Impact Analysis: GST registration was suspended and DRC-01 demands of nearly ₹98 lakh were issued for alleged wrongful ITC, but Delhi High Court protected the Assessee from coercive action till supplementary SCN was adjudicated.

Issue:
Whether the suspension of GST registration in FORM GST REG-17 and subsequent demands issued in FORM GST DRC-01 for alleged wrongful availment of ITC under Section 16 of the CGST Act, 2017 could proceed without first complying with the earlier direction of the Court to issue a supplementary Show Cause Notice.

Rule:
Where the Court has directed issuance of a supplementary Show Cause Notice, the Department must follow such direction and grant the Assessee proper opportunity to file reply with documents and avail personal hearing before adjudication. Coercive recovery should not be taken before such adjudication where procedural compliance is still pending.

Application:
The Assessee’s GST registration had been suspended with effect from 17.08.2024 through FORM GST REG-17 alleging violation of Section 16 and wrongful availment of ITC. The Assessee had already filed reply on 29.08.2024. Thereafter, the Department issued two FORM GST DRC-01 notices dated 29.09.2025 and 05.01.2026 demanding ₹48,54,714/- and ₹49,82,270/-. However, the supplementary SCN, which was required to be issued pursuant to the earlier order in W.P.(C) 17558/2025, had not yet been served.

Conclusion:
The Court permitted the Department to issue the supplementary SCN within six weeks. The Assessee was directed to file reply with documents within four weeks thereafter. The Department was directed to grant personal hearing and pass order after hearing. Though DRC-01 proceedings were allowed to continue, the Court restrained the Department from taking coercive steps till adjudication of the supplementary SCN.

IMPACT ANALYSIS:
This judgment reinforces that GST proceedings, especially involving suspension of registration and ITC demands, must follow procedural fairness. Even where DRC-01 notices are pending, the Department cannot take coercive action when an earlier Court-directed supplementary SCN remains unadjudicated.

Title: DHUPANI OVERSEAS vs. PRINCIPAL COMMISSIONER. DELHI GST, DELHI-NORTH
Court: HIGH COURT OF DELHI AT NEW DELHI
Citation: 101 TLC(GST) 005
Provision: Under Section 16