2024 (2) TMI 803 - HC - GST

Tax Demand Order Overturned: Procedural Flaws Expose Need for Fair Hearing and Detailed Clarification Under GST Provisions

Paras Enterprises Through Proprietor Sulabh Gupta Versus Union of India & Ors.

HC found procedural irregularities in tax demand order against petitioner under GST Act. The court set aside the original order due to insufficient ... Excess claim of Input Tax Credit - Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the petitioner and is a cryptic order - HELD THAT:- A perusal of the show cause notice shows that the Department has given specific details of alleged under declaration of output tax, excess claim Input Tax Credit [“ITC”], under declaration of ineligible ITC and ITC claim from cancelled dealers, return defaulters and tax non-payers. To the said show cause notice, a detailed reply dated 25.10.2023 was furnished by the petitioner giving full disclosures under each of the heads. In case the Proper Officer was of the view that reply is incomplete and further details were required, the same could have been 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 - Further petitioner was not provided with an adequate opportunity to defend the show cause notice by way of a hearing. The order cannot be sustained and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order and show cause notice is set aside. The matter is remitted to the Proper Officer for re-adjudication. Issues involved:The issues involved in this case are the confirmation of a demand against the petitioner under Section 73 of the Central Goods and Services Tax Act, 2017, based on a show cause notice, and the subsequent challenge to the order raising a demand of Rs. 10,11,855.60/- including penalty.Detailed Judgment:The petitioner challenged the order dated 23.12.2023 confirming the demand raised against them, alleging that their detailed reply to the show cause notice was not considered in the impugned order. The show cause notice provided specific details of alleged under declaration of output tax, excess claim Input Tax Credit, under declaration of ineligible ITC, and ITC claim from cancelled dealers, return defaulters, and tax non-payers. The petitioner had submitted a detailed reply dated 25.10.2023 addressing each allegation, but the impugned order dismissed it as unsatisfactory without seeking further clarification or providing an opportunity for a hearing.The Court observed that the impugned order failed to consider the petitioner's detailed response to the show cause notice, and instead concluded that no further clarification was provided despite repeated opportunities. The Proper Officer deemed the reply as unclear and unsatisfactory without giving the petitioner a chance to rectify or supplement the information. The Court noted that the petitioner was not afforded a proper opportunity to defend against the show cause notice, leading to the decision that the order could not be sustained and must be remitted for re-adjudication.The Court set aside the impugned order and show cause notice, directing the Proper Officer to inform the petitioner of any additional details or documents required within one week. The petitioner was instructed to provide the necessary explanation and documents within a week of receiving the intimation. Subsequently, the Proper Officer was mandated to re-adjudicate the show cause notice within two weeks after granting an opportunity for a hearing. It was clarified that the Court did not delve into the merits of the parties' contentions, preserving all rights and contentions for future proceedings.Finally, a copy of the order was directed to be provided expeditiously under the signatures of the Court Master for further action.