Sumetco Alloys Pvt. Ltd. v. Union of India & Ors.

[2026:RJ-JP:32007-DB]











        HIGH COURT OF JUDICATURE FOR RAJASTHAN


                    BENCH AT JAIPUR





             D.B. Civil Writ Petition No. 9323/2026


      CNR: RJHC020473812026 | URN: CW / 20784U / 2026





Sumetco Alloys Private Limited, G-740, RIICO Industrial Area,


Bhiwadi, Alwar, Rajasthan 301019 Through Its Director Mr.


Priyank Bhandari S/o Nirmal Kumar Bhandari, Aged 41 (Approx)


R/o 1/170, 2Nd Floor, Paschim Vihar, West Delhi, Delhi-110063.


                                                    ----Petitioner


                                       Versus


1.      Union Of India, Through Its Secretary, Department Of


        Revenue, Ministry Of Finance North Block, New Delhi.


2.      State Of Rajasthan, Through Additional Chief Secretary


        (Finance) To Government, Finance Department (Tax


        Division), Government Of Rajasthan, 1st Floor, Main


        Building, Government Secretariat, Jaipur, Rajasthan,


        302005


3.      Joint   Commissioner,     Commercial   Taxes,    Circle-C,


        Enforcement Wing-III, New Building Kar Bhawan,


        Ambedkar Circle, Jaipur, Rajasthan,


4.      Chief Commissioner Of State Tax, Commercial Taxes


        Department, Ambedkar Circle, Jaipur


                                                  ----Respondents








 For Petitioner(s)            :     Mr. Jatin Harjai with


                                    Mr. Palak Gupta


                                    Ms. Nikshubha Sharma


                                    Mr. Bimal Jain


 For Respondent(s)            :     Mr. Bharat Vyas, ASG- Sr. Adv. with


                                    Ms. Mahi Yadav, AAG


                                    Ms. Chelsi Agarwal, AAAG


                                    Mr. Yuvraj Singh Rajawat


                                    Mr. Devesh Yadav, CGC


                                    Ms. Anima Chaturvedi





                HON'BLE MR. JUSTICE ARUN MONGA


              HON'BLE MR. JUSTICE ASHUTOSH KUMAR


                                   Order(Oral)





13/08/2026





Per: Arun Monga, J.


1.    Vide instant writ petition, three reliefs are pressed. The first is





issuance of a writ in the nature of certiorari, quashing/declaring that





Section 16(2)(c) of the Central Goods and Services Tax Act, 2017,





alleged to be ultra vires the Constitution, being arbitrary and violative of








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Article 14. The second is quashing of the order in original dated





10.04.2026 (Annexure P-10), whereby a demand of Rs. 56,44,08,265/-





was raised against the petitioner. The third is quashing of the show





cause notice dated 26.09.2025 (Annexure P-5), which was the





precursor to that order.





2.    The petitioner company manufactures pure lead and lead ingots.





It procures raw material from Haryana, Delhi and Rajasthan, and also





by way of imports. It asserts that in accordance with law it has





maintained its books of account, discharged tax on outward supplies





and availed input tax credit on the strength of purchases made from





registered suppliers.





3.    On   20.03.2024,        the    State      Tax     Authorities   inspected   the





petitioner’s premises. Queries were raised regarding purchases from





certain suppliers whose registrations came to be cancelled thereafter.





The petitioner produced ledgers, financial statements, stock details and





creditor details. During the proceedings, the petitioner deposited Rs.





50,00,000/- through Form GST DRC-03. The deposit is stated to have





been made under protest and without admission of liability.





4.    Summons under Section 70 of the Act followed. The Director of





the petitioner appeared and his statement was recorded on 22.04.2024.





The petitioner again furnished input tax credit ledgers, financial





statements, bank statements, tax invoices, e-way bills, transport





documents, payment proofs, weighment slips and allied records. It is





the case petitioner that the suppliers held valid registrations as on the





dates of the transactions. That every transaction is backed by invoice,





banking channel payment and transport documentation.





