2024 (7) TMI 1346 - HC - GST

Tax Demand Order Overturned: Insufficient Reasoning Invalidates CGST Act Assessment Requiring Comprehensive Reconsideration of Evidence

HC set aside tax demand order against petitioner under CGST Act for insufficient reasoning. The court found the adjudicating authority's order lacking ... Violation of principles of natural justice - impugned order is unreasoned and the only ground for rejecting the petitioner’s response to the impugned SCN is that the same “has not been found satisfactory” and the petitioner has not been able to submit “substantial proof in support of his reply” - irregular availment of ITC - HELD THAT:- The impugned SCN did not allege that the petitioner had not received the goods from the dealer in question. The impugned SCN is premised on Section 16 (2) (c) of the CGST/DGST Act which, according to the Revenue, disentitles a taxpayer from availing ITC in respect of supplies, if the actual tax on the said supplies has not been deposited by the supplier. And, the impugned order does not indicate that the Adjudicating Officer had finally concluded that the dealer in question (Modern Traders) had not paid the taxes due on the supplies made to the petitioner. Although, the petitioner has a remedy of preferring an appeal against the impugned order, considering that the impugned order is unreasoned, in the peculiar facts, it is not considered apposite to relegate the petitioner to avail the remedy of an appeal. The impugned order is set aside. The matter is remanded to the Adjudicating Officer to decide afresh in accordance with law after affording the petitioner an opportunity to be heard - petition disposed off by way of remand. Issues: Impugning order under CGST Act and DGST Act for tax demand, incorrect availing of Input Tax Credit (ITC), rejection of petitioner's response, lack of reasoning in the order, failure to prove receipt of goods, remedy of appeal, challenge to notification under CGST Act.Analysis:1. Impugned Order on Tax Demand: The petitioner challenged an order passed by the Adjudicating Authority under the CGST Act and DGST Act, raising a tax demand of Rs. 18,30,522 for the period July 2017 to March 2018, along with interest and penalty. The order was based on a show cause notice alleging incorrect disclosure of tax liability and availing excess Input Tax Credit (ITC).2. Allegations and Response: The impugned show cause notice referred to Section 16(2)(c) of the CGST Act, stating that the petitioner had not correctly availed ITC on inward supplies. The petitioner responded with invoices, ledger details, and payment information to support its claim as a bona fide purchaser from the supplier in question, 'Modern Traders'.3. Reasoning and Rejection: The impugned order lacked reasoning for rejecting the petitioner's response, stating it was unsatisfactory without substantial proof. The order did not address whether the supplier had paid the due taxes on supplies made to the petitioner, a crucial aspect of the allegations.4. Proof of Goods Receipt: The respondent argued that the petitioner failed to prove receipt of goods against which ITC was claimed, citing the need for e-way bills as evidence. However, the impugned show cause notice did not question goods receipt but focused on the supplier's tax payment.5. Judicial Intervention: Despite the availability of an appeal, the Court set aside the unreasoned order and remanded the matter to the Adjudicating Officer for a fresh decision, emphasizing the petitioner's right to be heard and submit further documents to substantiate goods receipt.6. Notification Challenge: The petitioner also challenged a notification under the CGST Act, which was not addressed in the current judgment, leaving the petitioner's right to challenge it open for future consideration.In conclusion, the High Court's judgment provided relief to the petitioner by setting aside the unreasoned order, highlighting the importance of due process and the opportunity to substantiate claims. The detailed analysis of tax liability, ITC availing, and goods receipt underscored the need for proper reasoning and consideration of evidence in such matters.