Rejection of ITC Claim without considering Reply filed by Canara Bank: Delhi HC directs Re adjudication [Read Order]

The Delhi High Court directed re-adjudication as the proper officer rejected the claim for Input Tax Credit ( ITC ) without Considering the reply filed by Canara Bank. It was observed 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.

Canara Bank, the petitioner challenged the order whereby the impugned Show Cause Notice proposing a demand of Rs.20,07,15,517.00 against the Petitioner has been disposed of and a demand 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 ( CGST ).

Counsel for Petitioner submitted that Petitioner had filed a detailed reply dated 19.10.2023, however, the impugned order does not take into consideration the reply submitted by the Petitioner and is a cryptic order.

A perusal of the Show Cause Notice revealed that the Department has given separate headings i.e., excess claim Input Tax Credit [ “ITC” ]; under declaration of ineligible ITC; ITC be reversed on non-business transactions and exempt supplies; under declaration of ineligible ITC and ITC claimed from cancelled dealers, return defaulters and tax nonpayers.

The impugned order recorded that the reply uploaded by the taxpayer is incomplete, not duly supported by adequate documents, not clear and unsatisfactory. It merely states “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, 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 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 not clear and unsatisfactory.

The proper Officer had to at least consider the reply on merits and then form an opinion. He merely held that the reply is incomplete, not clear and unsatisfactory which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner.

A division bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja remitted the matter to the Proper Officer for re-adjudication and set aside the impugned order. It was observed 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.

Mr G. Shivadass, Senior Advocate with Mr Prashanth Shivadass, Mr Devashish Marwah, Mr Rishabh and Mr Sampath appeared for the petitioner. Mr Rajiv Aggarwal, ASC with Ms Samridhi Vats appeared for the respondent.

To Read the full text of the Order CLICK HERE

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