In a recent ruling, the Delhi High Court overturned a demand order, citing the failure of the Goods and Services Tax (GST) proper officer to consider the taxpayer’s response, thus indicating a lack of due diligence.
The bench of Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “Despite the fact that petitioner has filed a reply, the Proper Officer has held that neither he has filed a proper reply nor appeared for a hearing which ex-facie shows that the Proper Officer has not applied his mind to the reply submitted by the petitioner”.
The petitioner challenged the order dated 05.12.2023, which disposed of the Show Cause Notice ( SCN ), proposing a demand of Rs. 1,08,84,820.00 against them under Section 73 of the Central Goods and Services Tax Act, 2017.
The petitioner contended that despite submitting a detailed reply dated 11.10.2023, the impugned order fails to consider their response adequately.
The SCN delineated various reasons for the proposed demand, to which the petitioner responded comprehensively with supporting documentation. However, the impugned order dismissed the petitioner’s reply as unsatisfactory, alleging non-submission of proper documentation and absence at hearings.
The petitioner asserted that their reply was detailed and accompanied by supporting documents, warranting a fair assessment by the Proper Officer. The failure to consider these materials suggests a lack of diligence on the part of the Proper Officer.
Furthermore, the petitioner highlights the absence of any opportunity to provide additional details or clarifications, indicating a lack of procedural fairness.
The Proper Officer has opined that no proper reply justifying the facts of the case along with supporting documents has been submitted nor has the taxpayer appeared for a hearing. Further, he opined that the reply is not satisfactory.
The High Court noted that the observation in the impugned order dated 05.12.2023 is not sustainable for the reasons that the reply dated 11.10.2023 filed by the Petitioner is a detailed reply with supporting documents. Proper Officer had to at least consider the reply on merits and then form an opinion. He merely held that the reply is not satisfactory and no proper reply justifying the facts of the case along with supporting documents have been submitted nor has the taxpayer appeared for a hearing.
Further the court added that, if the Proper Officer was of the view that any further details were required, the same could have been specifically sought from the Petitioner. However, the record does not reflect that any such opportunity was given to the Petitioner to clarify its reply or furnish further documents/details.
Accordingly, the Delhi High Court ruled that the impugned order dated 05.12.2023 cannot be sustained and is set aside. The Show Cause Notice was remitted to the Proper Officer for re-adjudication.
The petitioner was granted 30 days from the date of order to submit an additional reply to the Show Cause Notice. Subsequently, the Proper Officer was instructed to re-adjudicate the Show Cause Notice, ensuring a personal hearing for the petitioner. A new, comprehensive order must be issued within the timeframe specified by Section 75(3) of the GST Act.
The Court clarified that it has refrained from deliberating on or expressing opinions regarding the merits of the arguments presented by either party. All rights and contentions put forth by the parties remain reserved for further examination.
Additionally, the challenge pertaining to Notification No. 9 of 2023 concerning the initial extension of time remains unresolved and is left open for future consideration.
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