GST Demand through a Response to Letter to Assessee after Search: Delhi HC directs Dept to Issue Notice First [Read Order]
The High Court held that the GST authority’s communication computing tax liability was not an enforceable order and directed that a proper Show Cause Notice be first issued to ensure due process.
GST Demand - Delhi HC - Dept - Issue Notice First - taxscan
GST Demand - Delhi HC - Dept - Issue Notice First - taxscan
In the recent judgment, the Delhi High Court ruled that communication computing GST ( Goods and Services Tax ) and penalty in response to the Assessee's post-search letter did not constitute an adjudication order and directed that a proper show cause notice must first be issued.
The Bench comprising Justice Pratibha M. Singh and Justice Rajneesh Kumar Gupta heard and reviewed the matter filed by the Assessee.
The Assessee, Shashi Kumar Choudhary, Proprietor of SK Enterprises, filed the writ petition under Article 226 of the Constitution of India, challenged the impugned communication dated 6th May, 2025 by which the total tax and penalty was determined at Rs. 2,99,23,614.
The Directorate General of GST Intelligence (DGGI) seized a large consignment of areca nuts in Delhi on April 30, 2024, belonging to the Petitioner. A search was conducted on 1st May, 2025, at the Godown of the petitioner, where a total of 4,97,070 Kgs (497.07 tonne) of areca nuts were seized for being traded without proper documentation.
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Subsequently, the Assessee, on 2nd May, 2025, wrote to the DGGI a letter, expressing his readiness to deposit the requisite tax amount and penalty in exchange of provisional release of the seized goods.
In response to this letter, DGGI issued communication dated 6th May, 2025, directing the petitioner to deposit the total tax and penalty and submit DRC-03 for release of seized goods within 3 days.
The assessee's counsel challenged this communication in a Writ Petition, arguing that imposition of tax and penalty under section 73 and 74 of CGST Act, 2017, required issuance of a Show Cause Notice and in its absence, no such demand could be legally raised. Thus, the Counsel argued it as untenable under law.
On the other hand, the respondent’s counsel submitted that the impugned communication dated 6th May, 2025 was merely a response to the Assessee’s communication dated 2nd May, 2025 for tax and penalty computation. The counsel further submitted that if the petitioner chose not to deposit the amount for the release of goods, the GST Department would proceed by issuing a proper Show Cause Notice in accordance with law.
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After considering the arguments, the high court clarified that impugned communication dated May 6, 2025, was merely a response to the assessee’s letter seeking computation of tax and penalty, and not an adjudication order.
Though, the assessee also sought for provisional release of the seized goods subject to furnishing a bank guarantee but the court declined this prayer in the writ petition.
Thus, the High Court directed the GST Department to proceed by issuing a Show Cause Notice in accordance with the law. The court even directed that the assessee could approach the concerned authorities for the Provisional Release of seized goods.
The petition was disposed of with the direction to the GST Department to proceed in accordance with law and pending applications, if any, were also disposed of with determination to preserve adjudication.
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