2024 (4) TMI 272 - HC - GST

Tax Dispute Remanded: SC Calls for Comprehensive Order and Proper Assessment of GST Demand of Rs. 44,24,400

GST tax dispute involving demand of Rs. 44,24,400 was remitted back by SC due to procedural deficiencies. The Proper Officer's order was found cryptic and ... Violation of principles of natural justice - cryptic order - excess claim Input Tax Credit - under declaration of ineligible ITC - ITC claimed from cancelled dealers - return defaulters and tax nonpayers - HELD THAT:- The observation in the impugned order dated 31.12.2023 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. He merely held that the reply is not satisfactory nor any substantial documents were submitted by the taxpayer which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the Petitioner. The impugned order records the reply furnished by the Petitioner as incomplete, not supported by adequate documents, unclear and unsatisfactory. Proper Officer is directed to intimate to the petitioner if any details/documents, as may be 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 PRESENTED AND CONSIDERED 1. Whether an adjudication order under Section 73 of the Central Goods and Services Tax Act, 2017 is vitiated where it records the taxpayer's reply as 'incomplete, not duly supported by adequate documents, without proper justification' without any independent consideration of the detailed reply furnished. 2. Whether the Proper Officer erred in including in demand an amount alleged to be tax despite the taxpayer having paid the tax in advance under Section 12(2)(b) read with Explanation 2 of the Act. 3. Whether natural justice and fair adjudication require the Proper Officer to afford a specific opportunity to the taxpayer to furnish further particulars or documents when the officer considers the reply inadequate, before confirming demand. 4. Appropriate remedy where an impugned order is cryptic, non-speaking and indicates lack of application of mind. 5. Whether the Court should decide the merits of the disputed claim on the basis of the record before it in the circumstances where the impugned order is non-speaking and the reply was not materially considered. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of a cryptic adjudication order that dismisses a detailed reply as 'incomplete' without consideration Legal framework: Adjudication under Section 73 requires the Proper Officer to examine show cause notices, consider replies filed by the taxpayer and pass a reasoned order; administrative orders must disclose application of mind and be speaking where findings are reached on evidence and documents. Precedent Treatment: No prior authority is invoked or relied upon in the judgment; the Court proceeds on statutory and principled grounds of adjudicatory fairness. Interpretation and reasoning: The order under challenge records the taxpayer's reply as 'not acceptable' and 'incomplete' in conclusory language without addressing content of the detailed reply. Such narration demonstrates the Proper Officer did not apply mind to the merits of the reply and produced a cryptic order incapable of revealing the basis of the decision. Where a reply is on record and is detailed, the adjudicating authority is obliged to consider it on merits and articulate reasons for rejecting it rather than recording merely that it is 'not satisfactory.' Ratio vs. Obiter: Ratio. The Court's direction that an adjudication order must reflect application of mind and must consider and deal with the taxpayer's detailed reply is central to its decision to set aside the impugned order. Conclusion: The impugned order is unsustainable insofar as it records conclusory rejection of a detailed reply without reasons and application of mind; remand for re-adjudication is required. Issue 2 - Treatment of tax paid in advance under Section 12(2)(b) and Explanation 2 Legal framework: Section 12(2)(b) and Explanation 2 (as cited in the judgment) govern payment of tax liabilities in advance; amounts already paid must be taken into account in demand adjudications. Precedent Treatment: No precedents are cited; the Court relies on statutory construct and the record showing payment. Interpretation and reasoning: The Proper Officer purportedly added an amount towards demand notwithstanding that the taxpayer had paid the tax in advance in terms of Section 12(2)(b) read with Explanation 2. Failing to recognize and account for tax already paid defeats the fairness and correctness of the demand. The officer should have examined records of payment and adjusted the demand accordingly before confirmation. Ratio vs. Obiter: Ratio, to the extent remand is required for the Proper Officer to reassess the demand after accounting for amounts already paid under the statutory provision. Conclusion: The officer erred in not taking into account tax paid in advance; re-adjudication must consider such payments and adjust demand if appropriate. Issue 3 - Requirement to afford opportunity to furnish further documents/details before confirming demand Legal framework: Principles of natural justice and statutory adjudicatory procedure require that when the record is found inadequate, the adjudicating authority must specifically call for further particulars and afford an opportunity to the taxpayer to respond, including personal hearing where warranted. Precedent Treatment: No authority cited; Court applies general principles of fair administrative procedure. Interpretation and reasoning: The impugned order indicates the reply was 'not clear and satisfactory' but the record does not show any specific requisition for further information or an opportunity to clarify. If the Proper Officer required additional details, the officer ought to have issued a specific intimation setting out what was necessary. Merely recording incompleteness without giving a chance to furnish missing material amounts to denial of opportunity and is procedurally unacceptable. Ratio vs. Obiter: Ratio. The Court directs that the Proper Officer must intimate required details and thereafter re-adjudicate after opportunity of personal hearing - this is a mandatory remedial step flowing from the procedural defect. Conclusion: The officer should have sought specific further documents/details and provided the taxpayer an opportunity to furnish them; absence of such procedure vitiates the order and mandates remand. Issue 4 - Appropriate remedy for a non-speaking order and scope of re-adjudication Legal framework: Where an adjudicatory order is non-speaking, cryptic or shows lack of application of mind, the remedial course is to set aside the order and remit the matter for fresh adjudication consistent with statutory timelines and procedural fairness. Precedent Treatment: Not cited; the judgment follows established remedial practice of remand for fresh decision making in light of procedural defects. Interpretation and reasoning: Given the impugned order's conclusory rejection of the taxpayer's detailed reply, failure to account for payments under statutory provision, and absence of any recorded demand for further particulars, the Court found remand to be the suitable remedy. The Proper Officer is directed to intimate required documents, provide opportunity of personal hearing, and pass a fresh speaking order within the period prescribed under Section 75(3) of the Act. Ratio vs. Obiter: Ratio. The directive to remit with specific procedural steps (intimation for documents, opportunity for hearing, fresh speaking order within statutory period) is dispositive of the remedy and binding in the case. Conclusion: The impugned order is set aside; matter remitted for re-adjudication after specific intimation and hearing; fresh speaking order to be passed within Section 75(3) timelines. Issue 5 - Whether Court considered merits of disputed tax demand Legal framework: Courts may decline to decide merits where adjudicatory process is vitiated and remand is necessary to enable proper fact-finding; parties' substantive rights are preserved for re-adjudication. Precedent Treatment: No precedents cited; Court preserves rights. Interpretation and reasoning: The Court expressly refrained from commenting on merits and reserved all rights and contentions of parties. The presence of procedural infirmity precluded adjudication on merits at the writ stage. Ratio vs. Obiter: Ratio in the context of this judgment's remedial scope - merits left open for adjudicating authority. Conclusion: Merits not decided; parties' rights and contentions reserved for re-adjudication. Ancillary observation The Court left open a separate challenge to a notification concerning extension of time (Notification No. 9 of 2023) and did not adjudicate upon it.