Pre-SCN Consultation Serves No Purpose In Large-Scale GST Fraud Cases Involving Complex Transactions: Delhi High Court

The Delhi High Court has observed that pre-SCN Consultative Notice prima facie serves no purpose in large-scale GST fraud cases involving multiple entities and a complex maze of transactions.Pre-SCN consultation was mandatory under Rule 142 (1A) of the Goods and Services Tax Rules, 2017. It prescribed that a proper officer shall, before service of notice to the person chargeable with tax, communicate the details of any tax, interest and penalty as ascertained by the said officer.However, a 2022 notification issued by the Central Tax Department replaced the word 'shall' with 'may', implying that pre-SCN consultation notice is not mandatory anymore.The Petitioner in this case, facing demand of over ₹9.6 crore had challenged this notification, arguing that pre-SCN Consultation must be held.Significant to note that a partner of the Petitioner-firm is statedly involved in incorporation of several firms and non-existent entities only to avail/pass on the Input Tax Credits. Notices in connection with this have been issued to as many as 15 firms.In this factual backdrop, a division bench of Justices Prathiba M. Singh and Renu Bhatnagar observed,“in the case of such large scale fraudulent availment of ITC with multiple entities, pre-SCN consultation notice may also have no impact. In the prima facie opinion of the Court such a notice would be having some bearing, only when certain simple transactions are noted. In such complex maze of transactions involving multiple parties, worth crores of rupees, pre-consultation would be meaningless due to the nature of the issues involved.”Reliance was placed on Zeta International v. The Additional Director (2025) where it was held that pre-SCN consultation notice cannot be held to be mandatory in nature.The Court further noted that the 2022 notification is already pending challenge, as such, it was not inclined to entertain this petition.Appearance: Mr. Chinmaya Seth, Mr. A.K. Seth, Ms. Palak Mathur, Advs. for Petitioner; Ms. Nancy Jain, Adv. Ms. Alpana Pandey, Adv. for R-4.Case title: Manpar Exim INC v. Additional Director, DGGI And OrsCitation: 2025 LiveLaw (Del) 1656Case no.: W.P.(C) 18204/2025Click here to read order

Pre-SCN Consultation Serves No Purpose In Large-Scale GST Fraud Cases Involving Complex Transactions: Delhi High Court

Kapil Dhyani

Tags