Can GST Demands Be Challenged Without Filing an Appeal?

Under the Goods and Services Tax (GST) regime in India, disputes relating to tax demands often lead to questions about the remedies available to aggrieved taxpayers. A pivotal issue is whether a taxpayer can directly challenge a GST demand order under Article 226 of the Constitution through a writ petition, bypassing the statutory appellate route provided under Section 107 of the Central Goods and Services Tax (CGST) Act, 2017.

Background of the Case

Infiniti Retail Limited, which operates under the brand name “CROMA,” filed a writ petition challenging an Order-in-Original dated 3rd February 2025, passed by the Additional Commissioner, CGST Delhi, raising demands and imposing penalties under various provisions of the CGST Act, 2017, the Delhi GST Act, and the IGST Act.

The total disputed demand exceeded ₹100 crore, primarily arising from:

• Alleged wrongful availment of Input Tax Credit (ITC)
• Short payment of CGST, SGST, and IGST
• Interest under Section 50
• Penalties under Sections 74 and 122

Issue

Can a taxpayer challenge a GST demand order under Article 226 of the Constitution of India without first availing the statutory remedy of appeal under Section 107 of the CGST Act?

Statutory Remedy under GST Law

Section 107 – Appeal to Appellate Authority

Section 107(1) of the CGST Act provides:

“Any person aggrieved by any decision or order passed under this Act by an adjudicating authority may appeal to the Appellate Authority… within three months from the date on which the said decision or order is communicated.”

This appeal is subject to:

• A mandatory pre-deposit of 10% of the disputed tax amount.
• Review of both facts and law.

This raises a concern: Can a taxpayer bypass this appeal mechanism by directly approaching the High Court under Article 226?

Court’s Observations and Analysis

1. Nature of Writ Jurisdiction

The Court emphasized that writ jurisdiction is discretionary and should be invoked sparingly, especially when a statutory appellate remedy is available. The High Court observed that the impugned order was appealable under Section 107 and involved substantial factual analysis—unsuitable for adjudication in writ jurisdiction.

2. Prior Directions Ignored

The petitioner had earlier approached the Court in W.P.(C) 12459/2024, where the Court had directed the adjudicating authority not to rely blindly on the audit report and to independently evaluate the petitioner’s response to the Show Cause Notice (SCN).

However, in the impugned order, the Adjudicating Authority merely summarized the reply and seemed to have rubber-stamped the SCN findings, showing non-application of mind. This was a point of contention but not enough to override the statutory appeal mechanism.

3. Appeal Remedy Deemed Adequate

Despite procedural irregularities, the Court concluded:

“No useful purpose would be served in sending the matter back to the Adjudicating Authority… The impugned order is an appealable order.”

Thus, even procedural lapses in adjudication may not be sufficient to invoke writ jurisdiction if an efficacious appellate remedy exists.

Exceptional Circumstance: Waiver of Pre-Deposit

The Court made a notable exception in regard to the mandatory pre-deposit under Section 107. It waived the 10% pre-deposit only for a portion of the demand (₹77.36 crore) where the dispute was limited to whether ITC was wrongly taken under CGST/SGST instead of IGST—without questioning the entitlement to credit itself.

This partial waiver was granted:

• In “unique and peculiar circumstances”
• Where the tax liability nature was not seriously disputed
• And where the entitlement to credit per se was not in doubt

Implications of the Judgment

1. Writ Petitions Not a Substitute for Appeals

The High Court reaffirmed that writ petitions cannot routinely substitute the appellate process, even if procedural violations or errors exist in the order.

2. Judicial Review Still Preserved

However, writ jurisdiction remains available:

• When the order is wholly without jurisdiction
• Where fundamental rights are violated
• Or gross procedural injustice exists, such as denial of a hearing

3. Flexibility in Pre-Deposit

The judgment shows that the High Court can intervene to modify or waive the statutory pre-deposit in appropriate cases to avoid undue hardship.

Legal Basis and Precedents

The ruling aligns with established jurisprudence:

A. Assistant Collector of Central Excise v. Dunlop India Ltd., (1985) 1 SCC 260

“Article 226 is not meant to circumvent statutory procedures…”

B. State of U.P. v. Mohd. Nooh, AIR 1958 SC 86

An alternative remedy does not bar a writ where a quasi-judicial order is made in complete disregard of principles of natural justice.

C. Whirlpool Corporation v. Registrar of Trademarks, (1998) 8 SCC 1

Writ jurisdiction can be invoked when:

• Fundamental rights are violated
• There is a violation of natural justice
• The authority lacks jurisdiction

Conclusion

The Delhi High Court judgment in Infiniti Retail Ltd. v. Union of India provides clear guidance: Taxpayers must primarily avail of the statutory appeal route under the GST law to challenge demand orders. The writ jurisdiction under Article 226 is not an alternative to appellate remedies, unless exceptional circumstances warrant interference.

However, this judgment also reinforces the principle that justice must not be defeated by procedure. By waiving the pre-deposit requirement in part, the Court ensured that the taxpayer was not prejudiced where no actual loss to the exchequer was shown.

Final Takeaway

• GST demands can be challenged via writ only in exceptional cases.
• Ordinary remedy lies in Section 107 appeal.
• Courts may waive pre-deposit to prevent hardship in clear-cut cases.