GST Penalty Writ Challenge Relegated to Appellate Remedy by Delhi HC

Rishiraj Singh Rathore Vs Commissioner of CGST (Delhi High Court)

Summary: The Delhi High Court declined to exercise writ jurisdiction in two connected petitions filed by Rishiraj Singh Rathore and Khushnud Khan, Directors of M/s Sterne India Private Limited, challenging a common Order-in-Original dated 31.03.2026 imposing a penalty of Rs. 27,11,59,404/- upon the Petitioners under Section 122(1A) of the Central Goods and Services Tax Act, 2017. The Petitioners accepted that an appellate remedy under Section 107 of the CGST Act, 2017 was available, but contended that the proceedings suffered from a jurisdictional error because, according to them, no Show Cause Notice had been issued to them individually. They also contended that relegating them to the Appellate Authority would not be fruitful because the Authority lacked power to remand the matter for fresh consideration. The Petitioners further disputed service of the personal-hearing notices, stating that the first notice was not served upon them, the second was addressed only to the company, and the third, though received, bore the same subject line and company e-mail addresses, leading them bona fide to believe that it concerned the company alone.

The factual background arose from a Directorate General of GST Intelligence investigation into fraudulent availment and passing of Input Tax Credit through fake invoices without corresponding supplies. Several firms shown as suppliers to the Petitioners’ Company were found non-existent at their declared business premises and were found to have been created to pass fraudulent ITC without actual movement of goods. Documents furnished by the Company, including ledgers, purchase orders and bank particulars, were subsequently verified, and the Court recorded that the account details belonged to a different supplier, indicating that genuine payments had not been made against the invoices on which ITC was claimed. Tracing of IMEI numbers through manufacturers and authorised distributors further revealed that goods covered by the disputed invoices had either been supplied to different entities or sold directly to B2C customers rather than passing through the Petitioners’ suppliers. A Show Cause Notice dated 21.03.2025 was thereafter issued against the Company and the Petitioners individually. The Company referred in its reply to its Corporate Insolvency Resolution Process and the subsisting moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. Personal hearings were attended only by the Resolution Professional, with no separate reply or appearance reflected on behalf of the Petitioners individually.