5.    Notwithstanding, respondent No. 3 issued the impugned show





cause notice dated 26.09.2025 under Section 74 of the Act for the





financial years 2020-21 to 2023-24. The notice alleges wrongful








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availment of input tax credit on purchases from certain suppliers. The





petitioner replied in detail on 01.11.2025 with supporting documents.





However, Respondent No. 3 thereafter passed the impugned order in





original dated 10.04.2026 confirming the demand.





6.      Hence, this writ petition.





7.      Mr. Jatin Harjai, learned counsel for the petitioner submits that





the petitioner is a bona fide purchaser.





7.1. He urges that once possession of a tax invoice, actual receipt of





goods, payment through banking channels and filing of returns are





established, the entitlement to input tax credit cannot be defeated by





the default of a supplier over whom the petitioner has no control.





7.2. He relies on the judgment of the High Court of Tripura in Sahil





Enterprises v. Union of India1 and on the judgment of the High Court





of Karnataka in Instakart Services Private Limited v. Union of





India2. He submits that in both these judgments, Section 16(2)(c) has





been read down and benefit thereof be accorded to the petitioner-





Company.





7.3. He       further    submits     that    the     writ   petition   is   maintainable





notwithstanding the appellate remedy, because there is a breach of the





principles of natural justice and a want of jurisdiction under Section 74.





8.      Au contraire, learned counsels for the respondents, at the outset





raise a preliminary objection on maintainability. They submit that the





order dated 10.04.2026 is appealable under Section 107 of the Act, with





a further appeal under Section 112.





8.1. They submit that none of the recognised exceptions to the rule of





alternative remedy is attracted in the case in hand. That, what the





petitioner seeks herein is nothing but appreciation of disputed facts.














1    2026 SCC Tri 4


2    2026 SCC Kar 2469


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8.2. On the constitutional challenge, they argue that the provision has





been enacted with the legitimate object of protecting revenue and





preventing evasion. Thus, it warrants no interference.





9.     We have heard learned counsel for both sides and perused the





record.





10.    The petitioner assails the proceedings primarily on five planks.





First, that Section 16(2)(c) is unconstitutional. Second, that the





jurisdictional foundation for invoking Section 74 is absent, because the





show cause notice contains no allegation of fraud, wilful misstatement





or suppression of facts attributable to the petitioner. Third, that the pre-





notice intimation in Form GST DRC-01A was not issued. Fourth, that





Respondent No. 3, having himself conducted the investigation, also sat





as the adjudicating authority, which is hit by the Rule of bias. Fifth, it is





also urged that the reply to the show cause notice was not dealt with in





the order in original.





11.    In the aforesaid backdrop, the following questions thus arise for





adjudication:-





      (i)   Whether Section 16(2)(c) of the Act is ultra vires the


      Constitution?


      (ii) If not, whether the provision is liable to be read down


      so as to protect a bona fide purchaser?


      (iii) Whether the show cause notice dated 26.09.2025 lacks


      the jurisdictional foundation for invoking Section 74?


      (iv) Whether the proceedings are vitiated by breach of the


      principles of natural justice, including the rule against bias


      and the non issuance of Form GST DRC-01A?


      (v)    Whether, in the absence of any of the above, the


      petitioner ought to be relegated to the statutory appellate


      remedy?





12.    Let us now find the answers one by one. The starting point is





Section 16 of the Act. The relevant extract is reproduced verbatim as





below:-


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      “16. Eligibility and conditions for taking input tax credit.—


      (1) Every registered person shall, subject to such conditions and


      restrictions as may be prescribed and in the manner specified in section


      49, be entitled to take credit of input tax charged on any supply of goods


      or services or both to him which are used or intended to be used in the


      course or furtherance of his business and the said amount shall be


      credited to the electronic credit ledger of such person.


      (2) Notwithstanding anything contained in this section, no registered


      person shall be entitled to the credit of any input tax in respect of any


      supply of goods or services or both to him unless,—


      (a) he is in possession of a tax invoice or debit note issued by a supplier


      registered under this Act, or such other tax paying documents as may be


      prescribed;


      (aa) the details of the invoice or debit note referred to in clause (a) has


      been furnished by the supplier in the statement of outward supplies and


      such details have been communicated to the recipient of such invoice or


      debit note in the manner specified under section 37;


      (b) he has received the goods or services or both.


