Aarem Tradex Private Limited v. Sales Tax Officer & Anr.,
Delhi High Court, W.P.(C) 2767/2024, Judgment dated 23.02.2024 (Category: Input Tax Credit – Wrong Head Claim; Section 73 CGST Act).
Facts of the Case (Paras 1–4)
The petitioner, Aarem Tradex Pvt. Ltd., was issued a show-cause notice under Section 73 of the CGST Act, 2017 alleging wrongful availment of ITC. The petitioner had inadvertently reported credit under IGST instead of bifurcating it into CGST and SGST, a purely clerical mis-posting. The taxpayer asserted that no excess claim was made, and the credit continued to lie in its electronic ledger. A detailed reply explaining the error and its legal implications was filed before the proper officer.
Despite this, the adjudicating authority passed the impugned order dated 22.12.2023, concluding proceedings under Section 73 and creating a demand without addressing the petitioner’s explanation. The order merely stated that the reply was “not comprehensive” and no payment had been made within 30 days.
Questions / Issues for Determination
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Whether an order under Section 73 CGST Act can be sustained when the adjudicating authority fails to consider a detailed reply submitted to the SCN.
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Whether clerical misclassification of ITC between IGST and CGST/SGST—when the credit remains intact—can be adjudicated without addressing the taxpayer’s explanation.
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Whether absence of reasons in a quasi-judicial order renders it legally unsustainable.
Court’s Observations (Paras 5–7)
The Court noted that the impugned order merely recorded that no payment was made within 30 days and that no proper reply/explanation was received. However, on examining the record, the Court found that:
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The petitioner had filed a detailed reply, which was not even referred to or discussed.
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A quasi-judicial authority exercising powers under Section 73 must apply its mind, analyse the reply, and give reasons for accepting or rejecting it.
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The officer’s conclusion that the reply was “not comprehensive” clearly showed non-consideration of the reply, which is a violation of principles of natural justice.
Thus, the order was bereft of reasons, and therefore unsustainable in law.
Judgment / Final Directions (Paras 8–12)
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The impugned order dated 22.12.2023 was set aside for complete non-application of mind.
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The matter was remitted to the proper officer for fresh adjudication of the SCN.
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The officer must grant a personal hearing and pass a reasoned order after considering all submissions.
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The petitioner was permitted to file an additional reply within one week.
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Constitutional challenge to the relevant notifications was kept open.
Classification of the Case under GST Law (2017)
Category: Input Tax Credit – Wrong Head Reporting / ITC Re-classification
Relevant Provisions:
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Section 73 CGST Act – Determination of tax not involving fraud or wilful misstatement.
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Principles of natural justice applicable to adjudication.
Between Fine Lines (Practical Takeaways for Industry)
Adjudicating authorities must issue reasoned orders reflecting examination of the taxpayer’s reply. Even clerical misreporting of ITC—where credit remains legitimately available—cannot lead to automatic demand creation without analysing the explanation. Any order that ignores the reply is vulnerable to being struck down for lack of application of mind. Taxpayers should always ensure replies clearly demonstrate the continuity and legitimacy of claimed credit.
Summary of Cases Referred (in Table Form)
(The judgment does not cite external cases; hence no case-law table is applicable.)
| Case Name | Citation | Principle Held | Relevance |
|---|---|---|---|
| — | — | No external precedents referred in the judgment | Not applicable |
Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”
