Facts of the Case

The Petitioner challenged an order dated 28.12.2023 passed under Section 73 of the CGST Act, whereby a demand of ₹7,86,84,337 along with penalty was raised pursuant to a Show Cause Notice dated 24.09.2023.

The Petitioner had submitted a detailed reply dated 07.11.2023 addressing multiple issues including:

  • Output tax declaration
  • Excess Input Tax Credit (ITC) claim
  • Scrutiny of ITC availed
  • ITC from cancelled dealers, return defaulters, and non-payers

However, the adjudicating authority passed the impugned order stating that the reply was “not satisfactory” and proceeded ex parte without proper consideration. 

Issues Involved

  1. Whether an adjudication order passed without considering the detailed reply of the taxpayer is legally sustainable.
  2. Whether failure to provide proper opportunity and reasoning violates principles of natural justice.
  3. Whether such an order qualifies as a non-speaking and arbitrary order under GST law.

Petitioner’s Arguments

  • The Petitioner contended that a comprehensive reply along with supporting documents was filed.
  • The adjudicating authority failed to consider the reply on merits.
  • The impugned order is cryptic, non-speaking, and passed without application of mind.
  • No opportunity was granted to clarify or furnish additional documents. 

Respondent’s Arguments

  • The Department maintained that the reply submitted by the taxpayer was examined.
  • It was stated that the reply was not satisfactory and no further explanation was received.
  • Hence, the demand was created ex parte in accordance with the CGST/DGST Act. 

Court Findings / Order

  • The Court held that the impugned order is unsustainable in law.
  • It observed that:
    • The reply filed by the Petitioner was detailed and supported by documents.
    • The Proper Officer failed to consider the reply on merits.
    • Merely stating that the reply is “not satisfactory” shows non-application of mind.
  • The Court emphasized that:
    • If further clarification was required, the officer should have specifically sought it.
    • No such opportunity was provided to the Petitioner.

Final Order

  • The impugned order dated 28.12.2023 was set aside.
  • The matter was remanded for fresh adjudication.
  • Directions:
    • Petitioner to file reply within 30 days
    • Proper Officer to:
      • Grant personal hearing
      • Pass a reasoned speaking order
      • Act within timelines under Section 75(3) 

Important Clarifications by Court

  • The Court did not comment on the merits of the case.
  • All rights and contentions of both parties are kept open.
  • Challenge to Notification No. 9 of 2023 (regarding time extension) remains open.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/62724042024CW57282024_123037.pdf

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