      …


      (ba) the details of input tax credit in respect of the said supply


      communicated to such registered person under section 38 has not been


      restricted;


      (c) subject to the provisions of section 41, the tax charged in respect of


      such supply has been actually paid to the Government, either in cash or


      through utilisation of input tax credit admissible in respect of the said


      supply;


      and


      (d) he has furnished the return under section 39:”


13.   Section 41, as substituted by the Finance Act, 2022 with effect





from 01.10.2022, is the companion provision expressly referred to in





clause (c). It reads as follows.





      “41. Availment of input tax credit.—


      (1) Every registered person shall, subject to such conditions and


      restrictions as may be prescribed, be entitled to avail the credit of eligible


      input tax, as self-assessed, in his return and such amount shall be credited


      to his electronic credit ledger.


      (2) The credit of input tax availed by a registered person under sub-


      section (1) in respect of such supplies of goods or services or both, the tax


      payable whereon has not been paid by the supplier, shall be reversed


      along with applicable interest, by the said person in such manner as may


      be prescribed:


      Provided that where the said supplier makes payment of the tax payable in


      respect of the aforesaid supplies, the said registered person may re-avail


      the amount of credit reversed by him in such manner as may be


      prescribed.”











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14.     Section 155 of the Act places the evidentiary burden. It reads as


follows.


        “155. Burden of proof.—


        Where any person claims that he is eligible for input tax credit under this


        Act, the burden of proving such claim shall lie on such person.”


15.     From a cumulative perusal of the above, four decisive features of





the statutory scheme emerge, viz.:-





15.1. First, sub-section (1) of Section 16 does not create an unqualified





right. It confers entitlement expressly “subject to such conditions and





restrictions as may be prescribed”. The entitlement is therefore





conditional at its very source.





15.2. Second, sub-section (2) opens with a non obstante clause and is





cast in the negative form. It says that no registered person shall be





entitled to credit unless the enumerated conditions are met. In our





view,    being     a   negatively      worded        non-obstante     provision,      it   is





mandatory in nature. The conditions in clauses (a), (aa), (b), (ba), (c)





and (d) are cumulative and not alternative. Thus, satisfaction of five of





them does not dispense with the sixth. The submission that compliance





with clauses (a), (aa), (b) and (ba) by itself establishes entitlement,





therefore, runs against the plain reading of the provision. If that





submission were accepted, clause (c) would be rendered otiose.





15.3. Third, clause (c) does not operate in isolation. It is expressly





made “subject to the provisions of section 41”. Section 41(2) requires





reversal of credit where the supplier has not paid, and the proviso then





permits the recipient to re-avail that very credit once the supplier





discharges the liability. The denial under clause (c) is, therefore,





contingent and reversible, not final and confiscatory.





15.4. Fourth, Section 155 places the burden of establishing eligibility





squarely on the person claiming the credit. The claimant must prove





entitlement. The revenue is not required to disprove it in the first





instance.





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16.    Taken     together,     the    provisions,       ibid,   indicate   a   deliberate





allocation of risk. Parliament has chosen to place the risk of supplier





default on the recipient, while simultaneously providing a mechanism





for restoration of the credit once the default is cured. Whether that





allocation is wise or harsh is a question of legislative policy. Most





certainly, it is not a question of constitutional validity to be adjudicated





by us in the absence of any material to the contrary. Particularly, in





light of the fact that benefit of Input Tax Credit is a contingent statutory





entitlement, rather than a vested right, much less a constitutional right.





17.    On the burden of proof, the position is equally well settled. In





State of Karnataka v. Ecom Gill Coffee Trading Private Limited 3,





it has been held that the burden of proving the genuineness of a





transaction for the purpose of claiming input tax credit lies on the





purchasing dealer, and that mere production of invoices, or payment by





cheque, is not by itself sufficient. The dealer must establish the actual





physical movement of goods and the genuineness of the transaction.





