The Hon'ble High Court of Delhi in M/s. Jindal Trading Co. v. Union of India [W.P.(C) 5966/2024] dated May 27, 2024 set aside orders demanding GST and penalty from the petitioner, ruling that the tax authorities failed to properly consider the petitioner's replies to show cause notices and pass reasoned orders.
Facts of the Case:
M/s. Jindal Trading Co., the petitioner, received two show cause notices from the GST authorities. The first notice, dated 22.09.2023, proposed a demand of Rs. 5,35,393, alleging that the petitioner had shown less liability in GSTR-3B compared to GSTR-1 or claimed excess ITC in GSTR-3B compared to GSTR-2A/2B. This notice was vague and unreasoned, merely stating that the taxpayer's reply to a previous ASMT10 notice was unsatisfactory.
The second notice, dated 29.09.2023, proposed a demand of Rs. 1,89,65,230. This notice raised issues under three heads: excess claim of ITC, scrutiny of ITC availed, and ITC claimed from cancelled dealers, return defaulters, and tax non-payers. In response to this notice, the petitioner submitted a detailed reply on 29.10.2023, providing explanations under each head with supporting documents.
The tax authorities subsequently passed two orders. The first order, dated 24.12.2023, was issued in response to the 22.09.2023 notice. It erroneously stated that the petitioner had not filed any reply and created an ex-parte demand. The second order, dated 28.12.2023, addressed the 29.09.2023 notice. This order claimed that the petitioner had filed a "plain reply" without proper calculations/reconciliation and relevant documents, despite the petitioner having submitted a detailed response with supporting evidence.
The petitioner challenged these orders before the Delhi High Court, arguing that the tax authorities had failed to consider their replies properly and had passed unreasoned orders.
Issue:
Whether the orders passed by the tax authorities were valid and sustainable in law?
Held by the Court:
The Hon'ble High Court of Delhi in M/s. Jindal Trading Co. v. Union of India [W.P.(C) 5966/2024] held as under:
The Court found that the show cause notice dated 22.09.2023 was vague and unreasoned, lacking specific details about the alleged discrepancies.
The order dated 24.12.2023 was deemed unsustainable as it incorrectly stated that the petitioner had not filed any reply, when in fact the petitioner was unable to file a reply. The Court held that one opportunity should be granted to the petitioner to respond to this show cause notice.
Regarding the order dated 28.12.2023, the Court held that the tax officer had not applied his mind to the detailed reply submitted by the petitioner. The Court noted that the reply included supporting documents such as invoices, ledger accounts, weighing bridge invoices, and bank statements showing payments to suppliers.
The Court observed that if the tax officer required further details, he should have specifically sought them from the petitioner. However, the record did not reflect that any such opportunity was given to the petitioner to clarify its reply or furnish additional documents/details.
Both impugned orders dated 24.12.2023 and 28.12.2023 were set aside by the Court, finding them unsustainable.
The Court remitted the show cause notices dated 22.09.2023 and 29.09.2023 back to the Proper Officer for re-adjudication.
The petitioner was given 30 days from the date of the order to file a further reply to the show cause notices.
The Court directed the Proper Officer to re-adjudicate the show cause notices after giving an opportunity of personal hearing to the petitioner.
The Proper Officer was instructed to pass a fresh speaking order in accordance with law within the period prescribed under Section 75(3) of the CGST Act.
The Court clarified that it had not considered or commented upon the merits of the contentions of either party, and all rights and contentions were reserved for the re-adjudication process.
Relevant Sections:
- "Section 73" of the Central Goods and Services Tax Act, 2017
- "Section 75(3)" of the Central Goods and Services Tax Act, 2017
_________________________________________________________
DISCLAIMER: The views expressed are strictly of the author and NLF Tax and Legal Advisory. The contents of this article are solely for informational purposes and for the reader’s personal non-commercial use. It does not constitute professional advice or a recommendation of the firm. Neither the author nor the firm and its affiliates accept any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing, and we reserve the legal right for any infringement on usage of our article or newsletter without prior permission
Comments