Denial of Input Tax Credit via non speaking order found deficient for lack of reasons; order quashed and set aside

Denial of input tax credit was challenged as based on a non speaking, unreasoned determination that failed to address the taxpayer's written submissions and prima facie involved non application of mind. The court found violation of natural justice because the authority did not consider the reply to the show cause notice and did not furnish reasons for treating the taxpayer as non genuine. For these procedural defects, the impugned non speaking order cancelling registration and confirming a tax demand was quashed and set aside by the High Court.

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Issues: Whether the impugned Order-in-Original dated 04.09.2024 denying Input Tax Credit and confirming demand should be quashed for being a non-speaking order that fails to consider the petitioner's submissions and thereby violates principles of natural justice.

Analysis: The petition challenges the order denying ITC on the ground that the supplier was declared a non-genuine taxpayer and that the assessing authority treated the petitioner's reply as "not in order" without dealing with the detailed submissions filed on 29.08.2024. The Court examined whether the impugned order records reasons addressing the petitioner's contentions or is a conclusory/non-speaking order. The Court found that the impugned order merely records that the taxpayer's reply was "not in order" without dealing with the submissions or providing reasons, thereby amounting to non-application of mind and breach of audi alteram partem. In these circumstances the Court considered whether setting aside the order and directing a fresh, reasoned hearing is the appropriate remedy to secure compliance with principles of natural justice and statutory requirements governing grant of ITC.

Conclusion: The impugned order dated 04.09.2024 is quashed and set aside. Respondent No.3 is directed to issue fresh notice, grant a personal hearing, consider all submissions of the petitioner and pass a reasoned order de novo expeditiously and preferably within six weeks from availability of this order.

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