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Case Law Details

Case Name : BAGGA Link Motors Limited Vs Commissioner State Goods And Services Tax Delhi & Anr. (Delhi High Court)
Appeal Number : W.P.(C) 5903/2024 & CM APPL. 24340/2024
Date of Judgement/Order : 26/04/2024
Related Assessment Year :

BAGGA Link Motors Limited Vs Commissioner State Goods And Services Tax Delhi & Anr. (Delhi High Court)

In a significant judgment, the Delhi High Court has quashed a tax demand of ₹10.4 crore against BAGGA Link Motors Limited. The court found that the Commissioner of State Goods and Services Tax (SGST) did not consider the detailed reply submitted by the petitioner on its merits. This case underscores the necessity for tax authorities to meticulously review and address the defenses presented by taxpayers before passing final orders.

Background of the Case

The dispute arose from a Show Cause Notice issued to BAGGA Link Motors Limited on September 23, 2023, proposing a tax demand of ₹10,43,36,362 under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act). The petitioner filed a comprehensive reply on October 23, 2023, addressing each allegation with supporting documentation. Despite this, the Commissioner issued an order on December 30, 2023, upholding the tax demand and penalties without adequately considering the petitioner’s detailed response.

Legal Proceedings and Arguments

The petitioner challenged the Commissioner’s order in the Delhi High Court, arguing that the order was cryptic and did not address the detailed reply. The petitioner’s counsel emphasized that the response included thorough explanations and supporting documents for each issue raised in the Show Cause Notice, such as under-declaration of output tax and excess claims of Input Tax Credit (ITC).

The court noted that the impugned order merely stated that the reply was incomplete and not supported by adequate documents, without engaging with the substantive arguments or evidence provided by the petitioner. The court observed that if the tax authorities found the reply lacking, they should have requested additional information instead of outright dismissing the reply.

Court’s Findings

The Delhi High Court found that the Commissioner failed to apply his mind to the detailed reply and supporting documents provided by BAGGA Link Motors. The court emphasized that administrative authorities must consider all relevant materials and provide a reasoned order reflecting due consideration of the taxpayer’s submissions.

The court highlighted several key points:

  • The petitioner’s reply was detailed and supported by documents.
  • The Commissioner did not specifically address the contentions or seek further clarifications from the petitioner.
  • The Commissioner’s order lacked a reasoned analysis of the petitioner’s defense.

Implications of the Judgment

The court set aside the impugned order and remitted the case back to the Proper Officer for re-adjudication. The petitioner was granted an additional 30 days to file a further reply. The Proper Officer is required to re-adjudicate the case, providing an opportunity for a personal hearing and issuing a fresh, reasoned order in accordance with Section 75(3) of the CGST Act.

This judgment reinforces the principle that tax authorities must engage substantively with the defenses raised by taxpayers and provide detailed reasons for their decisions. It also serves as a reminder that administrative orders must reflect a thorough consideration of all relevant materials to withstand judicial scrutiny.

Conclusion

The Delhi High Court’s decision in the BAGGA Link Motors Limited case underscores the importance of due process in tax adjudications. By quashing the ₹10.4 crore tax demand due to the Commissioner’s failure to consider the petitioner’s detailed reply, the court has set a precedent emphasizing the need for meticulous review and reasoned orders from tax authorities. This judgment not only provides relief to BAGGA Link Motors but also highlights the judiciary’s role in ensuring fair and transparent tax administration.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

Petitioner impugns order dated 30.12.2023 whereby the impugned Show Cause Notice dated 23.09.2023 proposing a demand of Rs 10,43,36,362.00/- against the petitioner had been disposed of and demand including penalty has been raised against the petitioner. The order has been passed under Section 73 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the Act).

2. Issue notice. Notice is accepted by learned counsel appearing for respondent. With the con-sent of the parties, petition is taken up for final disposal today.

3. Learned counsel for Petitioner submits that Petitioner had filed a detailed reply dated 23.10.2023, however, the impugned order dated 30.12.2023 does not take into consideration the reply submitted by the Petitioner and is a cryptic order.

4. Perusal of the Show Cause Notice dated 23.09.2023 shows that the Department has given reasons under separate headings i.e., under declaration of output tax; excess claim of Input Tax Credit [“ITC”]; Scrutiny of ITC availed; ITC to be reversed on non-business transaction and exempt supplies; under declaration of ineligible ITC and ITC claimed from cancelled dealers, return defaulters and tax non payers. To the said Show Cause Notice, a detailed reply was furnished by the petitioner giving response under each of the heads with supporting documents.

5. The impugned order, however, after recording the narration records that the reply uploaded by the taxpayer is incomplete, not duly supported by adequate documents and unable to clarify the is-sue. It states that “And whereas, the taxpayer had filed their objections/reply in DRC-06 and appeared personally. However, during the personal hearing, the taxpayer reiterated the contents of the reply filed in form DRC-06. On scrutiny of the same, it has been observed that the same is incomplete, not duly supported by adequate documents and unable to clarify the issue. Since, the reply filed is not clear and satisfactory, the demand of tax and interest conveyed via DRC-01 is confirmed.” The Proper Officer has opined that the reply is incomplete, not duly supported by adequate documents and unable to clarify the issue.

6. The observation in the impugned order dated 30.12.2023 is not sustainable for the reasons that the reply dated 23.10.2023 filed by the Petitioner is a detailed reply with supporting documents. Proper Officer had to at least consider the reply on merits and then form an opinion. He merely held that the reply is incomplete, not duly supported by adequate documents, unable to clarify the issue which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner.

7. Further, if the Proper Officer was of the view that any further details were required, the same could have been specifically sought from the Petitioner. However, the record does not reflect that any such opportunity was given to the Petitioner to clarify its reply or furnish further documents/details.

8. In view of the above, the impugned order dated 30.12.2023 cannot be sustained and is set aside. The show cause notice is remitted to the Proper Officer for re-adjudication.

9. Petitioner may file a further reply to the Show Cause Notice within a period of 30 days from today. Thereafter, the Proper Officer shall re-adjudicate the Show Cause Notice after giving an opportunity of personal hearing and shall pass a fresh speaking order in accordance with law within the period prescribed under Section 75 (3) of the Act.

10. It is clarified that this Court has neither considered nor commented upon the merits of the contentions of either party. All rights and contentions of parties are reserved.

11. Petition is disposed of in the above terms.

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