Facts of the Case

The petitioner, Canara Bank, challenged an order dated 26.12.2023 passed under Section 73 of the CGST Act, whereby a tax demand of approximately ₹20 crores along with penalty was confirmed.

A Show Cause Notice (SCN) dated 25.09.2023 alleged:

  • Excess claim of Input Tax Credit (ITC)
  • Ineligible ITC declarations
  • ITC on non-business transactions and exempt supplies
  • ITC from cancelled dealers and defaulters

The petitioner submitted a detailed reply dated 19.10.2023, addressing each allegation with disclosures and explanations.

However, the adjudicating authority passed a cryptic order, stating that:

  • The reply was incomplete
  • Not supported by adequate documents
  • Unsatisfactory

The demand was confirmed without detailed reasoning.

Issues Involved

  1. Whether an adjudication order under Section 73 CGST Act can be sustained if it does not consider the taxpayer’s detailed reply.
  2. Whether failure to provide opportunity for clarification or additional documents violates principles of natural justice.
  3. Whether a non-speaking order confirming demand is legally valid.

Petitioner’s Arguments

  • The petitioner had filed a comprehensive and detailed reply addressing all allegations in the SCN.
  • The adjudicating authority failed to consider the reply on merits.
  • The order is non-speaking and cryptic, lacking reasoning.
  • No opportunity was given to furnish additional documents or clarify deficiencies.
  • The order violates principles of natural justice. 

Respondent’s Arguments

  • The department contended that:
    • The petitioner’s reply was incomplete and unclear.
    • It lacked proper documentation and reconciliation.
    • Hence, the demand was rightly confirmed.

Court Findings / Order

The Hon’ble Delhi High Court held:

  • The impugned order is unsustainable as:
    • The petitioner had filed a detailed reply, which was not properly considered.
    • The Proper Officer failed to apply his mind.
    • Merely stating that the reply is “unsatisfactory” without reasoning is not valid.
  • The Court observed that:
    • If additional documents were required, the authority should have specifically sought clarification.
    • No such opportunity was granted.

Final Order

  • The impugned order dated 26.12.2023 was set aside.
  • The matter was remanded for fresh adjudication.
  • Directions issued:
    • Proper Officer to specify required documents/details
    • Provide opportunity of personal hearing
    • Pass a fresh speaking order within the statutory time limit under Section 75(3)

Important Clarification

  • The Court clarified that:
    • It has not examined the merits of the case.
    • All rights and contentions of both parties remain open.
    • Challenge to Notification No. 9 of 2023 (time extension) is kept open.

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/SAS02042024CW46892024_123210.pdf

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