Pre-2025 SCNs Governed by Earlier GST Appeal Pre-Deposit Rules: Delhi HC

Arun Kumar Jain Vs Additional Commissioner CGST Delhi West Commissionerate & Ors. (Delhi High Court)

Summary: The Delhi High Court disposed of twelve connected writ petitions challenging a common Order-in-Original dated 06.02.2025 imposing penalties under Sections 74, 76(2) and 122(1) of the CGST Act on Managing Directors and Directors of companies allegedly involved in fraudulent availment and utilisation of Input Tax Credit. No tax demand had been raised against the Petitioners in their individual capacities. Their principal contention was that Section 122(1) applies only to a “taxable person” and could therefore not be invoked against them personally. The Court declined to decide that issue because the same question is pending before the Supreme Court in Mukesh Kumar Garg v. Union of India & Ors., SLP(C) No.18178/2025. Since an appeal under Section 107 was admittedly maintainable and the other grounds required examination of individual roles, allegations and evidence, the Petitioners were relegated to the statutory appellate remedy. Following Gaurav Jain & Anr. v. Joint Commissioner (Appeals-II), CGST Delhi Zone & Anr., the Court held that the pre-deposit requirement would be governed by Section 107(6) as it stood when the SCNs were issued in 2020, and not by the substituted proviso effective from 01.10.2025. Physical appeals were also directed to be accepted where portal filing was not possible.

Section 122(1) Issue Left Open Pending Supreme Court Decision

The Petitioners challenged penalties imposed personally upon them even though the SCNs did not propose any tax demand against them in their individual capacities. Their main argument was that Section 122(1) of the CGST Act applies only to a “taxable person”.

The High Court did not decide this question on merits because the applicability of Section 122(1) to a non-taxable person is already pending before the Supreme Court in Mukesh Kumar Garg v. Union of India & Ors.. It therefore directed that the issue be considered in conformity with the Supreme Court’s eventual decision. The Court also clarified that Section 122(1A) was not involved in the present proceedings.

Section 107 Appeal and Applicable Pre-Deposit Requirement

Since an appeal under Section 107 was admittedly maintainable, and several grounds required examination of the Petitioners’ respective roles and the material relied upon by the Adjudicating Authority, the Court considered the statutory appellate forum appropriate for deciding those issues.

A significant direction concerned pre-deposit. The SCNs had been issued in 2020, whereas the proviso to Section 107(6) was substituted with effect from 01.10.2025. Following Gaurav Jain & Anr. v. Joint Commissioner (Appeals-II), CGST Delhi Zone & Anr., the Court held that the appeals would be governed by Section 107(6) as it stood on the dates of issuance of the SCNs. TaxGuru has also discussed the ruling that the 10% pre-deposit requirement for penalty-only appeals does not apply to pre-01.10.2025 SCNs.

Delhi High Court’s Directions and Practical Effect

The Petitioners were relegated to appeals under Section 107 with all grounds left open. If the GST portal does not permit an individual Petitioner to file an appeal because of absence of an individual GST registration or temporary identification number, the Appellate Authority must accept the appeal physically and cannot reject it merely because of the mode of filing.

The Court also directed that any application seeking exclusion of the period spent pursuing the writ petitions for limitation purposes should be considered pragmatically by the Appellate Authority.

Thus, the penalties were neither quashed nor upheld on merits. The judgment primarily preserves the Petitioners’ challenges for the statutory appellate forum, protects the pre-deposit regime applicable when the 2020 SCNs initiated the proceedings, and leaves the Section 122(1) issue to be governed by the Supreme Court’s eventual ruling.

Cases Discussed

• Mukesh Kumar Garg v. Union of India and Ors., Special Leave to Appeal (Civil) No.18178/2025, Supreme Court, order dated 04.08.2025 — applicability of Section 122(1) to a non-taxable person is pending consideration.
• Gaurav Jain & Anr. v. Joint Commissioner (Appeals II), CGST Delhi Zone & Anr., W.P.(C) 8414/2026, Delhi High Court, judgment dated 31.07.2026 — pre-deposit conditions are governed by the law applicable when the lis commenced.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

By way of this common judgment, this Court shall dispose of twelve (12) connected Writ Petitions preferred under Article 226 of the Constitution of India. The Petitioners assail the common Order-in-Original dated 06.02.2025 [hereinafter referred to as the ‘Impugned Order’], passed by the Additional Commissioner, CGST, Delhi West, imposing penalties under Sections 74, 76(2) and 122(1) of the Central Goods and Services Tax Act, 2017 [hereinafter referred to as the `CGST Act], read with the corresponding provisions of the State/Union Territory enactments and the Integrated Goods and Services Tax Act, 2017 upon them.

2. The Impugned Order arises from common adjudicatory proceedings involving sixty-one (61) companies/firms and seventy-one (71) individuals connected with them. With respect to six (6) firms, the matter has been kept pending in view of the order passed by the High Court of Punjab and Haryana. The Petitioners before this Court are either Managing Directors or Directors of the concerned companies.

3. The Petitioners were issued Show Cause Notices in the year 2020 [hereinafter referred to as the `SCNs’] in relation to the period from 01.07.2017 to 31.03.2019. The concerned companies were alleged to have fraudulently availed and utilised Input Tax Credit on the strength of invoices issued without any corresponding supply of goods.

