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Tax & Customs LawDelhi High Court

Dhruv Medicos Pvt Ltd vs. Deputy Commissioner, Central GST Circle 5, Audit-I, Delhi & Ors.

Writ Petition (Civil) · 2026:DHC:8422-DBDecided 29 Sept 2026New Delhi Bench
W.P.(C) 10213/2025CNR: DLHC010458302025
Justice Anil Kshetarpal · Justice Bharat Parashar

Background

Dhruv Medicos, a medicine distribution company, was audited by GST authorities for the period 2018-2023. During an on-site audit, the company was asked to deposit about Rs 40.10 lakh, which it later said was made under pressure/coercion rather than voluntarily. After the audit report was issued and the deposited amount was adjusted against the alleged liability, the department issued a show-cause notice under Section 74 of the CGST Act (used for cases involving fraud or wilful suppression) demanding a larger sum. The company argued its detailed written reply to the audit findings was brushed aside with the single word "non-satisfactory," in breach of a rule requiring the tax officer to properly consider such replies before finalising audit findings.

Decision Breakdown

The Court declined to strike down the show-cause notice at this stage. It held that a show-cause notice is only the start of a process, not a final decision on liability, and that all of the company's objections, including the claim that the Rs 40.10 lakh payment was coerced, disputes over limitation, and disputes over how the tax figure was calculated, could and should be raised before the GST Adjudicating Authority that would decide the actual case. The Court also closed separate contempt proceedings that had been initiated against one tax officer over an alleged violation of an earlier interim order, after finding he had a reasonable explanation.

Lesson Learnt

Courts are generally reluctant to intervene at the show-cause-notice stage of a tax dispute, even serious complaints like an under-explained rejection of a taxpayer's reply, or an allegedly coerced payment, are ordinarily left to be argued and decided by the tax department's own adjudicating authority first, with the writ court stepping in only if that process itself proves inadequate.

Dhruv Medicos Pvt Ltd vs. Deputy Commissioner, Central GST Circle 5, Audit-I, Delhi & Ors. – Legal Case Shots | LegalAware