Tax Authorities must Consider Late Replies to SCNs before Passing Orders: J&K HC Sets Aside GST Demand [Read Order]
The proper officer should not have declined to consider the reply and passed the order as if no representation had been submitted.
GST-demand-Taxscan
GST-demand-Taxscan
In a recent judgment, the High Court of Jammu & Kashmir and Ladakh has held that tax authorities must consider late replies to show cause notices before passing final orders under the GST Act, emphasizing the principles of natural justice and set aside the Goods and Service Tax (GST) demand made.
Zakir Hussain, a Contractor by profession and registered with the GST authorities, filed Writ Petition challenging an order issued by the State Taxes Officer, Circle Kishtwar. The order had raised a tax demand of Rs. 15,44,922/- for the financial year 2020-2021.
The petitioner contended that the demand notice violated principles of natural justice as his reply to the show cause notice dated 25.11.2024 had not been considered. The show cause notice, issued under Section 73(1) of the State Goods and Services Tax Act, 2017, had required the petitioner to either pay the outstanding tax liability of Rs. 15,06,304/- or submit clarifications by 30.12.2024. The petitioner submitted his reply on 20.01.2025, after the due date but before the final order was passed under Section 73(9) of the SGST Act.
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The State Taxes Officer did not consider the reply on the ground that it was submitted beyond the prescribed time, and proceeded to pass the order dated 26.02.2025 raising the demand of Rs. 15,44,922/-.
Counsel for the Petitioner argued that non-consideration of his reply violated principles of natural justice. The core issue before the Court was whether the proper officer is obliged to consider a reply submitted after the stipulated period but before the final order is passed.
Per contra, the Revenue contended that the reply was time-barred and therefore could not be considered.
The Division Bench of Justices Sanjeev Kumar and Sanjay Parihar analyzed Section 73 of the SGST Act and observed that the time period for submitting reply to a show cause notice issued under Section 73(1) has not been statutorily prescribed. While the proper officer may fix a reasonable period, if a reply is received before the final order under Section 73(9) is passed, it becomes incumbent upon the officer to consider such reply.
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The Court held that the language of Section 73(9) is clear and mandatory, using the word "shall" to indicate that the proper officer must consider representations, if any, made by the person chargeable with tax. The Court stated that in the interest of justice, equity, and fair play, responses received after the stipulated period but before the final order must be considered.
The Court noted that in the instant case, there was no dispute that the reply was received before the final order was passed. Therefore, the proper officer should not have declined to consider the reply and passed the order as if no representation had been submitted.
The bench allowed the petition and set aside the impugned order dated 26.02.2025. The State Taxes Officer, Circle Kishtwar was directed to pass a fresh order after considering the petitioner's reply and providing an opportunity for oral hearing. The tax, if any, recovered under the quashed order would remain subject to the fresh order to be passed.
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