Facts of the Case

The Petitioner challenged an order dated 15.02.2024 passed under Section 73 of the CGST Act, whereby a substantial demand of ₹7.87 crore (including penalty) was raised pursuant to a Show Cause Notice dated 19.12.2023.

The Petitioner, an individual with limited educational background, had engaged a consultant for GST compliance. Due to alleged errors by the consultant, incorrect GSTR-3B returns were filed for the financial year 2018–19.

Subsequently, the Petitioner filed corrected returns along with a detailed reply dated 07.02.2024 addressing discrepancies related to:

  • Excess Input Tax Credit (ITC) claim
  • Invalid ITC under Section 16(4)

However, the adjudicating authority passed an order dismissing the reply as “devoid of merits” without detailed reasoning. 

Issues Involved

  1. Whether an adjudication order under Section 73 CGST Act can be sustained when it fails to consider the taxpayer’s detailed reply.
  2. Whether passing a cryptic and non-speaking order violates principles of natural justice.
  3. Whether the Proper Officer is obligated to provide an opportunity for clarification before confirming demand.

Petitioner’s Arguments

  • The Petitioner argued that errors in GST returns were due to a consultant’s mistake and were subsequently corrected.
  • A comprehensive reply addressing all allegations in the Show Cause Notice was duly filed.
  • The impugned order failed to consider the reply on merits and was passed mechanically.
  • The order was non-speaking and violated principles of natural justice.

Respondent’s Arguments

  • The Department contended that the Petitioner failed to justify discrepancies and provide adequate supporting documentation.
  • It maintained that the demand raised in the Show Cause Notice was valid and rightly confirmed. 

Court’s Findings

The Delhi High Court held:

  • The impugned order was unsustainable as it failed to consider the detailed reply submitted by the Petitioner.
  • Merely stating that the reply is “devoid of merits” without analysis indicates non-application of mind.
  • The Proper Officer is required to evaluate the reply on merits before forming conclusions.
  • If additional clarification or documents were needed, the authority should have provided an opportunity to the Petitioner.

Court Order / Decision

  • The impugned order dated 15.02.2024 was set aside.
  • The matter was remanded for fresh adjudication.
  • Directions issued:
    • Petitioner to file reply within 30 days
    • Proper Officer to:
      • Grant personal hearing
      • Pass a reasoned speaking order
      • Follow timelines under Section 75(3) CGST Act

Important Clarification by Court

  • The Court clarified that it did not examine the merits of the case.
  • All rights and contentions of both parties were kept open for fresh adjudication.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/62710042024CW52512024_105856.pdf

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