Delhi High Court Directs GST Petitioners to Statutory Appeals; Holds Pre-October 2025 Cases Governed by Earlier Pre-Deposit Rule and Leaves Section 122 Issues Open
Delhi High Court Sends ₹227-Crore GST Penalty Challenge to Appellate Authority; Holds Officer’s Section 122 Jurisdiction Not Patently or Self-Evidently Absent
Facts
The Delhi High Court dealt with a large batch of writ petitions arising from proceedings under the Central Goods and Services Tax Act, 2017, involving common questions concerning Section 122 penalties, competence of the officers initiating proceedings, evidentiary material, natural justice and the statutory appellate remedy under Section 107.
The lead matter was M/s Siwon Enterprises Pvt. Ltd., a company engaged in trading and supplying TMT bars and allied iron and steel products. The investigation arose from allegations of invoices being issued without actual supply of goods and fraudulent availment or passing on of Input Tax Credit (ITC). The Department relied upon statements, electronic material and handwritten records allegedly recovered during searches.
A show-cause notice dated 30 June 2025 was issued under Section 122 and allied GST provisions for FY 2018-19 to FY 2024-25. In the lead case, liability of approximately ₹45.55 crore was initially proposed. The petitioner disputed the allegations and relied upon invoices, e-way bills, transportation records and other material while also seeking cross-examination of persons whose statements were relied upon.
The subsequent Order-in-Original dated 26 December 2025 imposed penalties under multiple clauses of Section 122. In the lead case, the consequential DRC-07 ultimately reflected an aggregate liability of approximately ₹227.72 crore.
The overall investigation was much larger: it concerned 629 firms/entities, and aggregate tax and penalty liabilities ran into hundreds of crores.
The petitioners therefore approached the Delhi High Court under Article 226 instead of pursuing appeals under Section 107.
Issues
The principal issues before the Court were:
- Whether the officers issuing the Section 122 notices were competent or “proper officers” under the CGST Act.
- Whether Section 122(1), which refers to a “taxable person,” could be invoked against persons who were neither registered nor liable to be registered.
- Whether Section 122(1A) could retrospectively apply to transactions before its insertion from 1 January 2021.
- Whether reliance on third-party statements, electronic evidence and handwritten material without cross-examination violated natural justice.
- Whether multiple penalties under different clauses of Section 122 could be imposed for substantially the same alleged conduct.
- Whether the amended pre-deposit requirement under Section 107(6), effective from 1 October 2025, could apply where the show-cause notices had been issued before that date.
- Whether the existence of the statutory appeal under Section 107 required the High Court to decline Article 226 jurisdiction.
Petitioners’ Arguments
The petitioners argued that the Section 122 proceedings were without jurisdiction because the officers issuing the show-cause notices had not been specifically assigned the relevant statutory functions when the notices were issued.
They relied upon Sections 2(91) and 5 of the CGST Act and the Circular dated 27 October 2025, which specifically assigned officers as proper officers for Section 122 proceedings. Their contention was that a subsequent assignment could not retrospectively validate notices that were void when issued.
They also alleged serious breaches of natural justice, including non-consideration of detailed replies, failure to supply relied-upon documents, denial of effective personal hearings and refusal to permit cross-examination.
The petitioners further argued that penalties were mechanically imposed under multiple clauses of Section 122 for the same conduct, resulting in liabilities far exceeding those proposed in the original notices.
They challenged the retrospective application of Section 122(1A) and also argued that the new Section 107(6) pre-deposit requirement could not apply to proceedings initiated before 1 October 2025.
Respondents’ Arguments
The GST authorities argued that the petitioners could not escape liability merely by asserting that they were not themselves taxable persons.
According to the Department, investigation material indicated active involvement by the concerned individuals and entities in issuing invoices without actual supply and facilitating fraudulent ITC transactions.
On the jurisdictional challenge, the Department relied upon Devender Singh v. Additional Commissioner, CGST, Delhi West, contending that an Additional Commissioner was duly empowered to issue Section 122 notices.
Most importantly, the respondents argued that the petitioners should pursue their statutory appeals under Section 107, since most of their challenges involved disputed factual questions regarding individual roles, evidence, genuineness of transactions and alleged GST contraventions.
Analysis of the Law
1. Pre-Deposit Under Section 107(6)
This was the point on which the High Court gave a clear ruling favourable to the petitioners.
Relying on its earlier decision in Gaurav Jain v. Joint Commissioner (Appeals-II), CGST Delhi Zone, the Court held that the substituted proviso to Section 107(6), which came into force on 1 October 2025, does not govern appeals arising from adjudicatory proceedings commenced by show-cause notices issued before that date.
All notices in the present batch had been issued before 1 October 2025. Therefore, the amended pre-deposit provision would not apply to their appeals.
The Court ultimately directed that appeals arising from these notices must be governed by Section 107(6) as it stood on the respective dates when the notices were issued.
2. Section 122(1) and Non-Taxable Persons
The Court recognised an important statutory distinction.
