Facts of the Case

The petitioner, TK Elevator India Private Limited (earlier known as Thyssenkrupp Elevator (India) Private Limited), challenged an order dated 21.06.2021 raising a total GST demand of Rs.9,38,39,317.24. The proceedings originated from a search conducted at the petitioner's premises by the Department of Trade and Taxes, Delhi, on 16.10.2020 relating to dues for the period July 2017 to October 2020. A notice dated 05.11.2020 pointing out discrepancies was issued under Section 61 of the CGST Act, 2017 read with Rule 99(1) of the CGST Rules, 2017. The petitioner replied on 05.12.2020 explaining the alleged discrepancies and requested that, if the proceedings were not dropped, it be given a personal hearing before any final decision. This request was rejected, and the impugned order was passed under Section 74 of the CGST Act.

Issues Involved

  1. Whether an order passed under Section 74 of the CGST Act without discussing the assessee's reply to the show cause notice, and without affording a personal hearing, can be sustained.

Petitioner's Arguments

  • The impugned order contained neither any discussion of, nor any reference to, the notice dated 05.11.2020 or the petitioner's reply to it, making it an unreasoned order.
  • The rejection of the petitioner's request for a personal hearing, despite the proceedings culminating in a substantial demand, violated the principles of natural justice.

Respondent's Arguments

  • Learned counsel for the respondent fairly conceded that the impugned order could be set aside and the matter remanded for a fresh order to be passed after affording the petitioner an opportunity of being heard.

Court Order / Findings

  • The Court found merit in the petitioner's contention that the order was vitiated for want of natural justice, since no opportunity of hearing had been afforded despite a specific request.
  • The Court held the order to be an unreasoned order, noting the complete absence of any discussion of the notice or the petitioner's reply, and set aside the order dated 21.06.2021.
  • The matter was remanded to the Proper Officer with a direction to pass a fresh speaking order after affording the petitioner an opportunity of being heard.

Important Clarification

An order under Section 74 of the CGST Act that neither discusses the show cause notice nor engages with the assessee's reply, and is passed after refusing a request for personal hearing, is liable to be set aside as an unreasoned order in breach of natural justice, irrespective of the quantum of demand involved.

Sections Involved

  • Section 74, CGST Act, 2017 — determination of tax not paid or short paid by reason of fraud, wilful misstatement or suppression of facts.
  • Section 61, CGST Act, 2017 — scrutiny of returns and issuance of discrepancy notices.
  • Rule 99(1), CGST Rules, 2017 — prescribes the form for scrutiny notices under Section 61.

Decision – In Favour of

In favour of the Assessee — the impugned order was set aside and the matter remanded for a fresh speaking order after a personal hearing.

Case Details

  • Court: High Court of Delhi at New Delhi
  • Case Number: W.P.(C) 8692/2021
  • CNR / Citation: W.P.(C) 8692/2021
  • Coram: Hon'ble Mr. Justice Vibhu Bakhru & Hon'ble Mr. Justice Amit Mahajan
  • Date of Order: 10 May 2023

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