Facts of the Case

The present writ petition was filed under Article 226 of the Constitution challenging a communication dated 6 May 2025, whereby tax and penalty amounting to ₹2,99,23,614/- were computed by the GST Intelligence authorities.

The case arose from the seizure of a large consignment of areca nuts (approximately 497.07 tonnes) transported from Assam to Delhi on the ground of absence of proper documentation. The Directorate General of GST Intelligence (DGGI) conducted a search and seizure operation on 30 April 2025 and 1 May 2025, and statements of concerned persons were recorded.

Subsequently, the Petitioner voluntarily addressed a letter dated 2 May 2025 requesting release of seized goods and expressing willingness to deposit applicable tax and penalty for disposal of the case. In response, the department issued the impugned communication quantifying the tax and penalty payable for provisional release of goods.

Issues Involved

  1. Whether the impugned communication dated 6 May 2025 constituted a valid adjudication order under the CGST Act, 2017.
  2. Whether tax and penalty under Sections 73 and 74 of the CGST Act can be imposed without issuance of a Show Cause Notice.
  3. Whether the petitioner was entitled to provisional release of seized goods through writ jurisdiction. 

Petitioner’s Arguments

  • The petitioner contended that although tax calculation was based on invoices, the imposition of penalty under Sections 130, 122, and 74 of the CGST Act was legally untenable.
  • It was argued that any demand under Sections 73 and 74 necessarily requires issuance of a Show Cause Notice, and in absence of such notice, the demand is invalid.
  • The petitioner also sought provisional release of goods upon furnishing a bank guarantee.

Respondent’s Arguments

  • The respondent submitted that the communication dated 6 May 2025 was not an adjudication order but merely a response to the petitioner’s own request dated 2 May 2025 seeking quantification of tax and penalty.
  • It was further argued that if the petitioner chose not to accept the computation and deposit the amount, the department would proceed in accordance with law by issuing a proper Show Cause Notice.

Court’s Findings / Order

  • The Delhi High Court observed that the petitioner had voluntarily offered to deposit tax and penalty and sought release of goods, pursuant to which the department merely computed the amount.
  • The Court clarified that the impugned communication cannot be treated as an adjudication order but only as a response to the petitioner’s request.
  • The Court noted that the petitioner subsequently changed its position and declined to deposit the amount.
  • The Court held that proper adjudication requires issuance of a Show Cause Notice in accordance with law.
  • The prayer for provisional release through writ jurisdiction was declined, granting liberty to approach the appropriate authority.
  • The GST Department was directed to proceed by issuing a Show Cause Notice as per law.
  • The writ petition was disposed of accordingly.

Important Clarification by Court

  • A quantification communication issued upon taxpayer’s request does not amount to an adjudication order.
  • Demand under Sections 73/74 requires due process including issuance of Show Cause Notice.
  • Taxpayer cannot later challenge computation after voluntarily seeking it, unless formal adjudication proceedings are initiated.
  • Relief of provisional release should ordinarily be sought before statutory authorities, not directly through writ jurisdiction.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/PMS19052025CW67232025_183059.pdf

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