The Delhi High Court has held that the mere rejection of the claim of Input Tax Credit ( ITC ) by stating the reply as unsatisfactory is invalid. The Court remitted the matter to the Proper Officer for re-adjudication.
Ethos 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. 1,36,98,144.00 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.
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 Show Cause Notice shows that the Department has given separate headings under declaration of output tax, excess claim Input Tax Credit [ ITC ], ITC to be reversed on non-business transactions & exempt supplies and under declaration of ineligible ITC. 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 stated that the reply uploaded by the taxpayer was not satisfactory. It merely states that “And whereas, the taxpayer had filed their objections/reply in DRC-06 but he failed to avail the Personal Hearing opportunity on the given due date. Based on the reply uploaded by the taxpayer, it has been observed that the same is incomplete, not duly supported by adequate documents and unable to clarify the issue. As such, the taxpayer is not entitled to get benefit based on its plain reply which is not supported with proper calculations/reconciliation and relevant documents. Since the reply filed is not clear and satisfactory, the demand of tax and interest conveyed via DRC-01 is confirmed.” The Proper Officer has opined that the reply is 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 unsatisfactory, incomplete and not duly supported by adequate documents. 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.
The Court found that the record does not reflect that any such opportunity was given to the petitioner. In light of the circumstance, the court remitted the matter to the Proper Officer for re-adjudication.
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