Facts of the Case

The petitioner challenged an order dated 29.12.2023 passed under Section 73 of the CGST Act, whereby a demand of ₹36,60,531 (including penalty) was raised pursuant to a Show Cause Notice dated 01.12.2023.

The petitioner had filed a detailed reply dated 09.12.2023 addressing each allegation in the Show Cause Notice, including reconciliation of GSTR-09 data and output tax declarations.

However, the adjudicating authority passed an order stating that the reply was “not satisfactory” and proceeded to create the demand ex-parte without meaningful consideration of the response. 

Issues Involved

  1. Whether an adjudication order passed without considering the petitioner’s detailed reply is legally sustainable.
  2. Whether merely stating that the reply is “unsatisfactory” satisfies the requirement of a reasoned (speaking) order.
  3. Whether failure to provide further opportunity or clarification violates principles of natural justice.

Petitioner’s Arguments

  • A detailed and comprehensive reply to the Show Cause Notice was duly filed.
  • The impugned order is cryptic and fails to consider the reply on merits.
  • No proper reasoning was provided for rejecting the reply.
  • No opportunity was given to furnish additional documents or clarification.
  • The order reflects complete non-application of mind. 

Respondent’s Arguments

  • The reply submitted by the taxpayer was examined.
  • The adjudicating authority found the reply unsatisfactory.
  • Adequate opportunities were allegedly provided.
  • Therefore, the demand was created in accordance with law.

Court’s Findings

  • The Court observed that the petitioner had filed a detailed reply addressing each issue raised in the Show Cause Notice.
  • The impugned order merely states that the reply is “unsatisfactory” without any reasoning.
  • Such an observation clearly indicates non-application of mind by the Proper Officer.
  • The authority failed to:
    • Examine the reply on merits
    • Provide reasons for rejection
    • Seek further clarification if required

The Court held that a quasi-judicial authority must pass a reasoned and speaking order, reflecting due consideration of the taxpayer’s response.

Court Order

  • The impugned order dated 29.12.2023 was set aside.
  • The matter was remitted back to the Proper Officer for fresh adjudication.
  • Directions issued:
    • The officer must specify required documents/details to the petitioner
    • Provide opportunity for submission and personal hearing
    • Pass a fresh speaking order in accordance with Section 75(3)

Important Clarifications

  • The Court did not adjudicate on merits of the tax demand.
  • All rights and contentions of both parties were kept open.
  • Challenge to Notification No. 9 of 2023 (regarding extension of time) was left open.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/62713032024CW36362024_105556.pdf 

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