The Delhi High Court has disposed of twelve writ petitions filed by directors, managing directors and key personnel of companies alleged to have fraudulently availed and passed ITC, remanding all petitioners to the statutory appeal remedy under Section 107 of the CGST Act — while making three important directions that go beyond a routine relegation. The judgment, by Justice Anil Kshetarpal and Justice Shail Jain in W.P.(C) 2704/2025 and connected matters (decided 13.08.2026), deals with an increasingly common class of cases: penalties imposed on individuals in their personal capacities for their alleged role in orchestrating fake ITC schemes, where the individuals themselves are not "taxable persons" and have no independent GST registration.
The factual context involves an investigation arising out of alleged fraudulent ITC availment for the period July 2017 to March 2019. SCNs were issued in 2020 to sixty-one companies and seventy-one associated individuals — Managing Directors, Directors and "real incharges." The SCNs did not propose any tax demand against the individuals. They were called upon to show cause why penalties should not be imposed under Sections 74, 76(2) and 122(1) of the CGST Act for allegedly masterminding the scheme. The Order-in-Original dated 06.02.2025 confirmed penalties against the petitioners — in some cases running to hundreds of crores as a multiple of the ITC amounts involved in their associated firms.
The petitioners' central legal challenge is whether Section 122(1) — the provision under which penalties have been imposed — applies to a person who is not a "taxable person" as defined under the CGST Act. This is not a trivial or speculative contention: the Supreme Court in Mukesh Kumar Garg v. Union of India (SLP(C) No. 18178/2025, order dated 04.08.2025) has granted leave and stayed recovery of the demand, subject to a 25% deposit, in a case raising exactly this question. Given the pending Supreme Court proceedings, the Delhi HC declined to express any view on the Section 122(1) applicability question and instead relegated the petitioners to the appellate remedy, with a direction that the appellate authority consider this issue in conformity with whatever the Supreme Court ultimately decides.
The pre-deposit question produced the second important direction. The SCNs in these cases were issued in 2020 — well before the amendment to the proviso to Section 107(6) which took effect on 01.10.2025. Following the Delhi HC's own judgment in Gaurav Jain v. Joint Commissioner (Appeals-II) (W.P.(C) 8414/2026, decided 31.07.2026), the court held that the pre-deposit obligation for an appeal is governed by Section 107(6) as it stood on the date of issuance of the SCN. Petitioners whose SCNs predate 01.10.2025 are not subject to the enhanced pre-deposit regime introduced by the Finance Act 2025.
The third and practically most immediate direction addresses a systemic portal problem: several of the petitioners have no individual GST registration and no temporary identification number, and the GST portal does not permit filing of a Section 107 appeal by such persons. The court directed that in any such case, the Appellate Authority must accept the appeal in physical form and cannot reject it solely on account of the mode of filing. This direction is important for all penalty cases involving non-taxable individuals who wish to challenge orders under Section 122 before the Appellate Authority but find the portal technically inaccessible.
- 2026-juristway.com-2199-HC(Delhi)-GST | High Court of Delhi | W.P.(C) 2704/2025 & 11 connected matters | 13.08.2026