The Delhi High Court in a recent decision, quashed a Show-Cause Notice ( SCN ) issued against Infiniti Retail Ltd. ( Infiniti ), a subsidiary of Tata Group. The SCN was quashed on the basis of the Revenue’s absolute reliance on its own Audit Report, overlooking all counter-submissions made by the Petitioner.
Infiniti Retail Limited-one of India’s leading Consumer Durables and Electronics retailers, operating under the brand name ‘Croma’ filed the present Writ Petition against the impugned Show-Cause Notice ( SCN ) dated 01.08.2024 issued by the Revenue Department under Section 74 of the Central Goods and Services Tax Act, 2017 ( CGST Act ) and the Delhi Goods and Services Tax Act, 2017 ( DGST Act ).
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The case matrix follows an audit conducted by the Revenue on Infiniti’s financial Records for Financial Years ( FY ) 2017-18 and 2018-19.
The Deputy Commissioner, CGST, Audit-II, New Delhi required the Petitioner to submit all relevant documents during the period from 29.03.2022 to 20.04.2022.
The Petitioner, through their Counsels, Prakash Shah, Mihir Deshmukh, Rajat Mittal and Suprateek Neogi averred before the Delhi High Court that despite providing all the relevant documents to the Revenue Department, a reminder letter for the same purpose dated 16.11.2023, was served on the Petitioner via email on 05.01.2024.
Additional notices were served to the Petitioner by The Assistant Commissioner, CGST Audit-II, New Delhi alleging that the Petitioner has not adduced any documents for the audit.
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The Petitioner, in a bid to reach the end of the issue at hand, proceeded to respond to the Assistant Commissioner’s letter and further called upon The Commissioner, CGST Audit-II, New Delhi to drop all further proceedings in connection with the audit claiming that the limitation for completion of the audit for FY 2017-18 had passed.
The key contention raised by the Counsel for the Petitioner was that the Assistant Commissioner issued an Audit Report without providing the Petitioner an opportunity to file their reply towards the noted discrepancies in accordance with Rule 101(4) of the Central Goods and Services Tax Rules, 2017.
The Revenue Department subsequently issued a corrigendum and imposed additional tax liability on the Petitioner citing mismatch between the Input Tax Credit availed by the Petitioner and the Purchase Register maintained by them.
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The Division Bench of the Delhi High Court comprising Justice Vibhu Bakhru and Justice Sachin Datta observed that there have been ‘certain gaps in the communication’ between the Petitioner and the Revenue Department.
While the Petitioner has been repeatedly asserting their due submission of all required documents, the same documents were repeatedly sought for by the Department without paying heed to the Petitioner’s submissions.
The Delhi High Court held that the Adjudicating Authority authorized to adjudge the Petitioner’s submissions may not implicitly rely on the observations made in the audit memo or audit report prepared by the Revenue Department, and is required to thoroughly examine the Petitioner’s Responses towards the SCN before passing an Order.
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Additionally, the Delhi High Court while disposing of the Petition provided the Petitioner the liberty to file all the required documents to contest the demands while reiterating that the Audit Report/Audit Memo shall not further prejudice the adjudication of the impugned SCN.
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