CGST Penalty: Delhi High Court Says Questions On Limitation, Proper Officer & Liability Must Be Raised In Appeal

The Delhi High Court has declined to entertain writ petitions challenging penalties imposed under the Central Goods and Services Tax (CGST) Act, observing that questions concerning limitation, the competence of the Proper Officer and the nature of the petitioners' liability should be examined by the statutory appellate authority.

The Division Bench of Justices Anil Khetarpal and Bharat Parashar was dealing with three connected writ petitions arising out of a common adjudication order dated March 25, 2026.

The petitions challenged penalties imposed under Section 122 of the CGST Act. In one of the petitions, Petitioner had been subjected to a penalty of ₹51,35,040 under Section 122(1)(vii) of the Act.

Petitioners contended that the proceedings suffered from violations of natural justice and that no limitation period had been prescribed under Section 127 of the CGST Act. They also questioned whether the proceedings had been initiated by the Proper Officer and argued that, once the alleged mastermind had been identified, their liability ought to be examined under Section 122(1A) or Section 122(3), rather than Section 122(1).

The Court noted that the impugned common order had been passed against 154 noticees following the same investigative proceedings. The adjudicating authority had found that one Pankaj Jha had allegedly orchestrated a syndicate comprising 113 fake and non-existent firms for availing Input Tax Credit through issuance of invoices without actual supply of goods.

The Court observed that Petitioners had an available statutory remedy of appeal under Section 107 of the CGST Act.

On the plea alleging violation of natural justice, it noted that Petitioners were unable to point out any specific instance where an opportunity of hearing had been denied or a particular submission or document had not been considered.

As regards the plea concerning limitation under Section 127, the Court observed that the question of what would constitute a reasonable period, in the absence of an express statutory limitation, would have to be examined in the context of the facts and circumstances of the case and could appropriately be considered by the Appellate Authority.

Similarly, the Court held that the questions as to whether the proceedings had been initiated by the Proper Officer and whether the petitioners' liability was to be examined under Section 122(1), Section 122(1A) or Section 122(3) involved an examination of the statutory provisions alongside the factual findings recorded in the adjudication order.

“These issues can equally be urged before and examined by the Appellate Authority in exercise of its appellate jurisdiction,” the Court said.

It further noted that since the common order concerned 154 noticees and the issues raised by Petitioners arose from the same investigative proceedings, permitting them to bypass the statutory appellate remedy and inviting the High Court to examine the factual and legal contentions at the first instance would not be warranted.

As such, the Court declined to entertain the writ petitions at this stage.

For Petitioner: Advocates Abhishek Garg, Yash Gaiha, Naman Mehta

For Respondents: Advocates Akash verma, SSC-CBIC with Aanchal Uppal