Case Law Details
Oriental Trimex Export Pvt Ltd Vs Commissioner of Delhi Goods And Services Tax & Anr. (Delhi High Court)
In the case of Oriental Trimex Export Pvt Ltd vs Commissioner of Delhi Goods And Services Tax & Anr., the Delhi High Court addressed the legality of an order passed under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act), concerning a demand raised against the petitioner, Oriental Trimex Export Pvt Ltd (the petitioner). The court’s decision primarily focused on procedural fairness and the duty of the tax authority to consider the petitioner’s detailed submissions before passing an adverse order.
The issue arose from a Show Cause Notice (SCN) dated 02.12.2023, which proposed a substantial demand of Rs. 3,11,54,338.00 against the petitioner. The notice alleged irregularities related to Input Tax Credit (ITC) claims, specifically scrutinizing ITC availed and claims from canceled dealers, return defaulters, and tax non-payers. In response to this SCN, the petitioner diligently filed a comprehensive reply on 15.12.2023, accompanied by supporting documents addressing each allegation raised under different headings.
Despite the petitioner’s detailed response, the impugned order dated 29.04.2024 disposed of the SCN in a manner that the court deemed unsatisfactory. The order merely stated that the petitioner had submitted incomplete supporting documents on the GST Portal in support of availing benefits related to canceled dealers. It directed the issuance of a Demand-cum-Show Cause Notice (DRC-07) for the alleged default amount, without sufficiently engaging with the petitioner’s submissions or providing an opportunity for clarification.
The Delhi High Court, upon hearing the petitioner’s plea, identified several critical flaws in the impugned order:
- Failure to Consider Petitioner’s Reply: The court observed that the order did not demonstrate a proper consideration of the petitioner’s detailed reply dated 15.12.2023. Instead, it summarily concluded that incomplete documents were submitted, without indicating how or why the documents were considered incomplete.
- Lack of Reasoned Decision: The court emphasized that the tax authority is obligated to apply its mind to the submissions made by the petitioner and provide a reasoned decision based on merits. In this case, the court found that the order lacked such application of mind and reasoned analysis.
- Denial of Opportunity: It was noted that if the tax authority required further details or clarifications, it should have specifically sought these from the petitioner before finalizing its decision. However, there was no record of such opportunity being given, which compromised the principles of natural justice.
In light of these observations, the Delhi High Court concluded that the impugned order could not be sustained. It set aside the order dated 29.04.2024 and remitted the SCN back to the Proper Officer for re-adjudication. The court directed the petitioner to file a further reply within 30 days and mandated the Proper Officer to re-adjudicate the matter after affording the petitioner an opportunity of a personal hearing.
Importantly, the court clarified that its decision did not delve into the substantive merits of the case, focusing instead on procedural irregularities. All substantive rights and contentions of the parties were expressly preserved for consideration during the re-adjudication process.
This case underscores the significance of procedural fairness in tax adjudication. It reinforces the principle that tax authorities must diligently review and consider all submissions made by taxpayers before passing adverse orders. Moreover, it highlights the court’s role in ensuring that due process is followed, thereby safeguarding the rights of taxpayers against arbitrary or summary actions by administrative authorities.
In conclusion, the Delhi High Court’s decision in Oriental Trimex Export Pvt Ltd v. Commissioner of Delhi Goods And Services Tax & Anr. serves as a reminder of the judiciary’s commitment to upholding procedural fairness and adherence to the rule of law in tax matters. By setting aside the impugned order and ordering re-adjudication with proper opportunity for the petitioner to be heard, the court reinforces the importance of fair administrative practices in the realm of tax law.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns order dated 29.04.2024 whereby the Show Cause Notice dated 02.12.2023 proposing a demand of Rs. 3,11,54,338.00/- against the petitioner has been disposed of and a demand including penalty has been created 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 consent 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 15.12.2023. He submits that a reminder notice was issued to the Petitioner on 04.03.2024 which was also duly replied to by the Petitioner on 02.04.2024. However, the impugned order dated 29.04.2024 does not take into consideration the reply submitted by the Petitioner and is a cryptic order.
4. Perusal of the Show Cause Notice dated 02.12.2023 shows that the Department has raised grounds under separate headings i.e., excess claim of Input Tax Credit [“ITC”]: Scrutiny of ITC availed; and ITC claimed from cancelled dealers, return defaulters & 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 merely records that the tax payer has submitted incomplete supporting documents on the GST Portal in support of availing the benefit of cancelled dealer. It states that “In response to the SCN issued to the taxpayer to submit reply/explanation alongwith the relevant documents, it has been observed that the taxpayer has submitted the supporting incomplete documents on GST Portal in support of availing the benefit of cancelled dealer. Hence the Proper Officer is left with no other option but to proceed for DRC-07 against the taxpayer with the direction to deposit the same at earliest. Now as per GST Act, 2017 DRC-07 is hereby issued.” The Proper Officer has opined that incomplete supporting documents have been submitted on the GST Portal in support of availing the benefit of cancelled dealer.
6. The observation in the impugned order dated 29.04.2024 is not sustainable for the reasons that the reply dated 15.12.2023 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 that the tax payer has submitted incomplete supporting documents on the GST Portal in support of availing the benefit of cancelled dealer which ex-facie shows that the 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 29.04.2024 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.
Author Bio
