M/s D.C. Sales through Proprietor Dinesh Bansal
High Court of Delhi
Writ Petition (Civil)
Section 73, Central Goods and Services Tax Act, 2017
Category of Dispute – Demand | Input Tax Credit | Procedural Violation
Date of Judgment – 12 February 2024
Facts
The petitioner, a registered taxable person, was issued a show cause notice dated 25.09.2023 proposing demand on multiple counts including alleged under-declaration of output tax, excess availment of Input Tax Credit, availment of ineligible ITC, and ITC allegedly availed from cancelled dealers, return defaulters, and tax non-payers. The proceedings culminated in an adjudication order dated 27.12.2023 passed under Section 73 of the CGST Act, confirming a demand of ₹32,92,938/- including penalty.
The petitioner asserted that a detailed reply dated 25.10.2023 was duly filed responding head-wise to each allegation contained in the show cause notice. However, the adjudicating authority passed the impugned order without considering the said reply and without granting an effective opportunity of personal hearing. The writ petition was therefore filed challenging the adjudication order on grounds of violation of natural justice and non-application of mind
Questions before the Court
Whether an adjudication order under Section 73 of the CGST Act can be sustained when the taxpayer’s detailed reply to the show cause notice is ignored and the order merely records that the reply is “not satisfactory” without any reasons.
Whether failure to grant an effective opportunity of hearing and to seek clarification where the reply is allegedly incomplete vitiates the adjudication proceedings under GST law.
Observations of the Court
The Court noted that the show cause notice itself contained detailed allegations with specific heads relating to output tax, ITC excess, ineligible ITC, and ITC from non-compliant suppliers. Correspondingly, the petitioner had filed a detailed written reply explaining its position under each head.
However, the impugned order, after narrating the background, summarily recorded that no reply or explanation had been received from the taxpayer and proceeded to confirm the demand ex parte. The Court observed that such a finding was factually incorrect and demonstrated complete non-application of mind.
It was further observed that even if the Proper Officer was of the view that the reply was unclear or incomplete, the principles of natural justice required that the petitioner be called upon to furnish further clarification or documents. The record did not reflect that any such opportunity was granted.
Additionally, the petitioner was not afforded an effective opportunity of personal hearing prior to passing of the demand order. The Court emphasized that adjudication under Section 73, which has serious civil consequences, cannot be reduced to a mechanical exercise and must reflect due consideration of the taxpayer’s defence
Judgment
The High Court held that the impugned adjudication order could not be sustained in law as it was cryptic, non-speaking, and passed in violation of the principles of natural justice. Consequently, the adjudication order dated 27.12.2023 as well as the show cause notice were set aside.
The matter was remanded to the Proper Officer for fresh adjudication. The Court directed that the Proper Officer must first intimate the petitioner of any further details or documents required within one week. Upon such intimation, the petitioner was granted one week to furnish the requisite explanation and documents. Thereafter, the Proper Officer was directed to re-adjudicate the show cause notice within two weeks after granting an opportunity of personal hearing.
The Court clarified that it had not expressed any opinion on the merits of the tax demand and that all rights and contentions of both parties were kept open
Statutory Provisions Involved
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Section 73, Central Goods and Services Tax Act, 2017
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Principles of natural justice implicit in quasi-judicial adjudication under GST law
Between the Fine Lines – Practical Takeaway for Trade and Industry
This judgment reinforces that GST adjudication cannot be reduced to a standard-format confirmation of demand. Where a taxpayer files a detailed reply, the Proper Officer is legally obligated to consider it, seek clarification if required, and grant a meaningful personal hearing. Cryptic orders merely stating that the reply is “not satisfactory” are vulnerable to being struck down. For businesses, this decision strengthens the procedural safeguards available during Section 73 proceedings and underscores the importance of placing comprehensive replies on record.
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.”
