Is Pre-Consultation before GST SCN Mandatory or Discretionary? Delhi HC Grants Interim Relief to Aadhar India [Read Order]

The Delhi High Court recently granted interim relief to Aadhar India, and directed that proceedings pursuant to a Show Cause Notice dated 29 November 2024 issued by the Goods and Services Tax (GST) Department may continue, but no final orders may be given without further orders of the Court.

The present writ petition, filed by Aadhar India challenged the constitutional validity of Notification No. 79/2020–Central Tax dated October 15, 2020, issued by the Central Board of Indirect Taxes and Customs (CBIC).

“Rule 142(1A) of the CGST Rules, 2017 (as amended)

(1A) The proper officer may, before service of notice to the person chargeable with tax, interest and penalty under sub-section (1) of section 73 or sub-section (1) of section 74, communicate the details of any tax, interest and penalty as ascertained by the said officer, in Part A of FORM GST DRC–01A.”

The said notification effectively amended Rule 142(1A) of the Central Goods and Services Tax Rules, 2017, making pre-consultation before issuance of a Show Cause Notice under Section 74(5) of the CGST Act discretionary instead of mandatory.

The petitioner contended that a demand-cum-Show Cause Notice was issued for the period 2018-19 to 2019-20 without first serving a prior intimation in Form GST DRC-01A, which would have communicated the ascertained details of tax, interest and penalty as required earlier. Aadhar India argued that the substitution of the word “shall” with “may” in Rule 142(1A) vide the 2020 notification effectively deprived taxpayers of an opportunity under Section 74(5) to make voluntary payments before initiation of adjudication.

The petitioner’s counsel, Chinmaya Seth, A.K. Seth and Palak Mathur argued that the rule-making authority cannot override the parent statute, and that the discretion introduced by the amendment rendered Section 74(5) otiose, violating the legislative intent that mandates a pre-show cause consultation. They also placed reliance on rulings by the Andhra Pradesh and Telangana High Courts in New Morning Star Travels and KH Facility Solutions India Pvt. Ltd., which recognized the taxpayer’s right to such an opportunity.

Appearing for the respondents, P.S. Singh, Rajneesh Sharma, Ashutosh Bharti and other counsel represented the Directorate General of GST Intelligence (DGGI) and the Union of India.

The Division Bench comprising Justice Prathiba M. Singh and Justice Shail Jain noted that the issue concerning the validity of Notification No. 79/2020–Central Tax and the mandatory nature of pre-consultation under Section 74(5) was already under consideration in connected petitions, including SSAPP Overseas, where the Court had issued directed that no coercive action be taken.

Considering that pleadings in the lead matter were complete, the Court listed the batch of petitions on 27th January 2026, directing that while proceedings emanating from the SCN may continue, any final order passed under Section 74 of the CGST Act shall not be enforced without leave of the Court.

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