18.    Pertinently, the constitutional validity of Section 16(2)(c) engaged





the attention of different High Courts, which took divergent views. The





High Court of Gujarat, in Maruti Enterprise v. Union of India,





R/Special Civil Application No. 18080 of 2023 and connected





matters, decided on 01.05.2026 (High Court of Gujarat), upheld the





provision and declined to read it down. That judgment was carried to





the Supreme Court and has been duly upheld by way of dismissed the





SLP.





19.    Hon’ble the Supreme Court, in Bhandari Scrap Traders v.





Union of India4, and connected matters, decided on 24.07.2026,





dismissed the batch of petitions. The operative reasoning is as follows.





        “1. Though we are informed that a special leave petition has been


        entertained in relation to the decision of the Tripura High Court … in





3   (2023) 6 SCC 12


4   2026 SCC OnLine SC 1570


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      Sahil Enterprises vs. Union of India & Ors., we find from the judgment


      passed by the High Court of Tripura that the exercise undertaken by the


      High Court of Gujarat in the judgment, presently under challenge, was not


      undertaken by it.


      2. The distinction and differences between the provisions of the Delhi Value


      Added Tax Act, 2004, and the Central Goods and Services Tax Act, 2017,


      brought out by way of a detailed analysis from paragraph 42 onwards in


      the impugned judgment along with the scheme of availing Input Tax Credit


      (ITC) under the GST regime, as set out in paragraph 56 of the impugned


      judgment, clearly demonstrate that there is no possibility of drawing parity


      between the provisions of the two enactments, so as to treat a purchasing


      dealer under the CGST Act on par with a purported bonafide purchasing


      dealer under the Delhi VAT Act in relation to ITC, when the supplier-


      dealer fails to pay the requisite tax.


      3. Further, the High Court of Gujarat has also referred to the provisions of


      Section 41 of the CGST Act and also Sections 73 and 74 thereof in the


      context of the purchasing dealer under the CGST regime being entitled to


      re-avail the reversed ITC after the supplier-dealer is made to discharge the


      tax liability.


      4. In that view of the matter, the High Court was fully justified in holding


      that no grounds were made out to declare Section 16(2)(c) of the CGST Act


      as unconstitutional or read down the provisions thereof. We find ourselves


      in complete and respectful agreement with the views expressed by the High


      Court of Gujarat and affirm and uphold the impugned judgment.


      5. The special leave petitions are, accordingly, dismissed.


      6. Pending application(s), if any, shall stand disposed of.”








20.   Thus, firstly in light of above, coupled with our discussion in the





preceding part, Section 16(2)(c) suffers from no constitutional infirmity.





Secondly, the existence of the reversal and re-availment mechanism





under Section 41, read with Sections 73 and 74, is a sufficient answer





to the charge of arbitrariness.





21.   It is also canvassed, though may we say, rather faintly, by Mr.





Jatin Harjai that the Hon’ble Supreme Court order being one dismissing





special leave petitions, it does not constitute a binding declaration of





law. The suggestion is untenable. For, the order is a speaking order. It





records reasons, expresses “complete and respectful agreement” with





the High Court of Gujarat. In no uncertain terms it affirms and upholds





the impugned judgment. The constitutional challenge to Section 16(2)














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(c), ibid, is thus water under the bridge and no more an issue which is





res integra.





22.     Question (i) is answered against the petitioner. Hence, the





challenge to the vires of Section 16(2)(c) fails, and it is not open to be





re-agitated.





23.     When the instant order was being dictated, learned counsel for





the petitioner also pressed the alternative plea of reading down. He





relied on the judgment of the High Court of Tripura in Sahil





Enterprises          (supra), and the judgment of the High Court of





Karnataka in Instakart Services Private Limited (supra). Reliance





was also placed on the judgment of the High Court of Gauhati in





National Plasto Moulding v. State of Assam 5.





