Seagull Maritime Agencies Private Limited. Vs Union of India & Ors (Delhi High Court)
The petitioner challenged two orders dated 04.12.2023 passed under Section 73 of the Central Goods and Services Tax Act, 2017, whereby demands of ₹18,04,132 and ₹1,43,59,445, including penalty, were raised pursuant to Show Cause Notices dated 20.09.2023 and 29.09.2023.
According to the petitioner, all business activities had been closed during the COVID-19 pandemic. Earlier, a Show Cause Notice dated 25.08.2020 had been issued proposing cancellation of the GST registration on the ground that returns had not been filed for a continuous period of six months. Thereafter, by order dated 19.09.2020, the GST registration was cancelled retrospectively with effect from 01.08.2020.
The petitioner submitted that it had no knowledge of the Show Cause Notices dated 20.09.2023 and 29.09.2023 because they had only been uploaded on the common portal and were neither served at its address nor by email. It was also submitted that, since the GST registration had been cancelled retrospectively, the petitioner did not check the GST portal.
The High Court noted that the Show Cause Notices contained separate heads relating to declaration of output tax, excess claim of Input Tax Credit (ITC), under-declaration of ineligible ITC, and ITC claimed from cancelled dealers, return defaulters and tax non-payers.
The Court further observed that the impugned orders dated 04.12.2023 merely recorded that no reply or explanation had been received from the taxpayer despite sufficient and repeated opportunities and, on that basis, ex parte demands were created under the CGST/DGST Act and Rules, 2017.
The High Court observed that the petitioner had been unable to access the Show Cause Notices or submit replies. Since the impugned orders had been passed solely because no reply had been filed, the Court held that they could not be sustained.
Accordingly, the Court set aside both orders dated 04.12.2023 and remitted the matter to the Proper Officer for fresh adjudication.
The Court directed the petitioner to file replies to the Show Cause Notices within two weeks. Thereafter, the Proper Officer was directed to re-adjudicate the Show Cause Notices after granting an opportunity of personal hearing and to pass a fresh speaking order in accordance with law within the period prescribed under Section 75(3) of the CGST Act.
The Court clarified that it had neither considered nor commented upon the merits of the parties’ contentions and that all rights and contentions were kept open. It also left open the challenge to Notification No. 9 of 2023 regarding the initial extension of time. The petition was disposed of in these terms.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns order dated 04.12.2023, whereby the impugned Show Cause Notices dated 20.09.2023 and 29.09.2023, proposing a demand against the petitioner have been disposed and a demand of Rs. 18,04,132.00 and Rs. 1,43,59,445.00 respectively 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. As per Petitioner he had closed all business activities during Covid-19 pandemic. However, Petitioner was issued a Show Cause Notice dated 25.08.2020, whereby the Petitioner was called upon to show cause as to why the registration be not cancelled on the ground “Any Taxpayer other than composition taxpayer has not filed returns for a continuous period of six months”. Pursuant thereto, impugned order of cancellation dated 19.09.2020 had been passed cancelling the GST registration w.e.f. 01.08.2020 i.e., a retrospective date.
3. Learned counsel for the Petitioner submits that Petitioner has no knowledge about the Show Cause Notice dated 20.09.20203 and 29.09.2023, as they were uploaded on the common poral and were not served to the Petitioner on his address or email, and considering that the GST of the Petitioner had been cancelled retrospectively he did not check the said portal.
4. Perusal of the Show Cause Notice dated 20.09.2023 and 29.09.2023 shows that the Department has given separate headings under declaration of output tax, excess claim Input Tax Credit [“ITC”], under declaration of ineligible ITC and ITC claim from cancelled dealers, return defaulters and tax non-payers.
5. Thereafter two impugned orders dated 04.12.2023, in reference to Show Cause Notice dated 20.09.2023 and 29.09.2023 were issued whereby after recording the narration, both the impugned orders record ex-parte demand is created. Both orders merely state that “Now, since no reply / explanation has been received from the taxpayer despite sufficient and repeated opportunities, which indicate that the taxpayer has nothing to say in the matter.
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In view of aforesaid circumstances, the undersigned is left with no other option but to create demand as ex-parte, in accordance with the provisions of CGST / DGST Act & Rules, 2017.”
6. As noticed hereinabove, the petitioner was unable to access the Show Cause Notices or reply to the said Show Cause Notices.
7. In view of the above, we are of the view that the impugned orders dated 04.12.2023 which have been passed solely because petitioner had not file a reply cannot be sustained. The matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned orders dated 04.12.2023 are set aside. The matter is remitted to the Proper Officer for re-adjudication.
8. Petitioner shall file reply to the Show Cause Notice within two weeks. 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.
9. 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.
10. The challenge to Notification No. 9 of 2023 with regard to the initial extension of time is left open.
11. Petition is disposed of in the above terms.
