Ex-parte Order Under Section 73 CGST Act Invalidated Due to Procedural Irregularity in Taxpayer's Registration Status

HC ruled that an ex-parte order disposing of a Show Cause Notice under Section 73 of CGST Act was unsustainable due to taxpayer's inability to file a reply caused by retrospective registration cancellation. The court set aside the order, directing the Proper Officer to re-adjudicate and provide a fair hearing, allowing the taxpayer to submit a reply within two weeks.

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Issues involved:
The issues involved in this case are the disposal of a Show Cause Notice under Section 73 of the Central Goods and Services Tax Act, 2017, cancellation of registration leading to inability to file a reply, and the validity of the order passed solely on the grounds of non-filing of a reply.

Disposal of Show Cause Notice:
The petitioner challenged an order disposing of a Show Cause Notice dated 23.09.2023, which proposed a demand of Rs. 36,63,454.00, including penalty, under Section 73 of the CGST Act. The impugned order raised concerns regarding excess claim Input Tax Credit, under declaration of ineligible ITC, and ITC claim from cancelled dealers, return defaulters, and tax non-payers. However, the order was passed ex-parte as the taxpayer did not file a reply or appear for a Personal Hearing due to the retrospective cancellation of registration, which hindered access to the portal.

Cancellation of Registration and Inability to File Reply:
The petitioner's counsel highlighted that the petitioner was unable to file a reply as the registration had been cancelled retrospectively, preventing access to the portal. The respondent's counsel acknowledged this limitation, noting that once registration is cancelled, the taxpayer cannot access the portal, as evidenced by the blank dropdown menu for assessment years in the screenshots provided by the petitioner.

Validity of Order Based on Non-Filing of Reply:
The High Court found that the impugned order, which was based solely on the petitioner's failure to file a reply, was unsustainable. The Court emphasized that the matter should be remitted to the Proper Officer for re-adjudication, setting aside the order dated 22.12.2023. The petitioner was directed to file a reply to the Show Cause Notice within two weeks, following which the Proper Officer would re-adjudicate the matter, providing an opportunity for a personal hearing and issuing a fresh speaking order in compliance with the law.

Conclusion:
The Court clarified that it did not delve into the merits of the parties' contentions and reserved all rights and contentions. The petition was disposed of with the directive for re-adjudication by the Proper Officer, emphasizing the importance of providing a fair opportunity for the petitioner to respond and participate in the proceedings.

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