Case: Arrow Aircraft Sales and Charters Pvt. Ltd. v. Sales Tax Officer Class II, AVATO Ward 202, Zone 11, Delhi & Ors.

Court: High Court of Delhi
Petition No.: W.P.(C) 2562/2024 & CM APPL. 10492-93/2024
Date of Judgment: 21.02.2024
Category of Dispute: Adjudication under Section 73 – Validity of Order – Non-consideration of Reply
Relevant Sections: Section 73 CGST Act, 2017; Notification No. 9/2023 dated 31.03.2023
Coram: Justice Sanjeev Sachdeva & Justice Ravinder Dudeja

FACTS (Paras 1–6)

The petitioner, Arrow Aircraft Sales and Charters Pvt. Ltd., challenged (i) Notification No. 9 of 2023 dated 31.03.2023, which extended the limitation for issuing adjudication orders under Section 73 of the CGST Act, and (ii) the order dated 31.12.2023, whereby proceedings under Section 73 were concluded and demand created without proper appreciation of the petitioner’s response.

A Show Cause Notice dated 24.09.2023 was duly replied to with a detailed, point-wise explanation (para 4). However, the impugned order wrongly records that “no proper reply/explanation has been received” (para 5). The Court observed that this assertion was factually incorrect, as the reply filed was elaborate and on record (para 6).

The petitioner argued that such non-consideration of reply amounts to a violation of natural justice, rendering the adjudication order vitiated.

QUESTIONS FOR DETERMINATION

1. Whether the adjudicating authority acted in breach of natural justice by failing to consider the taxpayer’s detailed reply before passing an order under Section 73?

2. Whether the order dated 31.12.2023 concluding proceedings under Section 73 can survive when the authority wrongly proceeded on the assumption that no reply was filed?

3. Whether the validity of Notification No. 9/2023 extending the limitation under Section 73 required adjudication in this petition?

COURT’S OBSERVATIONS (Paras 5–7)

The Court emphatically held that the adjudicating authority’s observation that “no proper reply/explanation has been received” is ex facie incorrect. The reply was admittedly filed, detailed, and available on record (para 6).

The proper officer was required to apply his mind, consider the reply on merits, and then record his findings as to whether the explanation was acceptable. Instead, the impugned order shows non-application of mind and indicates the reply was not even looked at (para 7).

Such conduct amounts to a fundamental procedural irregularity and violates the principles of audi alteram partem, which is intrinsic to adjudication under Section 73.

JUDGMENT / VERDICT (Paras 8–10)

The High Court set aside the adjudication order dated 31.12.2023 for failure to consider the taxpayer’s reply, holding the order legally unsustainable.

The matter was remitted to the proper officer for fresh adjudication, with the following mandates:

• The authority must re-adjudicate the SCN under Section 73 within four weeks (para 8).

• A personal hearing must be granted to the petitioner (para 8).

The challenge to Notification No. 9/2023 was left open (para 9), meaning the Court did not adjudicate on the issue of limitation extension.

The writ petition was disposed of accordingly.

SUMMARY OF CASES REFERRED TO (TABULAR FORM)

(Note: The judgment does not cite external precedents; hence only the present case is tabulated.)

BETWEEN FINE LINES (Practical Takeaways for Trade & Industry)

This judgment reinforces that proper officers cannot mechanically confirm GST demands. Even if limitation extensions apply or multiple opportunities are granted, a detailed reply must be substantively considered. Any adjudication order that ignores the taxpayer’s response is void for non-application of mind. Businesses should ensure replies are comprehensive and documented so that any procedural lapse is evident 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.”