Supreme Court Upholds Dismissal of Writ Petition Where Efficacious Appellate Remedy Under Section 107 Exists
Issue
Whether a writ petition under Article 226 challenging a penalty order passed under Section 122(1)(ii) for alleged fake billing and pass-through of inadmissible Input Tax Credit (ITC) is maintainable when an effective statutory appellate remedy under Section 107 is available.
Facts
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Initiation of Proceedings: Proceedings were initiated against the assessee under Section 122(1)(ii) alleging the issuance of tax invoices without actual supply of goods or services, leading to the passing of inadmissible ITC.
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Investigation Findings: During the investigation, the recipient of the invoices was found to be non-existent at its registered place of business.
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Adjudication Order: Based on these findings, a consequential penalty order under Section 122(1)(ii) was passed against the assessee.
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Writ Petition: The assessee filed a writ petition under Article 226 seeking to quash both the Show Cause Notice (SCN) and the consequential penalty order, alleging jurisdictional errors and natural justice violations.
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High Court Ruling: The High Court refused to entertain the writ petition, holding that an efficacious statutory appellate remedy was available under Section 107 where all grounds could be raised. The assessee was relegated to file an appeal.
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SLP Filed: The assessee challenged the High Court’s dismissal by filing a Special Leave Petition (SLP) before the Supreme Court.
Decision
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In Favor of Revenue: The Supreme Court found no error in the High Court’s order and disposed of the Special Leave Petition.
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Appellate Time Extended: The Supreme Court granted four weeks’ time to the assessee to file a statutory appeal under Section 107 before the competent Appellate Authority in accordance with law.
Key Takeaways
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Exhaustion of Alternative Remedy: Courts will consistently enforce the requirement to exhaust statutory remedies under Section 107 before entertaining extraordinary writ petitions under Article 226 against GST penalty orders.
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Broad Scope of Appellate Review: Objections regarding jurisdiction or procedural defects like natural justice breaches can and should be evaluated by the statutory Appellate Authority rather than bypassing the statutory machinery.
SUPREME COURT OF INDIA
Marginmart Infosystems (P.) Ltd.
v.
Assistant Commissioner CGST
J.B. Pardiwala and K. Vinod Chandran, JJ.
Petition for Special Leave to Appeal (C) No. 26494 of 2026†
AUGUST 18, 2026
Ms. Apurva Singh, Ms. Mary Jonet, Akash Tripathi, Advs. and Chapalgaonkar Siddharth Sarang, AOR for the Petitioner.
ORDER
1. Exemption Application is allowed.
2. Having heard the learned counsel appearing for the petitioner and having gone through the materials on record, we do not find any error not to speak of any error of law in the impugned order passed by the High Court.
3. All that the High Court has said is that the petitioner has an efficacious statutory remedy of appeal under Section 107 of the CGST Act.
4. We grant four weeks’ time to the petitioner to prefer Statutory Appeal in accordance with law.
5. It shall be open for the petitioner to raise all contentions available to it in law before the Appellate Authority, including the challenge to the deficiencies in the show cause notice.
6. With the aforesaid, the Special Leave Petition stands disposed of.
7. Pending applications, if any, also stand disposed of.