Delhi HC Quashes GST Demand Order Due to Lack of Reasoning

ICICI Lombard General Insurance Co. Ltd Vs Union of India & Ors. (Delhi High Court)

In ICICI Lombard General Insurance Co. Ltd vs. Union of India & Ors., the Delhi High Court quashed a GST demand order issued under Section 73 of the CGST Act, 2017. The petitioner had challenged the order, arguing that despite submitting a detailed response to the show cause notice (SCN), the tax officer summarily dismissed the objections without proper evaluation. The order stated that the reply was “not comprehensible, conceivable, or perspicuous,” without providing any substantive reasoning. The Court found that this language was identical to that used in previous cases, such as Xerox India Ltd. vs. Assistant Commissioner, where similar unreasoned orders had been struck down for lack of due consideration.

The High Court observed that the tax officer’s approach demonstrated a clear non-application of mind, as the order was essentially a template response without engaging with the taxpayer’s objections. As a result, the Court set aside the order and allowed the respondents to proceed afresh, ensuring that the petitioner’s response is duly considered. Additionally, the challenge to specific GST notifications was kept open for future deliberation if necessary. This ruling underscores the importance of reasoned decision-making in tax proceedings and reinforces the requirement for fair assessment before confirming tax demands.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

CM APPL. 70903/2024 (Ex.)

Allowed, subject to all just exceptions.

The application stands disposed of.

W.P.(C) 16744/2024 & CM APPL. 70902/2024 (Interim Stay)

1. The writ petitioner is aggrieved by the final order referable to Section 73 of the Central Goods and Services Tax Act, 2017 ¹ which has come to be passed by the Goods and Services Tax² Officer, observing as follows:-

“Whereas, a notice GST DRC-01 was issued to the taxpayer for the Financial Year 2019-20 along with the details of proposed tax, interest and Penalty with the direction to pay the due tax along with interest and Penalty along with opportunity of personal hearing.

And whereas, the taxpayer was also conveyed that if the said demand has already been paid or in case any objection, the taxpayer may file objections in DRC-06 within the stipulated period of time given in the notice and also granted opportunity of personal hearing to explain the same.

And Whereas, the taxpayer submitted its reply in DRC-06, but the same is found not comprehensive, conceivable, perspicuous and also no one appeared on behalf of the firm to provide explanation/clarification with regard to the reply submitted against DRC-01.

In view of the above, as the taxpayer failed to attend the personal hearing despite ample opportunity given and after having gone through the reply filed on the GST portal by the taxpayer in respect of each point, no opinion could be drawn in absence of personal hearing by the taxpayer. Since, the reply filed by the taxpayer is  not comprehensible, conceivable, perspicuous and ambiguous,  therefore, the proposed demand mentioned in the Show Cause  Notice i.e. conveyed through notice DRC-01 is confirmed.”

2. We take note of the fact that pursuant to the original Show Cause Notice which had come to be issued, the petitioner had furnished a detailed response. However, the same has been perfunctorily brushed aside and the observations as extracted hereinabove rendered.

3. We take note of an identical challenge which formed the subject matter of Xerox India Limited vs. Assistant Commissioner W.P.(C) 16451/2024 decided on 28 November 2024 . Dealing with an identically worded order framed by the said GST Officer, we had observed as follows:-

“3. We are constrained to observe that the order as passed follows lines identical to those which have come before us and have fallen for our notice on earlier occasions. The Assistant Commissioner has clearly adopted a template where the only reason assigned is that the reply filed was “not comprehensible, conceivable, not perspicuous and is ambiguous”. This clearly exhibits an abject non-application of mind and the officer repeatedly employing identical phraseology to deal with such matters.

4. Despite caution having been sounded by us of the said language having attained the status of a template and the concerned officer having chosen to replicate an identical pattern while framing orders, in Indian Highways Management Company Limited vs. Assistant Commissioner & Anr.  W.P.(C) 15701/2024 dated 12 November 2024 , we find that the officer has failed to make any amends.

5. Accordingly, while we are convinced that the impugned order being wholly unreasoned is liable to be set aside on this short score alone, we also require Mr. Aggarwal, learned counsel for the respondents to place a copy of this order before the Principal Commissioner concerned, so that an appropriate review of the manner in which such applications of assessees are adjudicated is undertaken.”

Following the aforesaid reasoning, we find ourselves unable to sustain the impugned order dated 31 August 2024.

4. We, consequently, quash the aforesaid order and allow the present writ petition.

5. The respondents shall have liberty to proceed afresh in light of the SCN already issued and the reply submitted. All rights and contentions of respective parties on merits are kept open.

6. The challenge to Notification No. 9/2023- Central Tax dated 31 March 2023 and Notification No. 56/2023- Central Tax dated 28 December 2023, issued under Section 168A of the CGST Act/Delhi Goods & Services Tax Act, 2017 (DGST Act) is kept open to be raised afresh, if need so arises.

Notes:

¹ CGST Act

² GST