By CA Alok Kumar
Published on: May 24, 2025
Website: www.caalokkumar.com
In a significant and much-needed clarification on procedural aspects under GST law, the Delhi High Court has delivered a judgment that could greatly influence the manner in which GST appeals involving multiple financial years are filed and processed. The case in question pertains to Metalax Industries, which was subjected to a demand of ₹6.35 crore on allegations of availing fake Input Tax Credit (ITC).
This case is not just about tax evasion; it’s about ensuring that taxpayers are not denied justice due to administrative errors or technical lapses by the GST authorities. The ruling reaffirms the judiciary’s role in maintaining procedural fairness and taxpayer rights.
Background of the Case
Metalax Industries came under the scanner following a search operation conducted on December 29, 2020, which was swiftly followed by the arrest of a representative on December 30, 2020. The proceedings culminated in an Order-in-Original dated February 3, 2025, raising a demand of ₹6.35 crore. The demand was formalised through Form GST DRC-07 dated February 5, 2025.
However, a major anomaly arose: while the Show Cause Notice (SCN) and the order covered three financial years – FY 2017-18 to FY 2019-20, the DRC-07 only reflected FY 2017-18. This created substantial confusion regarding how the appeal should be structured—whether a single consolidated appeal could be filed, or separate appeals were required for each financial year.
Key Legal Issue: Appeal Filing Ambiguity Due to Faulty DRC-07
The heart of the dispute lay in the format of the DRC-07, which forms the backbone of any appeal process under GST. The omission of FY 2018-19 and FY 2019-20 led to legitimate doubts about the scope and structure of the appeal. Filing incorrect or fragmented appeals could potentially render the entire appeal process void or dismissed as time-barred.
Recognising this procedural gap, Metalax Industries approached the Delhi High Court, seeking relief and clarity on whether a consolidated appeal could be filed under Section 107 of the CGST Act for all three years.
Delhi High Court Verdict: Relief with Precision
In a landmark order, the Delhi High Court ruled decisively in favour of the petitioner, setting a crucial precedent. Here’s what the Court held:
✅ One Consolidated Appeal Allowed
The Court permitted the filing of a single appeal under Section 107 of the CGST Act covering all three financial years, as the demand had emanated from a common adjudication order.
✅ Appeal Filing Deadline Extended
The Court further directed that the appeal, along with the required pre-deposit, must be filed by July 10, 2025, and shall not be treated as time-barred, considering the confusion arising from the department’s own documentation.
✅ Right to Challenge DRC-07 Format Preserved
The petitioner was also granted liberty to raise objections to the format and contents of DRC-07 before the Appellate Authority, ensuring that the matter receives full legal consideration on both procedural and substantive grounds.
Implications for Taxpayers and Professionals
This ruling is not just a win for Metalax Industries—it offers much-needed guidance for businesses and tax practitioners facing similar circumstances. Here’s why the judgment matters:
- Precedent for Multi-Year GST Disputes: In cases involving SCNs and orders covering multiple financial years, this judgment validates the option of a single, consolidated appeal.
- Clarity on DRC-07 Limitations: It highlights how technical or clerical mistakes in DRC-07—a core document in GST adjudication—can lead to major legal complications, and how such issues can be addressed judicially.
- Safeguarding Appeal Rights: The decision ensures that taxpayers are not penalised due to administrative errors of the department, particularly in sensitive matters like fake ITC, which often involve arrests and penal consequences.
Legal Insight: Section 107 of CGST Act
Section 107 allows a taxpayer to appeal against any decision or order passed under GST laws within three months from the date of communication. However, such appeals are conditional on the payment of 10% of the disputed tax amount as pre-deposit. In this case, the Court’s intervention provides a realistic deadline and avoids technical disqualification.
Conclusion: A Step Toward Procedural Fairness in GST Law
The Metalax Industries ruling from the Delhi High Court sends a powerful message—tax law must serve both revenue collection and principles of justice. In an ecosystem as complex as GST, where technology, documentation, and law converge, courts play a crucial role in ensuring that taxpayers are not victims of procedural rigidity.
Tax professionals and businesses must take note of this judgment and use it as a reference in cases where departmental notices or forms do not align with legal requirements. Equally, the GST authorities may need to revisit the format of DRC-07 and similar forms to ensure they are comprehensive, accurate, and litigation-proof.
📌 Action Point for Taxpayers:
If you receive a DRC-07 covering multiple years but showing only one year in the demand summary, consider this judgment as a legal basis to file a single appeal and seek judicial clarity on procedural compliance.
For more updates and expert insights on GST law, GST litigation in Delhi, and GST compliance strategies, stay connected with www.caalokkumar.com. GST Consultant in Dwarka Delhi
Disclaimer: This article is intended for informational purposes only. It does not constitute legal or professional advice. Readers are advised to consult qualified professionals before acting on the basis of this information.
