Demand order passed without considering reply to SCN is not sustainable

Engineering Aids Vs State Tax Officer (Circle) (Madras High Court)

The Hon’ble Madras Court in M/s. Engineering Aids v. State Tax Officer and Ors. [W.P. No.28124 of 2022 dated February 15, 2023] has quashed the demand order passed by the Revenue Department, on the grounds that the reply filed by the assessee to the Show Cause Notice (“SCN”) was not considered even though the same was received by the Revenue Department. Remanded the matter back for fresh consideration on merits and in accordance with the law. Further, directed the Revenue Department to pass final orders, after adhering to the principles of natural justice and providing the opportunity of hearing to assessee.

Facts:

This petition has been filed by M/s. Engineering Aids (“the Petitioner”) challenging the summary order in Form GST DRC-07 dated April 5, 2022 (“the Impugned Order”) passed by the Revenue Department (“the Respondent”) under Section 74 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) for demand and recovery of tax, on the grounds of violation of principles of natural justice, contending that only the Impugned Order was served and not the detailed order nor has it been uploaded on the GST portal. Further, the reply in Form GST DRC-06 dated February 25, 2022 (“the Reply”) to the SCN issued in Form GST DRC-01 dated February 17, 2022 (“the SCN”) was not considered by the Respondent while passing the Impugned Order.

Issue:

Whether the Impugned Order can be passed without considering the Reply to the SCN?

Held:

The Hon’ble Madras High Court in W.P. No.28124 of 2022 held as under:

• Noted that, the Petitioner has also filed Form GST DRC-06, dated February 25, 2022 which confirms that the Reply sent by the Petitioner was received by the Respondent.
• Observed that, there was no reference of the Reply in the Impugned Order and the Reply was not considered by the Respondent while passing the Impugned Order.
• Held that, the respondents have not considered the Reply even though the same was received by them hence the Impugned Order has to be quashed.
• Quashed the Impugned Order.
• Remanded the matter back to the Respondent for fresh consideration on merits and in accordance with the law.
• Directed the Respondent to pass final orders within 12 weeks, after adhering to the principles of natural justice and providing the opportunity of hearing to the Petitioner.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

This writ petition has been filed challenging the impugned order dated 05.04.2022 passed under Section 74 of the Goods and Services Tax Act, 2017 by the respondents on the ground of violation of principles of natural justice.

2. The petitioner contends that even though they have sent a reply dated 25.02.2022 in Form GST DRC-06 to the show cause notice issued by the respondents dated 17.02.2022, in Form GST DRC-01, the same has not been considered in the impugned order dated 05.04.2022 by the respondents.

3. The petitioner has also contended that only a summary of the order dated 05.04.2022 passed under Form GST DRC-07 was served on him and not the detailed order. According to the petitioner, the said detailed order has also not been uploaded in the web portal of the On the last hearing date i.e. on 06.02.2023, this Court directed the learned Additional Government Pleader for the respondents to get instructions as to whether the reply sent by the petitioner on 25.02.2022 was received by the respondents or not.

4. Today, the learned Additional Government Pleader appearing for the respondents is unable to inform this Court as to whether the aforesaid reply dated 25.02.2022 was received by the respondents or not. The petitioner has also filed Form GST DRC-06, dated 25.02.2022, which confirms that the reply dated 25.02.2022 sent by the petitioner was received by the respondents. However, as seen from the impugned order dated 05.04.2022, there is no reference to the reply dated 25.02.2022 and the said reply has also not been considered in the impugned order. The respondents have also placed before this Court the speaking order, dated 04.2022, which they claim was also uploaded in the web portal along with the summary of the order. The same is disputed by the petitioner, who would contend that only the summary of the order, dated 05.04.2022 was served on the petitioner and not the speaking order. Since the petitioner has been able to convince this Court that even though they have sent a reply dated 25.02.2022 to the show cause notice sent by the respondents, the same has not been considered by the respondents in the impugned order, dated 05.04.2022, hence, there is no necessity for this Court to adjudicate on the second ground raised by the petitioner viz., non service of the speaking order dated 05.04.2022 on them. Since, it is made clear that the respondents have not considered the reply, dated 25.02.2022, even though the same was received by them, the impugned order, dated 05.04.2022 has to be quashed and the matter will have to be remanded back to the respondents for fresh consideration on merits and in accordance with law.

5. For the foregoing reasons, the impugned order, dated 05.04.2022 passed by the respondents is hereby quashed and the matter is remanded back to the respondents for fresh consideration on merits and in accordance with law. The respondent is directed to pass final orders, within a period of twelve weeks from the date of receipt of a copy of this order, after adhering to the principles of natural justice and after affording a personal hearing to the petitioner.

6. In view of the quashing of the impugned order, the consequential bank attachment notice issued to the 3^rd respondent bank is also quashed.

7. With the aforesaid directions, this writ petition is disposed of. No costs. Consequently, connected miscellaneous petitions are closed.

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