Case Summary: Abhishek Gumber v. Commissioner of GST, New Delhi

Court: Delhi High Court
Petition No.: W.P.(C) 9629/2022 & CM No. 28733/2022
Date of Judgment: 06.07.2022
Statutory Provisions Involved: Sections 73(5), 75, 74, CGST Act, 2017, Rule 142(1A) and Rule 92(3) of the CGST Rules, 2017
Category: Demand – Premature Action / Refund – Forged ITC Allegation

Facts of the Case

(Paras 1–4 of the judgment)

The petitioner, proprietor of M/s A.G. Enterprises, was issued a DRC-01A demand notice dated 14.06.2022 raising a total demand of ₹29,65,670, comprising tax, interest and penalty. This demand notice arose after the petitioner had earlier filed a refund claim of ₹12,71,426, which was rejected through an adjudication order dated 12.05.2022, passed pursuant to an SCN dated 08.02.2021 issued under Sections 73/74 and Rule 92(3). The refund was rejected on the ground that it was based on forged ITC. The petitioner had filed an appeal on 26.05.2022 challenging the refund rejection order. Despite the appeal being pending, the department issued the impugned DRC-01A to “protect the revenue.”

Questions Before the Court

(Paras 2, 4, 7)

1. Whether the department could invoke Section 73(5) and issue a DRC-01A demand notice when the earlier adjudication order rejecting refund was already under challenge before the appellate authority?

2. Whether such a protective demand notice issued during pendency of appeal was premature, arbitrary, and without jurisdiction?

Observations of the Court

(Paras 7–7.2)

The Court noted that the refund had been rejected on the ground that the ITC was forged; and therefore, if the adjudication order were upheld, the petitioner would indeed be liable for tax, interest, and even penalty. However, as the appeal filed by the petitioner was pending, the adjudication order had not attained finality.

The Court held that the validity of further action under Section 75 and its attendant Rules depends entirely on the appeal’s outcome. Because appellate scrutiny was still underway, initiating a fresh demand notice under Section 73(5) amounted to an anticipatory and premature exercise without the necessary statutory foundation. Only after the appellate authority’s decision could the department re-initiate proceedings in accordance with law.

Judgment / Verdict

(Para 8–9)

The Court set aside the Demand Notice dated 14.06.2022 (DRC-01A) on the ground that it was premature. However, it granted liberty to the revenue to initiate proceedings under Section 75 once the outcome of the pending appeal was known. The writ petition was disposed of, and all pending applications were closed.

Cases Referred – Summary Table

(No external case law was cited; only statutory references are used in the judgment.)

Between Fine Lines – Practical Takeaways for Trade

The department cannot pre-emptively issue DRC-01A or start recovery-linked processes while an appeal against an adjudication order is pending. Any “protective” demand is invalid until the appellate authority confirms the liability. Taxpayers facing refund rejections on ITC grounds are shielded from parallel coercive action until the appellate stage concludes.

Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”