Delhi High Court Quashes GST Order-in-Original for Denial of Hearing Opportunity; Directs De Novo Adjudication Upon Full Deposit of Demand

Case Reference

Sun International Limited Vs Commissioner of Delhi Goods And Services Tax (Delhi High Court)

Background and Context

A writ petition was filed before the Delhi High Court challenging an Order-in-Original dated 17.08.2024 passed by the Commissioner of Delhi Goods and Services Tax. The order had been issued under Section 73 of the Delhi Goods and Services Tax Act, 2017 (DGST Act) in respect of the financial year 2019–2020, confirming a tax demand of ₹2,20,76,630.

The assessee, Sun International Limited, is a company incorporated under the Companies Act, 2013 and holds GSTIN 07AALCS3889D1ZY. The dispute arose in the context of alleged discrepancies in the assessee's annual return filed in Form GSTR-9, specifically concerning the availment of excess Input Tax Credit (ITC) and certain ineligible or blocked credits falling within the ambit of Section 17(5) of the DGST Act. The blocked credits in question included those pertaining to motor vehicles and conveyances, goods or services used for personal consumption, and inward supplies that are expressly restricted under the statutory framework.

The Demand and Recovery Proceedings

A show cause notice dated 29.05.2024 was issued under Section 73 of the DGST Act proposing the demand of ₹2,20,76,630 on account of the aforesaid irregularities in ITC availment. The demand was subsequently confirmed through the impugned Order-in-Original dated 17.08.2024, and the assessee was granted time until 15.11.2024 to clear the outstanding dues.

When the assessee failed to remit the demanded amount within the prescribed period, the revenue authorities escalated the matter by initiating recovery action. This culminated in the issuance of Form GST DRC-22 dated 16.01.2026, through which the assessee's bank account was provisionally attached under Section 83 of the DGST Act.

Assessee's Contentions

Non-Receipt of Notice and Absence from Proceedings

The primary grievance raised on behalf of the assessee before the High Court was that the show cause notice dated 29.05.2024 had merely been uploaded on the GST portal without appearing in the "outstanding tax liability" section of the portal interface. The assessee contended that no alert, intimation, or communication — whether through the portal or otherwise — was received from the authorities.

As a direct consequence of this alleged non-intimation, the assessee was neither able to file a reply to the show cause notice nor participate in the personal hearing scheduled before the adjudicating authority. It was argued that the resulting Order-in-Original was therefore vitiated by a fundamental breach of the principles of natural justice, rendering it legally unsustainable.

Demonstration of Bona Fides Through Subsequent Compliance

To substantiate the assessee's good faith and cooperative conduct in tax matters, reference was drawn to a subsequent show cause notice dated 30.06.2025 issued under Section 73 of the DGST Act for the financial year 2021–2022, proposing a demand of ₹27,74,484 on account of alleged wrongful availment of ITC.