2024 (9) TMI 1143 - HC - GST

Tax Authority Must Reconsider Show Cause Notice After Inadequate Review, Providing Detailed Hearing and Reasoning

HC found the tax authority's order dismissing a Show Cause Notice reply inadequate. The court determined the Proper Officer failed to properly consider ... 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 u/s 73 of the Central Goods and Services Tax Act, 2017 with penalty - HELD THAT:- The observation in the impugned order dated 30.12.2023 is not sustainable for the reasons that the reply dated 20.10.2023 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 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 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 order cannot be sustained, and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 30.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication - Petition disposed off by way of remand. Issues:Impugned order disposing of Show Cause Notice under Section 73 of the Central Goods and Services Tax Act, 2017 without considering petitioner's detailed reply.Analysis:The petitioner challenged an order dated 30.12.2023, which disposed of a Show Cause Notice proposing a demand of Rs.2,92,00,768.00 against the petitioner under the Central Goods and Services Tax Act, 2017. The petitioner contended that despite submitting a detailed reply on 20.10.2023, the impugned order did not take into account the petitioner's response and was cryptic in nature. The Show Cause Notice had various headings related to tax declarations, ITC claims, and other issues, to which the petitioner had provided detailed disclosures. However, the impugned order dismissed the petitioner's reply as unsatisfactory without proper consideration, indicating a lack of application of mind by the Proper Officer.The High Court found that the Proper Officer's opinion that the petitioner's reply was unsatisfactory was not sustainable. The Court noted that the reply submitted by the petitioner was detailed and should have been considered on its merits before forming an opinion. It was observed that the Proper Officer did not seek further details from the petitioner or provide an opportunity to clarify the reply or submit additional documents. Therefore, the Court held that the impugned order could not be sustained and remitted the matter back to the Proper Officer for re-adjudication.The Court directed the Proper Officer to inform the petitioner of any specific details or documents required and allowed the petitioner to furnish explanations and documents accordingly. The Proper Officer was instructed to re-adjudicate the Show Cause Notice after providing a personal hearing to the petitioner and to pass a fresh speaking order within the prescribed period under the Act. The Court clarified that it did not comment on the merits of the parties' contentions and reserved all rights and contentions for both parties. 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.