24.     The High Court of Tripura upheld the validity of Section 16(2)(c)





but read it down, is the argument. It has been held that the provision





ought to operate only where the transaction is found to be collusive or





fraudulent, and not where it is bona fide. Its reasoning proceeded on





the practical impossibility of a purchaser verifying whether the supplier





has in fact remitted the tax, on the principle that income ought not to





be taxed twice in the absence of express words, and on the line of cases





decided under the Delhi Value Added Tax Act, 2004. The operative





direction was in these terms.





        “(a) Section 16(2)(c) of the Act is held not violative of articles 14, 19(1)(g)


        or 265 or 300-A of the Constitution of India;


        (b) But section 16(2)(c) of the Act ought not to be interpreted to deny ITC


        to purchasers in a bona fide transaction like the petitioner and it should be


        read down and applied only where the transaction is found to be not bona


        fide or is a collusive transaction or fraudulent transaction to defraud the


        revenue.”


25.     It was also submitted that the High Court of Karnataka in





Instakart (supra) followed that view and read down both Section














5   2024 (89) G.S.T.L. 82 Gauhati High Court


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16(2)(c) and Rule 36(4) of the Central Goods and Services Tax Rules,





2017, so as to preserve credit in the hands of a bona fide recipient.





26.   We are unable to apply these judgments in the case in hand, for





two independent reasons.





27.   The first reason is that the plea of reading down has itself been





considered and rejected at the highest level, i.e., the Hon’ble Supreme





Court in Bhandari Scrap Traders (supra). Not merely that the





validity of the provision was also upheld. It was held, in terms, that no





grounds were made out either “to declare Section 16(2)(c) of the CGST





Act as unconstitutional or read down the provisions thereof”. The





alternative prayer was therefore expressly negated. The Supreme Court





further recorded that it was aware of the pendency of the challenge to





the Tripura view, and distinguished it on the ground that the exercise





undertaken by the High Court of Gujarat had not been undertaken by





the High Court of Tripura. In that state of affairs, the decisions of the





High Courts of Tripura, Karnataka and Gauhati, to the extent that they





read down Section 16(2)(c) are not applicable to the case in hand.





28.   The second reason is that even if the petitioner’s best case on





reading down were assumed in its favour, it would not carry the





petitioner across the threshold in the facts of the present case.





Pertinently, the reading down propounded by the High Court of Tripura





is not unconditional. It operates only where the transaction is found to





be bona fide. It expressly preserves the full rigour of Section 16(2)(c)





where the transaction is found to be collusive or fraudulent, or designed





to defraud the revenue. Whether the petitioner’s transactions fall on one





side of that line or the other is a pure question of fact.





29.   Moreover, it so appears that in Sahil Enterprises (supra), itself





the finding of bona fides rested on a specific factual foundation. The





department there had invoked only Section 73 of the Act. It had not








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invoked Section 74. It had not disputed that the purchaser had in fact





paid the tax to the supplier. There was no allegation that the purchaser





had failed to discharge its own liability. It was on those admitted facts





that the transaction was held to be bona fide.





30.   The present case is the converse. The department has invoked





Section 74. The allegation is not of a supplier who collected tax and





failed to remit it. The allegation is of fake invoices, bogus supplies and a





chain of multi layered paper transactions in which no goods moved.





That is precisely the class of case which the reading down, on its own





terms, does not protect. Whether the allegation is made out is a matter





for evidence and for the appropriate authority to consider which





exercise is open to challenge by way statutory appeal. It is not a matter





that can be resolved on affidavits in a writ petition.





31.   Thus, the plea of reading down is not available to the petitioner in





the facts of the present case. Question (ii) is answered accordingly. If





and to the extent the petitioner contends that its transactions are bona





fide, it is at liberty to raise such contention, which shall be considered in





accordance with law as per the statutory remedies.





32.   Adverting now to question no. (iii). Section 74(1) of the Act reads





as follows.





      “74. Determination of tax not paid or short paid or erroneously refunded


      or input tax credit wrongly availed or utilised by reason of fraud or any


      wilful-misstatement or suppression of facts.—


      (1) Where it appears to the proper officer that any tax has not been paid


      or short paid or erroneously refunded, or where input tax credit has been


      wrongly availed or utilised by reason of fraud, or any wilful-misstatement


      or suppression of facts to evade tax, he shall serve notice on the person


      chargeable with tax which has not been so paid or which has been so


      short paid or to whom the refund has erroneously been made, or who has


      wrongly availed or utilised input tax credit, requiring him to show cause


      as to why he should not pay the amount specified in the notice along with


      interest payable thereon under section 50 and a penalty equivalent to the


      tax specified in the notice.”


