Facts of the Case

The petitioner challenged eight separate orders dated 23.12.2023 passed under Section 73 of the CGST Act for FY 2017–18, whereby tax demand was raised against it.

The dispute arose from a Show Cause Notice (SCN) alleging incorrect carry forward of Input Tax Credit (ITC) amounting to ₹41,64,080/-. The SCN also alleged utilization of the same ITC within the same financial year, creating an apparent contradiction.

Previously, the petitioner had approached the High Court in W.P.(C) 15210/2023, wherein the Court directed the authorities to examine the matter and pass a reasoned speaking order. However, instead of complying, the department passed cryptic and inconsistent orders, ignoring the petitioner’s submissions and reply. 

Issues Involved

  1. Whether the impugned orders passed under Section 73 CGST Act were legally sustainable despite being cryptic and non-speaking.
  2. Whether failure to consider the petitioner’s reply and submissions amounts to violation of principles of natural justice.
  3. Whether contradictory findings within the SCN and orders demonstrate non-application of mind. 

Petitioner’s Arguments

  • The SCN itself was contradictory, as it simultaneously alleged carry forward and utilization of the same ITC.
  • The department failed to comply with the earlier High Court direction requiring a speaking order.
  • The impugned orders did not consider the petitioner’s detailed reply and submissions.
  • Orders were mechanical, cryptic, and arbitrary, reflecting complete non-application of mind.
  • No proper opportunity of personal hearing was effectively granted. 

Respondent’s Arguments

  • The department relied on the orders passed under Section 73 CGST Act and contended that demand was validly created.
  • It was implied that procedural requirements had been followed, including issuance of SCN and opportunity of hearing.

Court’s Findings / Order

  • The High Court observed that the impugned orders were cryptic and contradictory, with inconsistent references regarding personal hearing.
  • The orders clearly demonstrated non-application of mind and failure to consider the petitioner’s reply.
  • Such orders violate the requirement of a reasoned speaking order, especially after a specific judicial direction.

Final Order

  • The impugned orders dated 23.12.2023 were quashed.
  • The Proper Officer was directed to:
    • Re-adjudicate the matter in compliance with earlier High Court directions.
    • Consider the petitioner’s reply and contentions.
    • Provide a proper opportunity of personal hearing.
    • Pass a fresh reasoned order within 3 weeks.
  • Matter listed for compliance reporting. 

Important Clarifications

  • A speaking order is mandatory, especially when directed by a court.
  • Orders passed without considering replies or submissions are liable to be set aside.
  • Contradictions within SCN itself can invalidate proceedings.
  • Proper adjudication requires application of mind and reasoned findings, not mechanical conclusions.

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/SAS24042024CW3392024_150727.pdf  

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