Deepak Khandelwal Proprietor M/s Shri Shyam Metal v. Union of India & Anr.,
Delhi High Court, W.P.(C) 2227/2024, decided on 15 February 2024
Category of dispute: Adjudication under Section 73 – Violation of natural justice / Non-speaking order
Facts
The petitioner, a proprietary concern engaged in taxable supplies, was issued a show cause notice dated 23.09.2023 alleging under-declaration of output tax, excess availment of Input Tax Credit, availment of ineligible ITC, and ITC claimed from cancelled dealers, return defaulters and tax non-payers. The notice culminated in an adjudication order dated 29.12.2023 passed under Section 73 of the CGST Act, 2017, confirming tax demand along with penalty. The petitioner had filed detailed replies dealing with each allegation supported by particulars and explanations, yet the order merely recorded that the reply was “not satisfactory” without dealing with any submission on merits
Questions before the Court
The principal questions before the Court were whether an adjudication order under Section 73 can be sustained when it does not deal with the taxpayer’s detailed reply, whether denial of a meaningful opportunity of personal hearing vitiates the proceedings, and whether such cryptic disposal violates the principles of natural justice embedded in GST adjudication
Observations of the Court
The Delhi High Court noted that the show cause notice itself contained granular allegations under multiple heads and that the petitioner had furnished replies addressing each head with supporting particulars. However, the adjudication order merely reproduced a standard paragraph stating that the reply was vague and failed to counter the demand, without any discussion or reasoning. The Court observed that if the proper officer found the reply vague or deficient, the officer was duty-bound to seek clarification or additional documents, which was admittedly not done. The record further revealed that no effective opportunity of personal hearing was granted to the petitioner. Such an approach, according to the Court, rendered the adjudication unsustainable as it failed the test of a reasoned and speaking order and violated audi alteram partem
Judgement / Decision
The High Court set aside both the adjudication order dated 29.12.2023 and the underlying show cause notice dated 23.09.2023. The matter was remitted back to the GST officer for fresh adjudication after granting the petitioner a proper opportunity of personal hearing and after specifically intimating the details or documents required from the petitioner. Importantly, the Court kept open the petitioner’s challenge to the Notification dated 31.03.2023 extending limitation under Section 73(10) read with Section 168A of the CGST Act, granting liberty to raise the issue in appropriate future proceedings
Relevant statutory provisions
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Section 73, Central Goods and Services Tax Act, 2017
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Section 73(10), CGST Act
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Section 168A, CGST Act
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Principles of natural justice applicable to quasi-judicial adjudication
Cases referred (if any)
No external judicial precedents were relied upon; the decision rests on settled principles of natural justice and reasoned adjudication under GST.
| Case referred | Court | Issue | Verdict |
|---|---|---|---|
| Not applicable | — | — | — |
Between the Fine Lines – Practical takeaway for trade and industry
This judgment reiterates that GST adjudication cannot be reduced to a mechanical formality. Where detailed replies are filed, the proper officer must deal with them issue-wise and pass a reasoned order. Cryptic confirmations of demand, without granting a meaningful hearing or seeking clarifications, are vulnerable to being struck down. For taxpayers, the ruling reinforces the strategic value of filing detailed replies and challenging non-speaking orders at the writ stage where appellate remedies become illusory due to procedural unfairness.
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