33.   Two points on the import of the provision may be noted at the





outset. The first is that Section 74 applies to the financial years in





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question. Section 74A was inserted by the Finance (No. 2) Act, 2024,





governs the financial year 2024-25 onwards. The relevant periods here





are prior in time, i.e., 2020-21 to 2023-24. Second, the provision is





triggered where it “appears to the proper officer” that credit has been





wrongly availed by reason of fraud, wilful misstatement or suppression





of facts to evade tax. The statutory threshold at the notice stage is one





of, if it so appears, that is to say, prima facie satisfaction.





34.   Speaking now of the expression “suppression of facts”, we are in





agreement with learned counsel for the petitioner that the initial burden





of establishing the ingredients lies on the revenue. We accept,





therefore, that Section 74 cannot be invoked mechanically. A bare





recital of the statutory words, unsupported by any material, would not





do. But that is not the case here. Let us see how.





35.   We have examined the show cause notice dated 26.09.2025 which





led to the impugned order. It runs into thirty three pages. It sets out, in





detail, how multi layered transactions were routed between bogus





suppliers and the suppliers with whom the petitioner dealt. The chain of





that layering is depicted in graphic detail. It is alleged in terms that





credit was availed on the strength of fake invoices and bogus supplies,





that is to say, on paper transactions unaccompanied by any movement





of goods. Those allegations, if established, would squarely constitute





fraud and suppression to evade tax within the meaning of Section 74.





36.   We are conscious that a show cause notice which, on its face,





lacks the jurisdictional ingredient can be quashed in writ jurisdiction.





However, the practice of challenging show cause notices, with an intent





to stall the statutory process, has to be deprecated. The proper course,





ordinarily, is for the noticee to respond and to have the factual issues





determined by the competent authority.














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37.     That is exactly what the petitioner ought to do in the case in





hand. In fact, the petitioner participated. It filed a detailed reply on





01.11.2025. The reply was not accepted, and the order in original





followed. The grievance, therefore, is not that no jurisdiction existed.





The grievance is that the material relied upon was inadequate and that





the reply of petitioner ought to have prevailed. That is a grievance on





merits to be adjudicated at the appropriate fora under the Act.





38.     Question (iii) is thus answered against the petitioner.





39.     Moving on now to question (iv), i.e., the plea of breach of natural





justice. Rule 142(1A) of the Central Goods and Services Tax Rules,





2017,     governs     the     pre-notice       intimation.       As     it   stood   prior   to





15.10.2020, the rule was couched in mandatory terms. By Notification





No. 79/2020-Central Tax dated 15.10.2020, the word “shall” was





substituted by the word “may”. The rule, in its present form, reads as





follows:-





        “(1A) The proper officer may, before service of notice to the person


        chargeable with tax, interest and penalty, under sub-section (1) of


        section 73 or sub-section (1) of section 74, as the case may be,


        communicate the details of any tax, interest and penalty as ascertained


        by the said officer, in Part A of FORM GST DRC-01A.”





40.     The import of the amendment is plain. The pre-notice intimation is





now an enabling facility and not a condition precedent. Its non issuance





does not, by itself, vitiate a notice issued under Section 74. In any





event, the petitioner suffered no prejudice on this score. It had already





been summoned under Section 70. Its Director’s statement had been





recorded. It had produced its records. It knew precisely what was





alleged against it. It replied on the merits. No prejudice is pleaded and





none is demonstrable. Moreover, to be noted that the Rule 142(1A) is





not even under challenge by the petitioner.





41.     The submission also is that Respondent No. 3, having conducted





the investigation, could not have adjudicated upon it. The argument,





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though seemingly attractive on first blush, but even that does not





survive examination.





