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

HC found procedural irregularities in tax demand order against petitioner under GST Act. The court set aside the original order due to insufficient consideration of petitioner's detailed reply to show cause notice. HC directed tax authorities to provide specific clarification requirements, allow petitioner opportunity to respond, and re-adjudicate the demand within specified timelines, while preserving all substantive rights.

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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.

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