Tax Demand Order Invalidated Due to Procedural Flaws, Requiring Fair Hearing and Proper Notice for Comprehensive Reassessment

The SC found procedural irregularities in a tax demand order. The Proper Officer failed to provide adequate hearing opportunity and insufficiently addressed the petitioner's reply. The court set aside the order, directing re-adjudication with proper notice, specific document requests, and a fair hearing within specified timelines, without prejudicing either party's substantive arguments.

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Issues involved: Impugning an order under Section 73 of the Central Goods and Services Tax Act, 2017 due to lack of opportunity for defense and incomplete reply.

Summary:

Issue 1: Lack of Sufficient Opportunity for Defense
The petitioner challenged an order confirming a demand against them, stating that the notice fixing the hearing date was issued on a holiday, leaving insufficient time to prepare. The petitioner had submitted a detailed reply to the show cause notice, but the impugned order was passed without adequate reasoning, merely stating the reply was not clear and satisfactory. The Court noted that the Department provided specific details in the show cause notice, and the petitioner had responded comprehensively. However, the impugned order deemed the reply incomplete without giving the petitioner an opportunity to clarify or provide further details.

Issue 2: Inadequate Opportunity for Hearing
The Court observed that the notice for the hearing was issued on short notice, just before a gazetted holiday, without granting the petitioner adequate time to defend against the show cause notice. It was held that the petitioner had not been given a fair opportunity to present their case, as the Proper Officer did not seek additional information before passing the impugned order.

Judgment:
The Court set aside the impugned order and show cause notice, remitting the matter to the Proper Officer for re-adjudication. The Proper Officer was directed to provide the petitioner with specific details/documents required within a week, and the petitioner was given a week to furnish the necessary explanation and documents. Subsequently, the Proper Officer was instructed to re-adjudicate the show cause notice within two weeks after granting an opportunity for a hearing. The Court clarified that it did not comment on the merits of the case, preserving the rights and contentions of both parties.

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