delhi Zone, subject to applicability and fulfillment of stipulated conditions, thus ensuring their appeal rights are not unduly hampered.
The judgment highlights the principle that High Courts should not bypass or substitute the statutory appellate process, particularly in tax adjudication matters involving technical and intricate factual inquiries. The decision reinforces the procedural safeguards and the hierarchy of remedies within the GST adjudication framework.
The writ petitions (W.P.(C) 14095/2026, 14124/2026, and 14141/2026) stand disposed of accordingly, with the petitioners directed to pursue their grievances through the designated appellate mechanism.
Bottom Line:
CGST Act - Writ petitions challenging common adjudication order imposing penalty under Section 122 - When statutory appeal under Section 107 is available, High Court would not entertain writ petition in first instance, particularly where issues involve factual examination, adequacy of opportunity, limitation under Section 127, competence of proper officer, and determination whether liability falls under Sections 122(1), 122(1A) or 122(3) - Petitioners permitted to avail benefit of earlier judgment regarding pre-deposit, subject to applicability.
Statutory provision(s):
Central Goods and Services Tax Act, 2017 Sections 107, 122, 127, Article 226 of the Constitution of India
