The Delhi High Court addressed a case involving Manpar Exim Inc., which was investigated by the Directorate General of GST Intelligence (DGGI) for alleged involvement in a fraudulent input tax credit (ITC) network. The investigation led to the issuance of a Show Cause Notice (SCN) under Section 74, claiming wrongful ITC transactions amounting to over ₹9.60 crore. Manpar Exim Inc. contested the validity of the SCN and the subsequent Order-in-Original (OIO), arguing that the absence of a pre-SCN consultation notice rendered them invalid.
The court examined whether the omission of a pre-SCN consultation, as outlined in Rule 142(1A), invalidated the SCN and OIO after the 2020 amendment. The amendment made pre-consultation optional, particularly in cases involving allegations of fraud or complex ITC investigations. The court noted that Rule 142(1A) now uses the term "may," indicating that pre-consultation is discretionary and not mandatory.
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In its judgment, the court referenced previous rulings, such as those in Zeta International and Banson Enterprises, which clarified that pre-consultation is not required in cases of alleged fake ITC and multi-entity fraud. Additionally, the court highlighted that Manpar Exim Inc. had the option to pursue an appeal under Section 107, which remained unexhausted. As there was no procedural illegality found in the SCN or OIO, the court dismissed the writ petition, advising the petitioner to seek appellate remedies and await outcomes of related ongoing challenges.
Parties: Manpar Exim Inc. v. Additional Director, DGGI & Ors.
Order Date: 01 December 2025
Facts –
- The petitioner was subjected to investigation by DGGI for alleged involvement in a fake ITC network, following searches at multiple premises and seizure of documents.
- A Section 74 SCN was issued alleging wrongful availment and passing of ITC exceeding ₹9.60 crore, and an Order-in-Original later confirmed the demand with interest and penalty.
- The petitioner argued that the SCN and OIO were invalid as the department did not issue a pre-SCN consultation notice under Rule 142(1A).
- The Department submitted that, post the October 2020 amendment, pre-SCN consultation is discretionary and not required in cases involving fraud and complex ITC investigations.
Issue –
- Whether non-issuance of a pre-SCN consultation under Rule 142(1A) invalidates a Section 74 SCN and Order-in-Original after the 2020 amendment making pre-consultation optional?
Order –
- The Court held that post-amendment, Rule 142(1A) uses the word “may”, making pre-SCN consultation discretionary, not mandatory.
- In cases involving allegations of fake ITC, multi-entity fraud or complex investigations, pre-consultation is not required as per earlier rulings (Zeta International, Banson Enterprises).
- The petitioner had an alternative statutory remedy of appeal under Section 107, which remained available and unexhausted.
- The challenge to Notification No. 79/2022 is already pending before other benches, and the petitioner may rely on the outcome in its statutory appeal.
- Finding no procedural illegality in the SCN or OIO, the High Court dismissed the writ petition, granting liberty to pursue appellate remedies.
