FACTS OF THE CASE

The Petitioner, MS RS Trading Co., challenged:

– The impugned Show Cause Notice dated 31.03.2023 issued by the GST authorities;
– The Order‑in‑Original dated 18.06.2025 passed by the Additional Commissioner, CGST, North Delhi, whereby a huge GST demand, interest and penalty were confirmed against the Petitioner.

As per the GST Department, the Petitioner allegedly:

• Availed Input Tax Credit (ITC) on the basis of bogus invoices from non‑existing firms;
• Transactions were found to have occurred with fake suppliers with cancelled GST registrations;
• The total ITC involved was approximately Rs. 7.96 crore, of which demand/penalty was confirmed around Rs. 6.27 crore under Section 74, plus interest and penalty under Sections 50, 122 of the CGST Act.

During investigation, searches were conducted at the Petitioner’s office and residence, statements were recorded, and the Petitioner’s proprietor was arrested on 04.03.2021 for alleged offences under Sections 132(1)(b) & (c) of the CGST Act for falsification and fraud.

The Petitioner’s case was that it did not make pre‑deposit and relied on a CBIC Circular dated 06.07.2022, claiming that only penalty and not a tax demand could be levied in fake invoice cases. 

ISSUES INVOLVED

  1. Whether the Petitioner was justified in challenging the impugned GST demand/penalty order when the order is appealable under Section 107 of the GST Act.
  2. Whether a pre‑deposit was required and whether a tax demand could be confirmed in fake‑invoice/ITC fraud cases.
  3. Whether the Petitioner’s allegations had any merit to stay or quash the GST demand/penalty. 

PETITIONER’S ARGUMENTS

• The Petitioner argued that it could not comply with the pre‑deposit requirement.
• It relied on the CBIC Circular dated 06.07.2022, which, it claimed, suggests that where fake invoices are involved, only penalty and not a tax demand may be levied.
• Therefore, the demand under Section 74 was not sustainable.

RESPONDENT’S ARGUMENTS

• The Respondents (GST Department) submitted that the impugned order was an appealable order under Section 107 of the GST Act, and the Petitioner had an alternative and efficacious remedy of appeal.
• Therefore, writ jurisdiction should not be exercised to set aside the order. 

COURT ORDER / FINDINGS

The Delhi High Court observed:

The impugned Order‑in‑Original is appealable under Section 107 of the GST Act.
 Hence, the Petitioner was directed to file an appeal before the Appellate Authority with the necessary pre‑deposit.
Though the writ petition was filed within limitation, since the period for appeal has now expired, the Court allowed the Petitioner to file the appeal by 15.12.2025, with the pre‑deposit.
The appeal, if filed within time, shall be heard on merits and not treated as barred by limitation.
Ordinary writ jurisdiction was not exercised to quash/modify the GST demand at this stage. 

IMPORTANT CLARIFICATION

The Court did not decide on the merits of whether tax vs penalty should be imposed under the CBIC circular. The emphasis was on the availability of an alternate remedy under Section 107, and therefore directing the Petitioner to pursue an appeal rather than writ. 

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/PMS25092025CW149182025_163010.pdf 

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