Tax Authority's GST Demand Order Invalidated Due to Procedural Lapses, Taxpayer Granted Opportunity to Respond Under Section 73

HC reviewed a GST tax demand order challenging procedural irregularities in Section 73 proceedings. The court found the tax authority's order deficient, as it did not adequately consider the taxpayer's detailed reply. HC remanded the matter for re-adjudication, directing the taxpayer to submit a further reply within 30 days and mandating the tax officer to provide a fresh reasoned order after personal hearing, while reserving all substantive rights.

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Issues involved: Impugned order under u/s 73 of Central Goods and Services Tax Act, 2017 not considering petitioner's detailed reply, sustainability of observations in the impugned order, lack of opportunity for clarification, remittance of the matter for re-adjudication.

The petitioner challenged an order dated 29.12.2023, which disposed of a Show Cause Notice dated 25.09.2023 proposing a demand of Rs 1,51,05,808.00 against the petitioner under Section 73 of the Central Goods and Services Tax Act, 2017. The petitioner contended that the impugned order did not take into consideration the detailed reply submitted on 09.11.2023, and was deemed cryptic.

The Show Cause Notice dated 25.09.2023 provided reasons under separate headings, including declaration of output tax, excess claim of Input Tax Credit (ITC), scrutiny of ITC reversals, ITC to be reversed on non-business transactions and exempt supplies, and declaration of ineligible ITC. The petitioner furnished a detailed reply under each of these heads. However, the impugned order considered the reply incomplete, not duly supported by adequate documents, unable to clarify the issue, and unsatisfactory. The Proper Officer opined that the reply lacked proper calculations, reconciliation, and relevant documents.

The petitioner argued that the reply submitted was detailed and supported by documents, contrary to the observations in the impugned order. It was contended that the Proper Officer did not apply his mind to the reply and failed to seek further details if required. Therefore, the impugned order dated 29.12.2023 was deemed unsustainable, leading to the remittance of the matter to the Proper Officer for re-adjudication.

The Court directed the petitioner to file a further reply to the Show Cause Notice within 30 days and instructed the Proper Officer to re-adjudicate the matter, providing an opportunity for a personal hearing and issuing a fresh speaking order in accordance with the law. The Court clarified that it did not comment on the merits of the contentions of either party, reserving all rights and contentions. Additionally, the challenge to Notification No. 9 of 2023 regarding the initial extension of time was left open, and the petition was disposed of accordingly.

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