Delhi High Court Declines Writ Interference in Alleged Fake Invoice GST Demands, Leaves Steel Trader to Statutory Appeal Without Finally Deciding Liability or Penalty
Delhi High Court Finds Detailed GST Fraud Notice Sufficient to Decline Writ Intervention, Sends Disputed Tax Demands and Allegedly Unnotified Penalty Questions to Statutory Appeal
Facts
Manoj Kumar, proprietor of M.K. Steel Traders, challenged two orders-in-original dated 4 February 2025 through connected writ petitions. The CGST investigation alleged a network of firms issuing invoices without actual supplies to avail or pass on ineligible input tax credit (ITC). A search of Mohit Jain’s premises allegedly yielded stamps, letterheads and invoices of multiple firms; the Department also relied on Manoj Kumar’s statement dated 19 May 2023 concerning invoice distribution for commission. Show-cause notices dated 1 August 2024 and DRC-01 summaries dated 2 August 2024 preceded demands of ₹6,14,568 in W.P.(C) 50/2026 and ₹2,93,53,860 in W.P.(C) 2528/2026.
Issues
Whether Article 226 writ jurisdiction should be exercised despite an available CGST statutory appeal; whether the Section 74 show-cause notice was insufficiently particularised; and whether a penalty allegedly absent from the show-cause notice could lawfully be imposed in the resulting order.
Petitioner’s Arguments
The petitioner argued that the Section 74 notice challenged in W.P.(C) 50/2026 was non-speaking, lacked the particulars establishing fraud, wilful misstatement or suppression, and therefore invalidated the adjudication. In W.P.(C) 2528/2026, he submitted that the notice and DRC-01 did not propose a penalty although the final order imposed one. Relying on M/s G.R. Infra Projects Ltd. v. State of Madhya Pradesh, he contended that statutory labels alone cannot justify Section 74 and sought writ interference notwithstanding the alternative appeal.
Respondent’s Arguments
The Department’s case, as recorded in the judgment, was that interconnected firms issued invoices unaccompanied by real goods, facilitating ineligible ITC; it relied on search material, transaction chains and the petitioner’s recorded statement. The notices attributed roles to multiple noticees and detailed an alleged modus operandi. The respondents appeared through counsel, but the judgment does not separately set out detailed oral rebuttal submissions; the Court considered the Department’s pleaded allegations and adjudication record.
Analysis of the Law
Article 226 jurisdiction is broad but discretionary. Where the CGST Act supplies an efficacious appeal against an adjudication order, the High Court ordinarily refrains from resolving disputes that the appellate authority can examine. Section 74 requires factual particulars supporting allegations of fraud, wilful misstatement or suppression; merely reciting those expressions is inadequate. Whether the material ultimately establishes liability, and whether an unproposed penalty could be imposed, are issues that can be tested on statutory appeal. The Court drew no final conclusion on either issue.
Precedent Analysis
In M/s G.R. Infra Projects Limited, Ratlam v. State of Madhya Pradesh & Ors. (Civil Appeal No. 11277/2026), the Supreme Court held that a notice invoking Section 74 must disclose the factual basis of the alleged fraudulent or suppressive conduct, not simply repeat statutory phrases. The Delhi High Court accepted that principle but distinguished its application here: the notice in W.P.(C) 50/2026 ran to nearly 80 pages and described alleged transactions, a network of firms and invoice-based ITC arrangements. The precedent did not, without more, warrant bypassing the appellate forum.
Court’s Reasoning
The Bench found the first notice sufficiently detailed to defeat, at the writ stage, the assertion that essential facts were wholly absent; a common notice to several persons was not automatically defective. It expressly did not decide whether those allegations established Manoj Kumar’s individual liability. In the second petition, whether the notice proposed the penalty imposed required scrutiny of the whole notice, reply, evidence and applicable provisions—an exercise suited to the appellate authority. The Court rejected any suggestion that refusing writ intervention endorsed the penalty. The 158-person investigation and the petitioner’s role remained matters for appellate adjudication.
Conclusion
Both writ petitions were disposed of without interference with the orders dated 4 February 2025. The petitioner was relegated to the statutory appellate remedy, with every contention on Section 74, evidence, liability and penalty expressly kept open. If he seeks exclusion of time spent in the writ proceedings under Section 14 of the Limitation Act, the appellate authority must consider that request in accordance with law. The Court neither upheld the underlying GST demands on their merits nor declared the contested penalty valid.
Case: Manoj Kumar, Proprietor of M.K. Steel Traders v. Additional Commissioner, Central Goods and Services Tax & Anr.
Court: High Court of Delhi at New Delhi, Civil Writ Jurisdiction
Case Number: W.P.(C) 50/2026 and W.P.(C) 2528/2026 (with connected applications)
Judge: Justices Anil Kshetarpal and Bharat Parashar (judgment by Anil Kshetarpal, J.)
Date: 28 October 2026
Result: Both writ petitions disposed of; statutory appeal left open; Section 14 limitation-exclusion plea to be considered; no final merits determination.