Section 122(1) speaks of a “taxable person,” whereas Section 122(1A) uses the broader expression “any person.” The Court held that this difference in statutory language could not simply be ignored.
However, the precise issue—whether Section 122(1) can apply to someone who is not a taxable person—was already pending before the Supreme Court in Mukesh Kumar Garg v. Union of India.
The Delhi High Court therefore left the question open, directing that it would ultimately be governed by the Supreme Court’s decision.
3. Competence of Officer Under Section 122
The Court explained that Section 2(91) defines “proper officer” by reference to the particular function assigned to the officer.
Accordingly, merely holding a particular designation does not automatically make an officer the proper officer for every function under the CGST Act.
Nevertheless, Notification No. 14/2017 had invested DGGI officers with powers exercisable by central tax officers of corresponding rank.
The Court therefore declined to hold that the Section 122 notices suffered from a patent or self-evident absence of jurisdiction. The interpretation of the notifications, circulars and statutory scheme was capable of being considered by the Section 107 appellate authority.
Precedent Analysis
Gaurav Jain v. Joint Commissioner (Appeals-II), CGST Delhi Zone
This precedent governed the pre-deposit controversy.
It established that the substituted Section 107(6) requirement effective from 1 October 2025 does not apply where adjudicatory proceedings commenced through a show-cause notice before that date.
The Court followed this principle in favour of all petitioners in the present batch.
Assistant Commissioner of State Tax v. Commercial Steel Ltd., (2022) 16 SCC 447
The Supreme Court had recognised exceptions to the rule of alternative remedy, including cases involving violation of fundamental rights, natural justice, excess of jurisdiction or challenge to statutory vires.
However, the Delhi High Court emphasised that merely alleging one of these exceptions does not automatically justify bypassing the statutory appellate remedy.
Devender Singh v. Additional Commissioner, CGST
This decision was relied upon by the Department to support the competence of an Additional Commissioner to issue Section 122 notices.
Sunil Chauhan v. Principal Commissioner of CGST
The decision was relevant to the relationship between Sections 73/74 proceedings and penalties under Section 122, particularly whether a separate Section 122 adjudication is always necessary.
Mukesh Kumar Garg v. Union of India
The issue whether Section 122(1) can be invoked against a person who is not a “taxable person” is presently pending before the Supreme Court. The Delhi High Court therefore expressly refrained from finally deciding this issue.
Court’s Reasoning
The High Court found that most of the disputes raised by the petitioners were intensely factual.
They concerned whether particular transactions were genuine, whether individual petitioners participated in fraudulent ITC arrangements, whether statements and electronic records were reliable, whether cross-examination was wrongly refused, whether multiple penalties were justified and whether different adjudicating authorities had reached inconsistent conclusions.
These questions required examination of a large evidentiary record and were therefore better suited for the statutory appellate authority.
The Court held that the Section 107 appeal constituted a complete and efficacious remedy, permitting consideration of both factual and legal questions.
The petitioners’ jurisdictional objections were preserved, but they were not sufficiently patent to justify bypassing the appellate process.
The Court therefore concluded that the cases did not warrant exercise of extraordinary jurisdiction under Article 226.
Conclusion
The Delhi High Court disposed of the entire batch of writ petitions on the ground of availability of the statutory appellate remedy under Section 107 of the CGST Act.
The petitioners were permitted to raise all their objections before the appellate authority, including the competence of the officer, natural justice, evidentiary objections, multiplication of penalties and other statutory issues.
Importantly, the Court held that:
- the amended pre-deposit provision effective from 1 October 2025 would not apply to appeals arising from notices issued before that date;
- the question whether Section 122(1) can apply to a person who is not a “taxable person” remains open pending the Supreme Court’s decision;
- the challenge to the competence of the officers can be raised before the appellate authority; and
- petitioners may seek exclusion of the period spent prosecuting the writ petitions while computing limitation for their statutory appeals.
Case Details
Case: Rohit Garg v. Union of India & Ors. and connected matters, with M/s Siwon Enterprises Pvt. Ltd. v. Union of India & Ors. treated as the lead matter for adjudication.
Court: High Court of Delhi at New Delhi.
Case Number: W.P.(C) No. 8829 of 2026 and connected matters. The lead petition discussed by the Court was W.P.(C) No. 7287 of 2026.
Bench: Justice Anil Kshetarpal and Justice Shail Jain.
Judgment by: Justice Anil Kshetarpal.
Judgment Reserved: 20 August 2026.
Judgment Pronounced: 7 September 2026.
Subject: Sections 122, 122(1A) and 107 of the CGST Act; fraudulent Input Tax Credit; fake invoices; proper officer; multiple GST penalties; natural justice; cross-examination; statutory appeal; pre-deposit; Article 226.
Result: Writ petitions disposed of with liberty to file statutory appeals under Section 107. The amended pre-deposit requirement effective from 1 October 2025 was held inapplicable to appeals arising from earlier show-cause notices, while the substantive Section 122 objections were preserved for adjudication in the statutory appellate proceedings.