4. Insofar as the Petitioners in their individual capacities are concerned, the SCNs did not propose any demand of tax against them. They were called upon to show cause as to why penalties should not be imposed upon them under Sections 74, 76(2) and 122(1) of the CGST Act for having allegedly masterminded the modus operandi involving generation, availment and utilisation of fraudulent Input Tax Credit.

5. By the Impugned Order, each of the Petitioners has been subjected to a penalty equivalent to the amount mentioned against his name. The particulars of the Petitioners and the penalties imposed upon them are as follows:

6. Heard learned counsel representing the parties at length and with their able assistance, perused the paper books.

7. The principal contention of the Petitioners is that Section 122(1) of the CGST Act applies only to a “taxable person”, whereas the Petitioners have neither been treated as taxable persons nor has any tax demand been raised against them in their individual capacities. The Petitioners have also questioned the invocation of Sections 74 and 76(2) of the CGST Act, contending that no tax was payable or collected by them personally.

8. Learned counsel for the Respondents, on the other hand, submits that the Impugned Order is appealable under Section 107 of the CGST Act and that all such contentions may be examined by the Appellate Authority.

9. The issue concerning the applicability of Section 122(1) to a person who is not a taxable person is presently pending consideration before the Supreme Court. The Supreme vide order dated 04.08.2025 in Special Leave to Appeal (Civil) No.18178/2025 captioned Mukesh Kumar Garg v. Union of India and Ors., has passed the following order:

“1. Two primary contentions have been raised. First, Section 122(1) of the Central Goods and Services Tax Act, 2017 (for short ‘the Act) would not be applicable to the petitioner as he is a non-taxable person. Secondly, the provisions of Section 122 (1A) of the Act which came into force w.ef 01.01.2021 cannot be applied retrospectively for the Assessment Years 2017- 2020.

2. Leave granted.

3. In the meanwhile, there shall be stay on the recovery of the amount directed to be deposited provided the appellant deposits 25% of the demand before the GST Department either through Electronic Ledger or through Cash Ledger.”

10. It needs to be clarified that only the first contention noticed in the aforesaid order bears upon the present batch of Petitions. Section 122(1A) was neither invoked in the SCNs nor employed in the Impugned Order against any of the Petitioners.

11. During the pendency of the present Writ Petitions, this Court delivered its detailed judgment dated 31.07.2026 in W.P.(C) 8414/2026 captioned Gaurav Jain & Anr. vs. Joint Commissioner (Appeals II) CGST Delhi Zone & Anr. and held that the proviso to Section 107(6), as substituted with effect from 01.10.2025, does not govern an Appeal arising from adjudicatory proceedings initiated through an SCN issued before that date. Such an Appeal continues to be governed by Section 107(6) as it stood on the date of commencement of the adjudicatory proceedings.

12. It is also not in dispute that an Appeal under Section 107 of the CGST Act is maintainable against the Impugned Order.

13. The respective SCNs were issued to the Petitioners in the year 2020, much before the substitution of the proviso to Section 107(6) with effect from 01.10.2025. Consequently, the appellate remedy available to the Petitioners is governed by Section 107(6) as it stood on the dates of issuance of their SCNs.

14. The principal issue raised by the Petitioners concerning the applicability of Section 122(1) of the CGST Act to a person who is not a “taxable person” is presently under consideration before the Supreme Court. Judicial propriety, therefore, warrants that this Court refrain from expressing any opinion on the said issue. The Petitioners have, however, raised several other grounds which involve examination of their respective roles, the allegations levelled against them and the material relied upon by the Adjudicating Authority. These matters can appropriately be examined in the statutory appellate proceedings.

15. In view of the above, the present Writ Petitions are disposed of with the following directions:

i. The Petitioners are relegated to the statutory remedy of Appeal under Section 107 of the CGST Act, read with the corresponding provisions of the applicable State/Union Territory enactments. All grounds urged in the present Writ Petitions are left open to be raised before the Appellate Authority.

ii. The issue concerning the applicability of Section 122(1) of the CGST Act to a person who is not a “taxable person” shall be considered in conformity with the decision ultimately rendered by the Supreme Court in Mukesh Kumar Garg v. Union of India and Others.

iii. In view of the judgment of this Court in Gaurav Jain & Anr. v. Joint Commissioner (Appeals II), CGST Delhi Zone & Anr., the requirement of pre-deposit shall be governed by Section 107(6) as it stood on the dates of issuance of the respective SCNs and not by the proviso substituted with effect from 01.10.2025.

iv. If the electronic portal does not permit any Petitioner to file an Appeal for want of an individual GST registration or temporary identification number, the Appellate Authority shall accept the Appeal in physical form and shall not reject it merely on account of the mode of filing.

v. If an application for exclusion of the period spent in these Writ Petitions before the High Court is filed for the purpose of limitation, the same shall be considered pragmatically by the Appellate Authority.

16. It is clarified that this Court has not expressed any opinion on the merits of the contentions raised by either party. All the present Writ Petitions, along with the pending applications, are disposed of in the aforesaid terms.