Prior deposit of Rs. 2.01 Cr to be considered; Appeal to Tribunal allowed without further pre-deposit

Issue

Whether the Adjudicating and Appellate Authorities erred in confirming penalties for fraudulent ITC availment against the company and its directors without considering a substantial pre-notice deposit of Rs. 2.01 crore made during earlier registration restoration proceedings, and whether the petitioner can pursue a statutory appeal before the newly constituted GST Appellate Tribunal without additional pre-deposit.

Facts

Background: The petitioner (A And T Security Services Pvt Ltd), engaged in security services, had its GST registration cancelled in 2019 for non-filing of returns.
Restoration & Deposit: To restore registration, the petitioner appealed and subsequently deposited approximately Rs. 2.01 crore. The registration was restored in August 2021.
The New Demand: In July 2024, a fresh Show Cause Notice (SCN) was issued alleging fraudulent availment of Input Tax Credit (ITC).
The Impugned Order: The Adjudicating Authority imposed penalties on the company and its directors under Section 122. The Appellate Authority affirmed this in an order dated 16 May 2025, ignoring the petitioner’s submission regarding the Rs. 2.01 crore already deposited.
Petitioner’s Plea: The penalties were maintained due to a complete non-application of mind regarding the pre-existing deposit, which covered the alleged liability.

Decision

Lapse in Adjudication: The Delhi High Court held that the failure of both authorities to consider the substantial deposit of Rs. 2.01 crore—despite it being disclosed in the reply to the SCN—constituted a significant lapse in adjudication.
Relegation to Tribunal: Since the GST Appellate Tribunal (GSTAT) has now been constituted, the Court directed the petitioner to pursue their statutory appeal there.
Directions to Tribunal:
- The Tribunal must verify and consider the documents evidencing the deposit of Rs. 2.01 crore.
- Director Penalty: Under the statutory scheme, if tax and interest are paid pre-notice, the penalty on directors may not sustain.
- Company Penalty: The penalty on the company warrants reconsideration subject to linking the earlier payment with the current allegations.
Waiver of Pre-deposit: Recognizing the substantial amount already with the Department, the Court permitted the petitioner to file the appeal without any further pre-deposit.
Ruling: The writ petition was disposed of with directions to file the appeal before the Tribunal, which is to be decided on merits without dismissing it for delay.

Key Takeaways

Pre-SCN Payments Count: Payments made during earlier proceedings (like revocation of cancellation) must be accounted for in subsequent demand proceedings. Ignoring such deposits vitiates the penalty order.

Director Immunity: If the primary tax liability is discharged before the SCN (Section 73/74 closure), separate penalties on directors under Section 122 are often legally unsustainable.

Tribunal Access: With the GSTAT becoming functional, High Courts are increasingly relegating writ petitioners to the Tribunal. However, in cases of prior substantial deposits, Courts may grant a specific waiver from the mandatory 20% pre-deposit required for Tribunal appeals.

HIGH COURT OF DELHI

A and T Security Services (P.) Ltd.

Additional Commissioner of CGST Delhi West

PRATHIBA M. SINGH and SHAIL JAIN, JJ.

W.P.(C) Nos. 16792, 16798, 16906 and 16909 of 2025
CM APPL. Nos. 69009,69024.69532, 69533, 69537 and 69538 of 2025

NOVEMBER 18, 2025

A.K. Babbar and Ms. Ishmat Kaur, Advs. for the Petitioner. Akshay Amritanshu, Sr. Standing Counsel, Ms. Drishti Rawal, Abhay Nair, Mayur Goyal and Sarthak Srivastava, Advs. for the Respondent.

ORDER

Prathiba M. Singh, J.- This hearing has been done through hybrid mode.

2. The Petitioner in the present petitions i.e. A and T Security Services Pvt. Ltd. is engaged in the business of supply of Security Services and has a Goods and Services Tax Registration No. 07AAECA1356L1ZO.

3. An inspection was stated to be conducted at the Petitioner’s premises on 18^th March, 2019 where the premises was found to be locked. This led to show cause notice dated 12th September, 2019(hereinafter, ‘SCN’) being issued to the Petitioner for cancellation of the registration certification. The said SCN records that the Petitioner did not file the returns for a continuous period of six months and hence, the registration of the Petitioner is liable to be cancelled.

4. An opportunity for personal hearing was also given in the said SCN for 19th September, 2019, and the reply to the SCN was to be filed by the Petitioner.

