Facts of the Case

The petitioner challenged an order dated 29.04.2024 passed under Section 73 of the CGST Act, whereby a demand of ₹11,50,530/- including penalty was raised pursuant to a Show Cause Notice dated 09.12.2023.

The petitioner had submitted:

  • A detailed reply dated 09.01.2024
  • An additional reply dated 27.02.2024

These replies addressed multiple issues raised in the Show Cause Notice, including:

  • Output tax declaration discrepancies
  • Reconciliation issues in GSTR-09
  • Excess Input Tax Credit (ITC) claims
  • ITC reversals
  • ITC on non-business transactions and exempt supplies
  • ITC from cancelled dealers and non-compliant taxpayers

Despite this, the Proper Officer passed an order stating that the reply was “not properly filed,” without detailed reasoning. 

Issues Involved

  1. Whether an adjudicating authority can pass an order under Section 73 CGST Act without properly considering the taxpayer’s reply.
  2. Whether a cryptic order lacking reasoning violates principles of natural justice.
  3. Whether failure to provide further opportunity for clarification invalidates the adjudication process.

Petitioner’s Arguments

  • The petitioner contended that detailed replies along with supporting documents were duly filed.
  • The impugned order failed to consider these replies on merits.
  • The order was arbitrary and cryptic, merely stating that replies were “not properly filed” without justification.
  • There was complete non-application of mind by the Proper Officer.
  • No opportunity was provided to clarify or supplement the response, if required.

Respondent’s Arguments

  • The department maintained that sufficient opportunities had been provided.
  • It was asserted that the petitioner failed to properly respond to the Show Cause Notice.
  • Based on this, the demand was confirmed in accordance with CGST/DGST provisions. 

Court’s Findings / Order

The Hon’ble High Court held:

  • The replies filed by the petitioner were detailed and supported by documents.
  • The Proper Officer failed to examine the replies on merits.
  • The conclusion that replies were “not properly filed” was unsupported and unjustified.
  • The order demonstrated clear non-application of mind.
  • If further clarification was required, the officer should have specifically sought it.

Final Order

  • The impugned order dated 29.04.2024 was set aside.
  • The matter was remanded for fresh adjudication.
  • Petitioner allowed to file an additional reply within 30 days.
  • Proper Officer directed to:
    • Provide personal hearing
    • Pass a fresh speaking order
    • Comply with timelines under Section 75(3) CGST Act

Important Clarifications by the Court

  • The Court did not adjudicate on merits of the tax demand.
  • All rights and contentions of both parties were kept open.
  • The challenge to Notification No. 56 of 2023 (extension of time) was left open.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/SAS22052024CW74172024_154048.pdf

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