Facts of the Case

The Petitioner challenged an order dated 29.12.2023 passed under Section 73 of the CGST Act, whereby a tax demand of ₹1,51,05,808/- along with penalty was confirmed pursuant to a Show Cause Notice dated 25.09.2023.

The Petitioner had submitted a detailed reply dated 09.11.2023 addressing multiple issues raised in the Show Cause Notice, including:

  • Declaration of output tax
  • Excess Input Tax Credit (ITC) claimed
  • ITC reversals
  • ITC on exempt and non-business transactions
  • Ineligible ITC

However, the Proper Officer passed the impugned order alleging that the reply was incomplete, unsupported by documents, and unsatisfactory, without properly evaluating the submissions. 

Issues Involved

  1. Whether an adjudication order under Section 73 CGST Act can be sustained when the Proper Officer fails to consider the taxpayer’s detailed reply.
  2. Whether a cryptic and non-reasoned order violates principles of natural justice.
  3. Whether the Proper Officer is obligated to seek clarification or additional documents before rejecting a reply.

Petitioner’s Arguments

  • The Petitioner contended that a comprehensive and detailed reply along with supporting documents was duly filed.
  • The impugned order is cryptic and non-speaking, as it summarily rejects the reply without proper analysis.
  • The Proper Officer failed to apply his mind and did not examine the reply on merits.
  • No opportunity was given to provide additional clarification or documents, thereby violating principles of natural justice.

Respondent’s Arguments

  • The Department maintained that:
    • The reply filed was incomplete and lacked adequate supporting documents.
    • The Petitioner failed to properly substantiate its claims.
    • The demand was rightly confirmed based on available records.

Court’s Findings

The Delhi High Court made the following key observations:

  • The Petitioner had indeed filed a detailed reply with disclosures under each head.
  • The Proper Officer merely labeled the reply as incomplete and unsatisfactory without examining it on merits.
  • Such observations clearly demonstrate non-application of mind.
  • If further clarification or documents were required, the Proper Officer ought to have specifically sought the same.
  • The absence of such an opportunity renders the order procedurally flawed. 

Court Order / Decision

  • The impugned order dated 29.12.2023 was set aside.
  • The matter was remanded to the Proper Officer for fresh adjudication.
  • Directions issued:
    • Petitioner may file an additional reply within 30 days.
    • Proper Officer must:
      • Provide an opportunity of personal hearing
      • Pass a fresh, reasoned (speaking) order
      • Comply with Section 75(3) CGST Act

Important Clarifications by the Court

  • The Court clarified that it has not examined the merits of the case.
  • All rights and contentions of both parties are kept open.
  • The issue regarding Notification No. 9 of 2023 (extension of time) was left open.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/62716042024CW54252024_105313.pdf

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