Delhi HC Sends Steel Trader To Appeal Over ₹2.93-Crore GST Demand, Leaves Penalty Challenge Open

The petitioner challenged two orders-in-original dated 4 February 2025 arising from an investigation into alleged availment and passing on of ineligible input tax credit through invoices unsupported by genuine supplies.

The orders raised demands of ₹6,14,568 and ₹2,93,53,860, respectively.

In W.P.(C) 50/2026, he contended that the common show-cause notice did not disclose sufficient particulars to invoke Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act).

In W.P.(C) 2528/2026, he objected that the order imposed a penalty not proposed in the show-cause notice.

He relied on M/s G.R. Infra Projects Limited v. State of Madhya Pradesh & Ors., Civil Appeal No. 11277/2026.

A statutory appeal was available against both orders.

Article 226 of the Constitution confers wide writ jurisdiction, but the existence of an efficacious statutory remedy is a material consideration; a writ court ordinarily exercises restraint where the dispute can be examined by the statutory appellate forum.

Section 74 of the CGST Act requires the factual basis for invoking fraud, wilful misstatement or suppression to be discernible from the show-cause notice; merely using those statutory expressions is insufficient.

The Supreme Court’s decision in M/s G.R. Infra Projects Limited v. State of Madhya Pradesh & Ors. was cited for that principle.

The legality of a penalty imposed in an adjudication order, including whether the notice proposed it, may be examined by the statutory appellate authority.

An application under Section 14 of the Limitation Act, 1963, seeking exclusion of the period during which the writ petitions were pending, is to be considered by the appellate authority in accordance with law.

The Court found that the notice challenged in W.P.(C) 50/2026 was nearly 80 pages and set out the alleged transactions and modus operandi involving interconnected firms.

It therefore declined to treat the petitioner’s notice-sufficiency objection as a sufficient basis for bypassing the appeal; the merits of the allegations and compliance with Section 74 were left open to the appellate authority.

In W.P.(C) 2528/2026, the Court treated the penalty objection as requiring examination of the notice, the reply, the adjudication findings and the applicable provisions—matters the appellate authority was competent to determine.

It expressed no view on whether the notice adequately proposed the penalty.

The Court considered G.R. Infra Projects but held that, given the contents of the notices and the nature of the objections, it did not warrant writ intervention.

It clarified that this conclusion neither diluted the Supreme Court’s principle nor finally determined that Section 74’s requirements were satisfied.

It left open all merits, including the applicability of Section 74, the sufficiency of the Department’s material and the legality of the penalty.

Any application under Section 14 of the Limitation Act for exclusion of the period spent in the writ proceedings is to be considered by the appellate authority in accordance with law.

Both writ petitions and pending applications were disposed of.