Canara Bank v. Assistant Commissioner, DGST, High Court of Delhi, W.P.(C) 4689/2024, decided on 02 April 2024
Court, Petition & Statutory Framework
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Court: High Court of Delhi
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Petition: W.P.(C) 4689/2024
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Date of Judgment: 02.04.2024
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Category of Dispute: Input Tax Credit – Adjudication under Section 73
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Relevant Provisions: Sections 73, 75(3), and 79 of the CGST Act, 2017
Facts
The petitioner, Canara Bank, challenged the adjudication order dated 26.12.2023 passed under Section 73 of the CGST Act, whereby a show cause notice dated 25.09.2023 proposing a tax demand of ₹20.07 crore was confirmed along with interest and penalty. The petitioner had submitted a detailed reply dated 19.10.2023 addressing each allegation raised in the notice, including excess ITC, ineligible ITC, ITC on non-business transactions, exempt supplies, and ITC availed from cancelled or non-compliant dealers. However, the impugned order summarily rejected the reply without substantive discussion, merely branding it as “incomplete” and “unsatisfactory”
Questions for Consideration
Whether an adjudication order under Section 73 of the CGST Act can be sustained when the Proper Officer fails to examine the taxpayer’s detailed reply on merits and passes a non-speaking, cryptic order confirming the demand without reasoned findings
Observations of the Court
The High Court noted that the show cause notice itself was structured under multiple specific heads, and the petitioner had furnished a comprehensive reply dealing with each allegation. Despite this, the adjudication order merely recorded a general conclusion that the reply was unclear and unsupported, without engaging with the explanations or documents submitted. The Court held that such an approach ex facie reflected non-application of mind. It was further observed that if the Proper Officer found the reply inadequate, procedural fairness required seeking further clarification or documents, which was admittedly not done. The absence of a reasoned analysis rendered the order legally unsustainable.
Judgment / Verdict
The High Court set aside the adjudication order dated 26.12.2023 and remitted the matter to the Proper Officer for fresh adjudication. Directions were issued to specifically intimate the petitioner regarding any further documents or details required, grant an opportunity of personal hearing, and pass a speaking order strictly in accordance with law within the limitation prescribed under Section 75(3) of the CGST Act. The Court expressly clarified that it had not examined the merits of the tax demand, and all rights and contentions were kept open
Cases Referred – Summary Table
| Case | Court | Issue | Verdict |
|---|---|---|---|
| Canara Bank v. Assistant Commissioner, DGST | Delhi High Court | Cryptic GST adjudication under Section 73 | Demand set aside; matter remanded for fresh adjudication |
Between the Fine Lines – Practical Takeaway for Trade & Industry
This ruling reinforces that GST adjudication is not a mere formality. Where a taxpayer furnishes a detailed reply, the Proper Officer is legally bound to deal with it head-wise and record cogent reasons. Mechanical confirmations of demand using standard phrases such as “reply not satisfactory” are vulnerable to judicial review. For businesses, the judgment underscores the importance of comprehensive replies and preserves the remedy of writ jurisdiction where procedural fairness under Sections 73 and 75 is compromised.
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