5. It is the Petitioner’s case that a reply to the SCN was filed on 23rd September, 2019 and it was stated that all the GSTR-1 and GSTR-3B returns were filed up to date by the Petitioner. Accordingly, the Petitioner prayed for withdrawal of the SCN for cancellation of registration. Thereafter, the reply filed by the Petitioner was considered by the Department and the registration certificate of the Petitioner was cancelled on 29^th November, 2019 and zero demand was created on the Petitioner.

6. An appeal was filed by the Petitioner against the order of cancellation dated 29th November, 2019. The Appellate Commissioner (Appeals) allowed the appeal on 27^th August, 2021 and ordered for restoration of the GST Registration Certificate of the Petitioner in the following terms:

“In view of above discussions, analysis and statutory provisions cited in para 4, the appeal filed by the appellant merits lenient view and deserve to be allowed, if the appellant submits an undertaking before the concerned jurisdictional officer that all the pending GST returns/pending tax liabilities would be filed within one month from restoration of GST registration.

Further, it is desired from the appellant that GST returns would be filed within the stipulated time period in future. Accordingly, the present appeal is hereby disposed of, in terms of Section 107(12) of CGST Act, 2017.”

7. As can be seen from the above order dated 27^th August, 2021, the Petitioner was to file all the pending GST returns and pay all the pending tax liabilities. According to the Petitioner, the Petitioner thereafter paid a total sum of Rs. 2,01,20,299/- and thus, the GST Registration of the Petitioner was also restored.

8. Subsequently, a further show cause notice was issued to the Petitioner on the ground of fraudulent availment of ITC on 31^st July, 2024. A reply to the said show cause notice was filed by the Petitioner on 2nd September, 2024 and the personal hearing was also attended on 28th January, 2025. Thereafter, the order-in-original was passed on 31^st January, 2025, creating a demand under Section 122 of CGST/SGST Act on account of penalty.

9. This order-in-original dated 31st January, 2025 was challenged by the Petitioner before the Commissioner(Appeals). The total penalties which were imposed on the Petitioner by the Commissioner(Appeals) in its order dated 16th May, 2025 is to the following effect:

10. According to Mr. A.K. Babbar, ld. Counsel for the Petitioner, in the parallel proceedings relating to cancellation of the GST Registration, the Petitioner has already deposited more than Rs. 2.01 crores prior to the show cause notice dated 31^st July, 2024 being issued. This aspect has, however, not been taken into consideration in the impugned order dated 16th May, 2025. He thus submits that the order dated 16th May, 2025 deserves to be set aside qua the Petitioner.

11. Mr. Akshay Amritanshu, ld. Senior Standing Counsel for the Respondent concedes to the fact that the aspect of payment of Rs.2,01,20,299/- by the Petitioner does not appear to have been considered in the order dated 16th May, 2025.

12. The documents which have been placed on record in respect of the cancellation of GST registration of the Petitioner, clearly show that a substantial amount of payments have been made by the Petitioner. This fact has also been stated in the reply filed by the Petitioner on 2nd September, 2024 to the show cause notice dated 31st July, 2024.

13. In the opinion of this Court, this aspect ought to have been considered by the adjudicating authority, as also the appellate authority which clearly shows that there has been a lapse in the adjudication.

14. Considering the fact that the order dated 16th May, 2025 is an appealable order before the GST Appellate Tribunal and the Court is informed that the GST Appellate Tribunal has now been constituted and appeals are being accepted, the Petitioner shall challenge the order dated 16th May, 2025 before the GST Appellate Tribunal itself.

15. The GST Appellate Tribunal shall duly consider the documents that have also been produced before this Court to show that prima facie, approximately Rs. 2,01,20,299/- have already been deposited by the Petitioner prior to issuance of the show cause notice dated 31^st July, 2024.

16. Thus, in terms of Section 73 of the Central Goods and Service Tax Act, 2017, the penalty raised against directors of the Petitioner concern may not sustain. Moreover, even the penalty against the Petitioner company would have to be reconsidered in view of the earlier payments which have been made. Needless to act, if the said payments do not relate to the present allegations which have been raised, then the same would also be liable to be considered by the GST Appellate Tribunal.

17. However, in the facts of the present case, considering the substantial amount of money which has already been paid by the Petitioner, the Court is of the opinion that the Petitioner ought to be permitted to avail of the appellate remedy before the GST Appellate Tribunal without any further payment of any amount as pre-deposit.

18. Let the appeal be filed by the Petitioner by 25^th December, 2025. If the appeals are filed within the said time period, the same shall be considered on merits and shall not be dismissed on the ground of delay.

19. The present petitions are disposed of in said terms. Pending applications, if any, are also disposed of.