Tax Demand Quashed: Procedural Errors Invalidate Rs. 7.02 Crore Assessment Under Improper Audit and Reply Evaluation

HC set aside an Order-in-Original under CGST Act challenging a tax demand of Rs. 7.02 crore. The court found the order defective due to improper consideration of the petitioner's replies and mechanical application of a Special Audit Report. The case was remitted for re-adjudication, granting the petitioner 30 days to file additional responses, with directions for a fresh order within statutory timelines.

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Issues involved: Impugning an Order-in-Original u/s 73 of the Central Goods and Services Tax Act, 2017 based on a Show Cause Notice, alleging improper consideration of replies and mechanical application of Special Audit Report.

Summary:
The petitioner challenged an Order-in-Original dated 29.04.2024, which disposed of a Show Cause Notice dated 24.12.2023 proposing a demand of Rs. 7,02,71,577.00 u/s 73 of the CGST Act for FY 2018-19. The petitioner contended that their detailed replies were not considered, and the order was cryptic. It was argued that the Show Cause Notice lacked proper application of mind, as the Special Audit Report findings were mechanically included without detailed reasons. The petitioner provided detailed responses to the Notice, addressing various audit findings, but the impugned order dismissed the replies as not properly filed without adequate justification. The court found the order unsustainable, noting that the Proper Officer failed to consider the replies on merits and did not provide an opportunity for clarification or additional details. Consequently, the impugned order was set aside, and the Show Cause Notice was remitted for re-adjudication. The petitioner was granted 30 days to file a further reply, and the Proper Officer was directed to pass a fresh order within the prescribed period under Section 75(3) of the Act. The court clarified that it did not delve into the merits of the case and reserved all rights and contentions of the parties. The challenge to Notification No. 56 of 2023 regarding time extension was left open, and the petition was disposed of accordingly.

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