Court clarifies amended pre-deposit rules non-applicable retrospectively, leaves contested jurisdiction and evidentiary issues for appellate adjudication
In a significant judgment dated September 7, 2026, the Delhi High Court (Division Bench of Justices Anil Kshetarpal and Shail Jain) disposed of a batch of writ petitions challenging penalty adjudication proceedings initiated under Section 122 of the Central Goods and Services Tax (CGST) Act, 2017. The petitions, filed by multiple taxpayers including M/s Siwon Enterprises Pvt. Ltd. and various other entities and individuals, assailed the validity of show cause notices (SCNs), the competence of officers issuing such notices, evidentiary bases of the proceedings, and the applicability of amended pre-deposit requirements for filing appeals.
The Court took cognizance of a vast and complex investigation conducted by the Directorate General of GST Intelligence (DGGI), involving alleged issuance of invoices without actual supply of goods, wrongful availment or passing on of Input Tax Credit (ITC), and related contraventions spanning multiple financial years. The aggregate tax and penalty demands in the adjudication orders run into hundreds of crores of rupees.
A central issue raised was whether the officers who issued the SCNs were "proper officers" vested with authority under the CGST Act to initiate proceedings under Section 122. The petitioners argued that the officers lacked proper assignment of functions at the time of issuance, citing a later Circular dated October 27, 2025, which specifically designated officers empowered to exercise such functions. They contended that a subsequent assignment could not validate SCNs issued earlier and that denial of cross-examination, non-supply of documents, and mechanical multiplication of penalties violated principles of natural justice.
The respondents, representing the Union of India, defended the competence of the officers by relying on statutory Notifications Nos. 14/2017 and 2/2017, which confer powers on officers of the DGGI at ranks equivalent to Commissioners or Additional Commissioners, and assign functions under the CGST Act. They further argued that the amended pre-deposit conditions under Section 107(6), which became effective from October 1, 2025, did not apply retrospectively to SCNs issued before that date, a position accepted by the Court.
After extensive examination, the Court held that the objections regarding officers' competence and evidentiary disputes involve mixed questions of law and fact and are best suited to be adjudicated by the statutory Appellate Authority under Section 107 of the CGST Act. The Court declined to exercise its writ jurisdiction under Article 226 of the Constitution, emphasizing the availability of an efficacious and complete statutory remedy of appeal.
Notably, the Court left open the question of applicability of Section 122(1) to persons who are not "taxable persons," as it is pending before the Supreme Court. The Court also clarified that appeals arising from SCNs issued before October 1, 2025, would not be subject to the substituted proviso to Section 107(6) introduced thereafter, thereby safeguarding taxpayers from retrospective imposition of onerous pre-deposit conditions.
The judgment underscores the principle that writ jurisdiction in fiscal matters is to be exercised sparingly when an effective statutory appellate remedy exists, even where issues of jurisdiction and natural justice are alleged. The petitioners were directed to avail themselves of the appellate remedy and were assured that all grounds, including jurisdictional and evidentiary objections, will be independently examined by the Appellate Authority.
This ruling brings clarity on procedural aspects of GST penalty proceedings and sets a precedent for handling challenges to adjudication orders under the CGST Act, reinforcing the importance of statutory appeal mechanisms in tax dispute resolution.
Bottom Line:
The writ petitions challenging the validity of proceedings under Section 122 of the CGST Act were disposed of on the ground of the availability of an appellate remedy under Section 107 of the Act. The Court declined to interfere under Article 226 of the Constitution, leaving contentious issues, including the competence of officers and evidentiary disputes, to be adjudicated by the Appellate Authority.
Statutory provision(s):
Central Goods and Services Tax Act, 2017: Sections 2(91), 3, 5, 20, 22, 74, 74A, 107(6), 122(1), 122(1A), 122(3)(a), 132(1)
Rohit Garg v. Union of India, (Delhi)(DB) : Law Finder Doc Id # 2973502
