Tax Order Quashed: Revenue Department Must Provide Clear Reasoning and Reissue Notice Within Four Weeks of Legal Challenge

HC found merit in petitioner's challenge against tax order due to lack of reasoning. The court quashed the impugned order dated 28 April 2023, allowing revenue department to issue a fresh show cause notice within four weeks. The fresh notice must be adjudicated with proper reasoning, considering petitioner's contentions, and ensuring compliance with legal procedural requirements.

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Issues involved: Challenge to order u/s 74 of Maharashtra Goods and Service Tax Act, 2017 due to lack of reasons and findings in the impugned order; Demand against petitioner on interest payable u/s 50(3) of CGST Act, 2017 and penalty imposed u/s 122 of CGST/SGST Act, 2017 read with section 73(9) of CGST/SGST Act, 2017.

The petitioners challenged the order dated 28 April 2023 issued by the Deputy Commissioner of Sales Tax, Mumbai-51, which was based on a show cause notice issued to the petitioner u/s 74 of the Maharashtra Goods and Service Tax Act, 2017. The contention raised was that the impugned order lacked reasons and findings despite a detailed reply and personal hearing being provided to the petitioner.

Upon perusal of the impugned order, the court found merit in the petitioner's contention as none of the contentions raised by the petitioner were recorded in the "findings" section. The order raised a demand against the petitioner for interest payable u/s 50(3) of the CGST Act, 2017 and imposed a penalty u/s 122 of the CGST/SGST Act, 2017 read with section 73(9) of the CGST/SGST Act, 2017 without any discussion on the issues raised by the petitioner.

The petitioner also argued that the penalty provision u/s 122 was not invoked in the show cause notice, making the impugned order defective and illegal due to the lack of reasons, indicating a failure to apply mind while passing the order.

In response, the counsel for the revenue agreed that the impugned order could be set aside, allowing the Department to issue a fresh show cause notice in accordance with the law. The Department would then adjudicate the fresh notice after considering the petitioner's reply and granting an opportunity for a personal hearing, which was accepted by the court.

Consequently, the court disposed of the petition by quashing and setting aside the order dated 28 April 2023, with liberty given to the Department to issue a fresh show cause notice within four weeks. The fresh notice was to be adjudicated in accordance with the law, and all contentions of the parties on the proposed proceedings were expressly kept open with no costs imposed.

The Designated Officer was reminded to pass the fresh order with appropriate reasons, considering the petitioner's case and ensuring that the reasons are recorded.

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