Facts of the Case

The petitioner, Federal Bank Ltd., challenged an order dated 27.12.2023 passed under Section 73 of the Central Goods and Services Tax Act, 2017, whereby a show cause notice dated 23.09.2023 proposing tax demand was confirmed.

The petitioner contended that although a detailed reply dated 21.10.2023 had been filed addressing all allegations such as under-declaration of output tax, excess Input Tax Credit (ITC), and ITC from cancelled or non-compliant dealers, the adjudicating authority passed the order in a cryptic manner.

Further, the notice for personal hearing was issued on 24.12.2023 at 08:39 PM fixing the hearing on 26.12.2023, with 25.12.2023 being a gazetted holiday, thereby providing inadequate time to respond effectively.

Issues Involved

  1. Whether sufficient opportunity of hearing was granted to the petitioner before passing the order under Section 73 CGST Act.
  2. Whether a cryptic order without proper reasoning satisfies principles of natural justice.
  3. Whether short notice for hearing, especially around holidays, vitiates adjudication proceedings.

Petitioner’s Arguments

  • The petitioner submitted that a detailed and comprehensive reply had already been filed addressing each allegation in the show cause notice.
  • It was argued that the hearing notice was issued at an unreasonable time, i.e., late evening on 24.12.2023, leaving practically no time due to the intervening public holiday.
  • The impugned order merely stated that the reply was “not clear and satisfactory” without providing any reasons, making it arbitrary and non-speaking.
  • No opportunity was granted to furnish additional documents or clarify alleged deficiencies.

Respondent’s Arguments

  • The respondent department relied upon the findings in the impugned order stating that:
    • The reply furnished by the petitioner was incomplete.
    • The documents were insufficient to clarify discrepancies.
    • The reply was not satisfactory to the Proper Officer.

Court’s Findings / Order

The Delhi High Court observed:

  • The petitioner had indeed submitted a detailed reply addressing all issues raised in the show cause notice.
  • If the Proper Officer found the reply deficient, an opportunity should have been given to the petitioner to furnish further clarification or documents.
  • The hearing notice was issued at an unreasonable time and failed to provide adequate opportunity, especially considering the intervening holiday.
  • The impugned order was non-speaking and lacked proper reasoning.

Held:

  • The order dated 27.12.2023 and the show cause notice were set aside.
  • The matter was remanded back to the Proper Officer for fresh adjudication.
  • Directions were issued:
    • The department must specify required documents within one week.
    • The petitioner must respond within one week thereafter.
    • A fresh order must be passed after granting proper hearing.

Important Clarification by Court

  • The Court clarified that it has not expressed any opinion on the merits of the case.
  • All rights and contentions of both parties were kept open for re-adjudication. 

Sections Involved

  • Section 73 of the Central Goods and Services Tax Act, 2017
    (Determination of tax not paid or short paid without fraud or wilful misstatement)

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/62712022024CW19602024_175203.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.