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Case Law Details

Case Name : Laxmi Traders Proprietor Dipanshu Garg Vs Principal Commissioner of Gst Department of Trade And Taxes & Anr (Delhi High Court)
Appeal Number : W.P.(C) 4977/2024
Date of Judgement/Order : 05/04/2024
Related Assessment Year :

Laxmi Traders Proprietor Dipanshu Garg Vs Principal Commissioner of GST Department of Trade And Taxes & Anr (Delhi High Court)

The case of Laxmi Traders, represented by Dipanshu Garg, against the Principal Commissioner of GST Department of Trade and Taxes & Anr, brought before the Delhi High Court, challenges the validity of a demand order issued without prior issuance of a show cause notice.

The Delhi High Court’s judgment, dated 07.02.2024, highlights a crucial procedural lapse in the demand creation process. Despite the purported order under Section 73 of the Central Goods and Services Tax Act, 2017, no show cause notice or DRC-01 was issued to the petitioner beforehand. The absence of this essential procedural step is a clear violation of Section 73, which mandates the issuance of a show cause notice prior to passing any order creating a demand.

The court’s scrutiny reveals that while a show cause notice proposing to cancel the GST registration was indeed issued on 16.06.2023, it was subsequently dropped on 25.08.2023, based on the petitioner’s response. However, this does not absolve the authorities from the obligation to issue a fresh show cause notice specifically concerning the demand creation.

The judgment emphasizes the significance of adhering to principles of natural justice. The absence of a show cause notice deprives the petitioner of the opportunity to present their case adequately and respond to the allegations against them. As such, the court rightly quashes the impugned order on this procedural ground alone.

The court’s decision underscores that while the impugned order is set aside due to procedural irregularities, it does not delve into the merits of the contentions raised by either party. This clarification ensures that the rights and contentions of both parties remain unaffected, with the petitioner retaining the opportunity to contest any future proceedings initiated with proper adherence to procedural requirements.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. Petitioner impugns order dated 07.02.2024, whereby a demand has been created against the petitioner and the same has been set off against blocked ITC.

2. Issue notice. Notice is accepted by learned counsel appearing for respondents.

3. With the consent of parties, petition is taken up for final disposal.

4. Learned counsel for respondent No.1, under instructions submits that there does not appear to be any show cause notice or DRC-01 issued to the petitioner prior to passing of the impugned order.

5. The impugned order is purportedly an order passed under Section 73 of the Central Goods and Services Tax Act, 2017 [“the Act”], creating a demand.

6. Section 73 of the Act mandates issuance of show cause notice prior to passing an order creating a demand. In the instant case, admittedly, no show cause notice was issued to the petitioner prior to impugned order being passed.

7. A show cause notice dated 16.06.2023 was issued proposing to cancel the GST registration of the petitioner, however, the said proceedings were dropped by order dated 25.08.2023 upon consideration of the reply of the petitioner.

8. Since no show cause notice was issued prior to passing of impugned order, on the said technical ground alone, this order is liable to be set aside. The same is accordingly quashed.

9. It is clarified that it would be open to the respondents to pass an appropriate order after giving a proper show cause notice and an opportunity of personal hearing to the petitioner.

10. It is clarified that this Court has neither considered nor commented on the merits of contentions of either party and the impugned order has been set aside solely on the ground of infraction of principles of natural justice. All rights and contentions of the parties are reserved

11. Petition is accordingly disposed of in the above terms.

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