FACTS OF THE CASE

  1. The petitioners — A and T Security Services Pvt Ltd, its Director Tejvir Malik, and other connected petitioners — are engaged in security services and hold GST registration.
  2. On 18th March 2019, an inspection report allegedly showed the petitioner’s premises locked, triggering a show cause notice (SCN) on 12th September 2019 for alleged non‑filing of GST returns for six consecutive months.
  3. The petitioners replied stating returns (GSTR‑1 and GSTR‑3B) were filed up to date and sought withdrawal of the SCN; yet their GST registration was cancelled on 29th November 2019.
  4. On appeal, the Appellate Commissioner (Appeals) restored GST registration on 27th August 2021 under Section 107(12) of CGST Act, 2017, subject to filing pending returns and payment of liabilities — which the petitioners complied with, depositing over ₹2.01 crores.
  5. A fresh SCN was issued on 31st July 2024 alleging fraudulent availment of input tax credit (ITC). A reply was filed on 2nd September 2024, and a personal hearing was attended.
  6. An order‑in‑original dated 31st January 2025 imposed penalty under Section 122 of CGST/SGST Act. The appeal before the Commissioner (Appeals) confirmed the penalty on 16th May 2025. 

ISSUES INVOLVED

  1. Whether the adjudicating and appellate authority erred in failing to consider substantial compliance by the petitioner (including payment of dues) in relation to the SCN alleging fraudulent ITC.
  2. Whether the penalty imposed under Section 122 of the CGST Act against the petitioners (company & directors) was justified without considering earlier deposits and compliance.
  3. Whether the petitioners are entitled to pursue appellate remedy before the GST Appellate Tribunal without further pre‑deposit of amounts. 

PETITIONER’S ARGUMENTS

• The penalty order dated 16th May 2025 did not consider the substantial payments already made by the petitioner (₹2,01,20,299/-).
• Compliance with the directions of the earlier appeal order (2021) should have been taken into account.
• The impugned penalty order is unsustainable as the adjudicating authority failed to give due consideration to facts and payments prior to issuance of the SCN.

RESPONDENT’S ARGUMENTS

• The Department accepted that payment details may not have been given appropriate consideration by the lower appellate authority.
• However, the facts regarding alleged fraudulent availment of ITC stood independently for penalty action. 

COURT ORDER / FINDINGS

• The court observed that the adjudicating and appellate authority failed to consider the significant payments made by the petitioners before issuance of the show cause notice of 2024.
• Found that there was a lapse in adjudication due to omission of relevant documents and payments.
• Allowed the petitioners to file appeal before the newly constituted GST Appellate Tribunal without requirement of further pre‑deposit.
• Noted that the Tribunal shall consider all documents and merits on record. 

IMPORTANT CLARIFICATIONS

Petitioners can challenge penalty orders before GST Appellate Tribunal without additional pre‑deposit, given compliance evidence placed on record.
 Payment of dues before issuance of SCN is a factor that ought to be considered before imposing penalty under Section 122 of CGST Act.
 Appellate authorities must consider compliance history and payments in adjudication proceedings. 

SECTIONS INVOLVED

  • Section 73, CGST Act, 2017 – Determination of tax not paid or erroneously claimed.
  • Section 122, CGST Act, 2017 – Penalty for specified offences.
  • Section 107(12), CGST Act, 2017 – Powers of Appellate Commissioner (Appeals).

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/75418112025CW169062025_175814.pdf 

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