In a recent case, the Delhi High Court directed re-adjudication on the order demanding tax and penalty under the Goods and Service Tax Act ( GST ) Stating ‘Unsatisfactory reply’. The court viewed that the proper officer merely held that the reply was incomplete, not duly supported by adequate documents and not clear and unsatisfactory which ex-facie shows that the Proper Officer has not applied his mind to the reply submitted by the petitioner.
Knowledge Infrastructure Systems Pvt Ltd, the petitioner challenged the order whereby the impugned Show Cause Notice proposing a demand against the petitioner has been disposed of and a demand of Rs 2,72,81,448.00 including penalty has been raised against the petitioner. The order has been passed under Section 73 of the Central Goods and Services Tax Act, 2017 (the Act).
Counsel for Petitioner submitted that a detailed reply was filed to the Show Cause Notice, however, the impugned order does not take into consideration the reply submitted by the petitioner and is a cryptic order.
The Department has given separate headings i.e., excess claim Input Tax Credit [ ITC ]; and ITC to be reversed on non-business transactions and exempt supplies. To the said Show Cause Notice, a detailed reply was furnished by the petitioner giving full disclosures under each of the heads.
The impugned order, however, after recording the narration, records that the reply uploaded by the taxpayer is not clear and satisfactory. It merely states that “The taxpayer filed their reply. On scrutiny of the same, it has been observed that the same is not acceptable as incomplete, not duly supported by adequate documents, without proper justification and thus unable to clarify the issue. Since the reply filed is not clear and satisfactory, the demand of tax and interest conveyed via DRC-01 is confirmed, with the direction to deposit the amount mentioned in DRC-07 within three months from the date of receipt of this demand notice, failing which recovery proceedings under section 79 of CGST Act will be initiated and the actions as per law will be initiated without further reference.” The Proper Officer has opined that the reply is unsatisfactory and incomplete.
A division bench comprising Justice Sanjeev Sachdeva and Justice Ravinder Dudeja observed that the Proper Officer had to at least consider the reply on merits and then form an opinion on whether the reply was unsatisfactory. He merely held that the reply is incomplete, not duly supported by adequate documents and is not clear and unsatisfactory which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner.
It was thus held that the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 30.12.2023 was set aside. The matter was remitted to the Proper Officer for re-adjudication.
It was also added that the Proper Officer shall re-adjudicate the show cause notice after allowing a personal hearing and shall pass a fresh speaking order by law within the period prescribed under Section 75(3) of the Goods and Services Tax Act.
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