The Hon’ble Telangana High Court in the case of Bharat Kumar Agarwal v. Joint Commissioner (AE) [Writ Petition Nos. 9166 and 9354 of 2026, order dated April 08, 2026] held that where a composite Order-in-Original and Form GST DRC-07 is issued jointly against a company and its Managing Director, thereby depriving the unregistered Managing Director of the statutory right to appeal, the Revenue must issue separate DRC-07 orders and facilitate grant of temporary registration to enable the Managing Director to avail the appellate remedy.
Facts:
Mr. Bharat Kumar Agarwal (“the Petitioner”), the Managing Director of M/s. Sugna Metals Limited, against whom tax liability and penalty were imposed under the CGST Act despite not being registered under GST.
Joint Commissioner (AE) (“the Respondent”), who issued a composite Order-in-Original dated 30.12.2025 and summary in Form GST DRC-07 dated December 31, 2025, confirming demand of Rs. 2.20 crores along with interest and penalty, and additionally imposed penalty of Rs. 2.59 crores on the Petitioner under Section 122(1A) of the CGST Act, 2017.
The Petitioner contended that the Order-in-Original and DRC-07 were issued in a composite manner against both the company and its Managing Director. Further being unregistered under GST, he could not file an appeal against the demand since a separate DRC-07 is required for initiating appellate proceedings.
The Respondent contended that, under Rule 16A of the CGST Rules, 2017 the Proper Officer is empowered to grant a temporary identification number and that the Petitioner may apply physically for such registration.
Aggrieved by denial of effective appellate remedy due to issuance of a composite order and absence of registration, the Petitioner approached the Hon’ble High Court by way of a writ petition, seeking appropriate directions.
Issue:
Whether issuance of a composite Order-in-Original and Form GST DRC-07 against a company, thereby preventing the Managing Director from availing appellate remedy, is valid?
Held:
The Hon’ble Telangana High Court in Writ Petition Nos. 9166 and 9354 of 2026 held as under:
- Observed that, the impugned order imposed a liability jointly on the company and its Managing Director, making it impossible for the unregistered Managing Director to prefer an appeal.
- Noted that, the Managing Director after obtaining a temporary registration, is entitled to avail the remedy of appeal and take all such grounds on facts and in law as are available to him.
- Observed that, Rule 16A of the CGST Rules, 2017 empowers the Proper Officer to grant temporary identification number, which can be used to facilitate appellate remedy.
- Directed that, the Managing Director shall apply for temporary registration within one week and that the competent authority shall issue such registration within one week thereafter.
- Directed that, revised two separate Form GST DRC-07 containing the liability as against the Company and its Managing Director be issued within a period of two weeks, so that the aggrieved parties may prefer separate appeals.
- Held that, the limitation period for filing appeal shall run only after issuance of fresh DRC-07 and disposed of the writ petitions without entering into merits of the case.
Our Comments:
The Hon’ble Court addressed a procedural lacuna where issuance of a composite DRC-07 effectively nullified the statutory right of appeal under Section 107 of the CGST Act for an unregistered person. The Court’s reasoning is rooted in ensuring access to appellate remedy, which is a substantive right and cannot be defeated by procedural irregularities of the Department. The Court recognized that temporary registration is not merely administrative but a facilitative mechanism to ensure legal remedies are not illusory.
The Court deliberately refrained from adjudicating on merits. Further, the direction that limitation begins from fresh DRC-07 ensures that procedural defects by the Department do not prejudice the assessee.
Relevant Provisions
Section 74(9) of the CGST Act, 2017
“74. Determination of tax pertaining to the period up to Financial Year 2023-24, not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any willful- misstatement or suppression of facts.-
(9) The proper officer shall, after considering the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order.”
Section 122(1A) of the CGST Act, 2017
“122. Penalty for certain offences.-
(1) Where a taxable person who-
(i) supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;
(ii) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder;
…
(xxi) disposes off or tampers with any goods that have been detained, seized, or attached under this Act,
he shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher.
(1A) Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.”
Rule 16A of the CGST Rules, 2017
“16A. Grant of temporary identification number. –
Where a person is not liable to registration under the Act but is required to make any payment under the provisions of the Act, the proper officer may grant the said person a temporary identification number and issue an order in Part B of FORM GST REG-12.”.
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