42.   The scheme of the Act itself vests both functions in the “proper





officer”. Section 2(91) defines the proper officer in relation to any





function as the Commissioner or the officer to whom the function is





assigned. Section 67 empowers the proper officer to inspect and search.





Section 70 empowers him to summon. Section 74 requires him to issue





notice and, thereafter, to determine the amount due. Parliament has





therefore consciously placed investigation and determination within the





competence of same statutory office. Thus, as per legislation, it is the





assessing authority which gathers, both, i.e., the material and then also





assesses upon it.





43.   Where a statute itself confers both functions on the same





authority, the Rule against bias, unless there is other material on





record, stands displaced to that extent. In any case, such is the





statutory scheme.





44.   Further, the test for disqualification of an officer or Rule of bias is





not one of mere apprehension. The test of existence of real likelihood of





bias, or of a reasonable apprehension in the mind of a fair minded





person. The petitioner has pleaded no personal interest on the part of





Respondent No. 3. No animus. No material suggesting a closed mind.





The only foundation is that the same officer performed both the





functions. Which, as already observed by us, is envisaged under the





statute. Such a foundation cannot, thus, be used as bias in the absence





of anything cogent.





45.   The final limb is that the reply to the show cause notice was not





dealt with in the order in original.





46.   It is necessary to be precise about what is and what is not





alleged. It is not alleged that no show cause notice was served. It is not








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alleged that no opportunity to reply was given. It is not alleged that a





personal hearing was refused. It is not alleged that material was used





behind the petitioner’s back. The conceded position is that notice was





issued, a detailed reply was filed, hearing was afforded, and a reasoned





order was passed. What is alleged is that the reply was not dealt with to





the petitioner’s satisfaction.





47.   The alleged inadequacy in the appreciation of reply filed by





petitioner stands on an entirely different footing. It is, at the moot,





arguendo, an error within jurisdiction, if at all. The appellate authority





under Section 107 has plenary power to examine it, including the power





to make such further inquiry as may be necessary. The petitioner has





been heard at every stage. All its contentions remain fully available to it





in appeal. No prejudice of the kind that would justify bypassing the





statutory remedy is made out.





48.   Question (iv) is answered against the petitioner.





49.   What remains is the preliminary objection that Section 107 of the





Act provides the appellate remedy. Since the vires challenge fails, to





permit bypassing Section 107 by labeling a grievance on merits as a





breach of natural justice would render the appellate hierarchy, and the





pre-deposit condition that Parliament has attached to it, nugatory.





50.   Point (v) is answered against the petitioner. The petitioner has to





be, therefore, relegated to the statutory remedy by filing appeal in





accordance with law.





51.   As an upshot, the writ petition is disposed of in the following





terms:-





(a)   The challenge to the constitutional validity of Section 16(2)(c) of





the Central Goods and Services Tax Act, 2017, is rejected.





(b)   The challenge to the show cause notice dated 26.09.2025 and the





order-in-original dated 10.04.2026 is rejected.








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                                   (c)   Liberty is granted to the petitioner to prefer an appeal under





                                   Section 107 of the Act against the order in original dated 10.04.2026. If





                                   such appeal is filed within thirty days of the instant judgment being





                                   uploaded on the website of this Court, the period spent in prosecuting





                                   this writ petition shall stand excluded in computing limitation. The





                                   appeal shall be decided on merits without objection as to limitation.





                                   (d)   The sum of Rs. 50,00,000/- deposited by the petitioner through





                                   Form GST DRC-03 shall be given credit for, and adjusted towards, the





                                   pre-deposit payable under Section 107(6) of the Act. This direction is





                                   without prejudice to the rival contentions on the character of that





                                   deposit.





                                   (e)   All contentions on the merits, including the contention that the





                                   transactions in question are bona fide, are kept open for consideration





                                   by the appellate authority in accordance with law. Nothing stated in the





                                   instant order shall be construed as an expression of opinion on the





                                   merits of the impugned demand.





                                   52.   All pending applications stand disposed of.














                                   (ASHUTOSH KUMAR),J                                                  (ARUN MONGA),J


                                   27/AARZOO ARORA














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