Facts of the Case

  • The petitioner challenged an Order-in-Original dated 29.04.2024 arising from a Show Cause Notice dated 24.12.2023.
  • The demand of approximately ₹7.02 crores (including penalty) was raised for FY 2018–19.
  • The Show Cause Notice was primarily based on findings of a Special Audit conducted under Section 66 of the CGST Act.
  • The petitioner submitted detailed replies dated 17.01.2024 and 27.02.2024 with supporting documents addressing all allegations.
  • The adjudicating authority passed the order stating that the replies were “not properly filed/replied” without providing reasons. 

Issues Involved

  1. Whether an adjudication order passed without proper consideration of the taxpayer’s reply is sustainable in law.
  2. Whether reliance solely on a Special Audit Report without independent application of mind is valid.
  3. Whether failure to provide adequate opportunity violates principles of natural justice.

Petitioner’s Arguments

  • The impugned order is cryptic and non-speaking, ignoring detailed replies and supporting documents.
  • The Show Cause Notice was issued mechanically based on the Special Audit Report without independent reasoning.
  • Each audit objection was specifically addressed by the petitioner, yet no findings were recorded on merits.
  • The authority failed to seek further clarification, thereby denying a fair opportunity.

Respondent’s Arguments

  • The department relied upon the Special Audit findings and asserted that sufficient opportunity had been provided.
  • It was contended that the replies submitted were inadequate or improperly filed. 

Court’s Findings / Order

  • The High Court held that the adjudicating authority failed to apply its mind to the detailed replies submitted by the petitioner.
  • The observation that replies were “not properly filed” was unsustainable and unreasoned.
  • The authority ought to have:
    • Examined the replies on merits, or
    • Sought further clarification if required.
  • The impugned order dated 29.04.2024 was set aside.
  • The matter was remanded for fresh adjudication with:
    • Opportunity of personal hearing
    • Passing of a reasoned (speaking) order under Section 75(3). 

Important Clarifications by Court

  • The Court did not examine the merits of the case.
  • All rights and contentions of both parties were kept open.
  • Challenge to Notification No. 56/2023 (regarding extension of time) was left open.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/62727052024CW77472024_105942.pdf

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