ITC Claim rejected merely stating reply is not clear and unsatisfactory is invalid: Delhi HC directs Re adjudication [Read Order]

The Delhi High Court set aside the order denying the claim of Input Tax Credit ( ITC ) merely stating reply was not clear and unsatisfactory and directed the proper officer to  Re re-judicate.

Tim Delhi Airport Advertising Private Limited, 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. 2,18,73,860.00 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 Petitioner submitted that a detailed reply was filed to the Show Cause Notice, however, the impugned order dated 30.12.2023 does not take into consideration the reply submitted by the Petitioner and is a cryptic order. Further submitted that the show cause notice itself was defective being unsigned and limitation having expired.

The Department has given separate headings i.e. under declaration of output tax; excess claim Input Tax Credit [“ITC”]; ITC to be reversed on non-business transactions; under declaration of ineligible ITC and ITC claimed from cancelled dealers, return defaulters and tax nonpayers. 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 recorded that the reply uploaded by the taxpayer was not clear and unsatisfactory. It merely stated that “And whereas, the taxpayer had filed their objections/reply in DRC-06 and appeared personally. However, during the personal hearing, the taxpayer reiterated the contents of the reply filed in form DRC-06. On scrutiny of the same, it has been observed that the same is incomplete, not duly supported by adequate documents and 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 one month from the date of receipt of this demand notice, failing which recovery proceedings u/s 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 not clear and unsatisfactory.

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 whether the reply was incomplete, not duly supported by adequate documents and unsatisfactory. He merely held that the reply is not clear and unsatisfactory which ex-facie shows that the Proper Officer has not applied his mind to the reply submitted by the petitioner.

Further viewed that if the Proper Officer was of the view that the reply is incomplete, not duly supported by adequate documents and unsatisfactory, if 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.

The Court set aside the order and remitted the matter to the Proper Officer for re-adjudication.

To Read the full text of the Order CLICK HERE

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