Reply to SCN rejected without proper reasoning & failure to provide personal hearing: Delhi High Court sets aside GST Order [Read Order]

The Delhi High Court has set aside an order by the Commissioner of Delhi Goods and Service Tax ( DGST ) on grounds of insufficient reasoning and failure to provide a personal hearing. The decision came in response to a writ petition filed by M/s. Lakshman Pran Data Enterprises, challenging the validity of a show cause notice and subsequent order related to an alleged excess Input Tax Credit ( ITC ) claim.

The petitioner, represented by Pawan Shree Aggarwal, Akarsh Garg, Subhan Shankar and Rounak Kumar, contested the order dated December 26, 2023, that demanded a sum of Rs. 2,73,78,128.40, including interest for both Central Goods and Service Tax ( CGST ) and State Goods and Service Tax (SGST), based on allegations of availing excess ITC amounting to Rs.4,52,09,706.00 for the tax period from July 2017 to March 2018.

The respondent revenue, The Commissioner of Delhi Goods and Service Tax,

Delhi and another, represented by Mr. Avishkar Singhvi, Mr. Vivek Kr. Singh, Mr. Naved Ahmed and Mr. Shubham Kumar argued that the Show Cause Notice ( SCN ) and subsequent order were within the permissible time limits and that the petitioner had been provided an opportunity for a personal hearing through the reminder notice. They contended that the petitioner’s responses were inadequate, justifying the issuance of the order.

The court noted that the petitioner had filed their GSTR-9 return for the concerned period on March 9, 2020, followed by a reconciliation statement on March 11, 2020, in Form GSTR-9C. Despite these submissions, the DGST issued a show cause notice on September 23, 2023, and a reminder notice on December 8, 2023, which the petitioner argued was barred by limitation.

The petitioner highlighted that the reminder notice did not specify a date for the personal hearing, instead marking it as “NA” (Not Applicable), thus denying them the opportunity for a fair hearing. The court found merit in this argument, emphasising that the lack of a specified hearing date and the absence of detailed reasoning in the impugned order rendered the process flawed.

The High Court remarked that the impugned order failed to articulate the reasons for rejecting the petitioner’s responses and did not reflect any consideration of the material submitted by the petitioner, including sale and purchase invoices. The bench held that the procedural lapses, particularly the denial of a personal hearing, constituted a violation of the principles of natural justice.

“In view of the above, it is not necessary to examine the petitioner’s contentions that the impugned order was passed beyond the period of limitation,” the court stated. The judgment thus focused on the procedural deficiencies without delving into the merits of the petitioner’s claims regarding the time-barred nature of the notice and order.

In result, the division bench comprising Justice Vibhu Bakhru and Justice Sachin Datta set aside the DGST’s order dated December 26, 2023, and remanded the matter back to the department for fresh consideration.

The bench clarified that this decision does not preclude the petitioner from challenging the related notification issued on March 31, 2023, under Section 168A of the CGST Act, 2017, at a later stage.

The judgment highlights providing taxpayers with the opportunity for a fair hearing and well-reasoned decisions.

To Read the full text of the Order CLICK HERE

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