HC Declines to Interfere with Rs. 9.6 Crore Fake ITC Demand; Says Pre-SCN Consultation Not Mandatory After 2020 Amendment

Manpar Exim Inc. challenged an Order-in-Original dated 22 October 2025 confirming a GST demand of Rs. 9.60 crore on allegations of fraudulent availment and passing of ITC. The proceedings stemmed from searches at premises linked to partner Parag Garg, who was allegedly involved in floating multiple non-existent firms used for circular ITC movements. T

The petitioner argued that the Show Cause Notice dated 12 March 2025 was vitiated because no pre-SCN consultative notice was issued under Rule 142(1A), and this objection was not examined by the adjudicating authority.

Issue Before HC: Whether the absence of a pre-SCN consultative notice under Rule 142(1A) invalidates the Show Cause Notice and the Rs. 9.6 crore demand in a post-2020 amendment scenario involving alleged large-scale fake ITC transactions.

HC’s Decision: The Court held that after the October 2020 amendment, Rule 142(1A) no longer mandates issuance of a pre-SCN consultation, and the petitioner cannot rely on the earlier “shall” version to contest proceedings initiated in 2025. The bench noted that the distinction between pre- and post-amendment situations was already clarified in Gulati Enterprises and reaffirmed in Banson Enterprises and Zeta International. In large, complex fraud cases with multiple entities and high-value transactions, a pre-SCN consultation would not meaningfully serve its purpose.

The Court declined to entertain the writ and directed the assessee to proceed under the appellate mechanism of Section 107 of the CGST Act. It further clarified that the pending constitutional challenge to Notification No. 79/2022 would govern later appellate proceedings.

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