2024 (3) TMI 964 - HC - GST

Procedural Fairness Prevails: GST Show Cause Notice Quashed Due to Inadequate Consideration of Petitioner's Reply

Ethos Limited Versus Assistant Commissioner Department Of Trade And Taxes & Anr.

HC ruled that the Proper Officer failed to adequately consider the petitioner's reply to a Show Cause Notice under GST Act. The court set aside the ... Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the petitioner and is a cryptic order - demand alongwith penalty - HELD THAT:- Perusal of the Show Cause Notice shows that the Department has given separate headings under declaration of output tax, excess claim Input Tax Credit, ITC to be reversed on non-business transactions & exempt supplies and under declaration of ineligible ITC. To the said Show Cause Notice, a detailed reply was furnished by the petitioner giving full disclosures under each of the heads - The observation in the impugned order dated 23.12.2023 is not sustainable for the reasons that the reply filed by the petitioner is a detailed reply. Proper Officer had to at least consider the reply on merits and then form an opinion whether the reply was unsatisfactory, incomplete and not duly supported by adequate documents. He merely held that the reply is not clear and unsatisfactory which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner. Further, if the Proper Officer was of the view that the reply is unsatisfactory and if any further details were required, the same could have been specifically 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. The matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 23.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication - Proper Officer is directed to intimate to the petitioner details/documents, as maybe required to be furnished by the petitioner. Pursuant to the intimation being given, petitioner shall furnish the requisite explanation and documents. Thereafter, the Proper Officer shall re-adjudicate the show cause notice after giving an opportunity of personal hearing and shall pass a fresh speaking order in accordance with law within the period prescribed under Section 75(3) of the Act. Petition disposed off. Issues involved: Impugned order under Section 73 of the Central Goods and Services Tax Act, 2017, regarding a demand raised against the petitioner.Summary:Issue 1: Consideration of petitioner's reply to Show Cause NoticeThe petitioner challenged an order raising a demand against them, contending that their detailed reply to the Show Cause Notice was not considered in the impugned order. Despite the petitioner providing full disclosures under various heads in response to the Notice, the order deemed the reply unsatisfactory without proper consideration. The Court held that the Proper Officer did not adequately assess the petitioner's reply, and the order was unsustainable as it lacked proper reasoning. The matter was remitted to the Proper Officer for re-adjudication, directing them to seek any necessary details or documents from the petitioner for a fresh decision.Issue 2: Re-adjudication and opportunity for clarificationThe Court emphasized that the Proper Officer must review the petitioner's reply on merits and provide an opportunity for clarification if needed. It was noted that the record did not show any specific request for further details from the petitioner before deeming the reply unsatisfactory. The Court directed the Proper Officer to inform the petitioner of any required details/documents, allowing the petitioner to furnish explanations and documents. The Proper Officer was instructed to conduct a re-adjudication, including a personal hearing, and issue a new order within the prescribed period under the Act.Conclusion:The Court set aside the impugned order and remitted the matter for re-adjudication, ensuring proper consideration of the petitioner's reply and providing an opportunity for clarification. The Court clarified that it did not delve into the merits of the parties' contentions, preserving their rights and contentions. Additionally, the challenge to a specific notification was left open, and the petition was disposed of accordingly.