DGGI’s Letter Quantifying GST demand and Penalty is Only a Response, Not Order: Delhi HC Directs to Issue SCN [Read Order]

In a recent ruling, the Delhi High Court has held that a letter issued by the Directorate General of GST Intelligence ( DGGI ) quantifying GST demand and penalty in connection with a seizure of areca nuts is not an adjudication order but merely a response to the taxpayer's request.

Justices Prathiba Singh and Rajneesh Kumar Gupta directed that a proper show cause notice (SCN) must be issued if further action is to be taken. It was observed that “it is clarified that the impugned communication dated 6th May, 2025 would only be treated as a response to the letter dated 2nd May, 2025 and not an adjudication order.”

The issue started when M/s S.K. Enterprises' owner, Shashi Kumar Choudhary, contested the DGGI's communication from May 6, 2025, which calculated a total GST and penalty due of ₹2.99 crore after 7101 sacks (about 497 tonnes) of areca nuts were seized on April 30, 2025. A search was conducted on 1st May 2025. Because the products were reportedly carried without the required paperwork, they were seized.

On 2nd May 2025, the petitioner voluntarily wrote to the DGGI requesting disposal of the case and release of goods and expressed willingness to deposit the applicable tax and penalty. In response, the DGGI issued a letter quantifying the amount and directing payment within three days for release of the goods.

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However, the petitioner later contested this demand before the High Court, arguing that the penalties under Sections 122, 130, and 74 of the CGST Act, 2017 could not be imposed without the issuance of a show cause notice, which is a legal requirement under Sections 73 and 74 of GST Act.

However, on the contrary, the DGGI clarified that the 6th May communication was not a final adjudication order but a response to the petitioner’s letter seeking a way forward for release of goods. It submitted that in case the petitioner was unwilling to pay, the matter would proceed through due process, including issuance of a show cause notice.

After considering both sides, the Division Bench ruled that the said communication cannot be treated as an adjudication order. The Court stated that the demand raised in the letter was conditional upon the petitioner’s willingness to pay and release the goods, and not a final determination under law.

The High Court directed the GST authorities to issue a proper show cause notice as per legal provisions. The court directed the petitioner to approach the appropriate authority for provisional release of the goods furnishing a bank guarantee.

The petitioner was represented by Advocate, Mr. Vinay Shraff and the Respondents WERE represented through Advocates, Mr. Dipak Raj and Mr. Subham Kumar, Mr. Anurag Ojha.

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