Facts of the Case

Manpar Exim Inc, engaged in the readymade garments and leather goods business, challenged an Order-in-Original dated 22.10.2025 confirming a demand of Rs.9,60,15,714 (CGST and SGST combined) with an equal penalty under Section 74(1) of the CGST Act, 2017, for excess availment/passing of Input Tax Credit. The show-cause notice, issued to over 100 noticees, alleged that Mr. Parag Garg, a partner of the petitioner firm and of several other firms sharing common addresses, was the mastermind behind incorporating non-existent entities to fraudulently avail and pass on ITC. The petitioner had deposited Rs.1.66 crore during the investigation via Form GST DRC-03.

Issues Involved

  1. Whether the absence of a Pre-SCN Consultative Notice under Rule 142(1A) of the CGST Rules, 2017 renders the show-cause notice and Order-in-Original invalid.
  2. Whether the amendment substituting 'shall' with 'may' in Rule 142(1A) by Notification No. 79/2022-Central Tax made pre-SCN consultation discretionary rather than mandatory.

Petitioner's Arguments

  • No Pre-SCN Consultative Notice under Rule 142(1A) was issued before the show-cause notice dated 12th March 2025, rendering the SCN and the Order-in-Original unsustainable in law.
  • The constitutional validity of Notification No. 79/2022-Central Tax, which changed 'shall' to 'may' in Rule 142(1A), was separately challenged.

Respondent's Arguments

  • This is a case of fraudulent availment of ITC through multiple entities, where writ petitions have consistently been held not maintainable, relying on Banson Enterprises v. Assistant Commissioner CGST.
  • In Zeta International v. The Additional Director, a coordinate Bench had already held that post-amendment, the pre-SCN consultation notice is not mandatory.

Court Order / Findings

  • The amended Rule 142(1A), effective from 15 October 2020, makes it discretionary ('may') for the proper officer to issue a pre-SCN intimation, in contrast to the earlier mandatory ('shall') requirement considered in Gulati Enterprises v. CBIC.
  • Since the SCN in this case was issued on 12 March 2025, well after the amendment, pre-SCN consultation was not mandatory; moreover, in a complex, multi-entity fraud of this scale, such consultation may serve no real purpose.
  • The challenge to Notification No. 79/2022-Central Tax was already pending before the Court in Zeta International, whose outcome would bind the present matter.
  • The Court declined to entertain the writ petition, directing the petitioner to avail its appellate remedy under Section 107 since the limitation period had not yet expired, clarifying that its observations would have no bearing on the merits.

Important Clarification

  • Post the 2020 amendment to Rule 142(1A) of the CGST Rules, a Pre-SCN Consultative Notice in Form DRC-01A is discretionary, not mandatory, for show-cause notices issued thereafter — a critical distinction from the pre-amendment position recognised in Gulati Enterprises.
  • Writ courts continue to be reluctant to entertain challenges to large-scale, multi-entity fake ITC demands at the threshold stage, preferring to relegate such matters to the statutory appellate hierarchy.

Sections Involved

  • Section 74(1) of the CGST Act, 2017 — determination of tax involving fraud, wilful misstatement or suppression.
  • Section 122 of the CGST Act, 2017 — penalty for certain offences, including fraudulent ITC availment.
  • Section 107 of the CGST Act, 2017 — appeal to the appellate authority.
  • Rule 142(1A) of the CGST Rules, 2017 — pre-show cause notice intimation in Form GST DRC-01A.

Decision – In Favour of

In favour of the Department — the writ petition was not entertained and the petitioner was relegated to its statutory appeal under Section 107.

Case Details

Court: High Court of Delhi at New Delhi — Case No.: W.P.(C) 18204/2025 with connected CM Applications — Coram: Hon'ble Justices Prathiba M. Singh and Renu Bhatnagar — Date of Decision: 1 December 2025.

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