Case Law Details
Pasricha Enterprises Through Its Proprietor Mr. Deepak Pasricha Vs Commissioner Delhi Goods And Services Tax and Ors. (Delhi High Court)
Introduction: In a significant ruling, the Delhi High Court addressed the issue of due process in the adjudication of GST disputes. In the case of Pasricha Enterprises Through Its Proprietor Mr. Deepak Pasricha Vs Commissioner Delhi Goods And Services Tax and Ors., the court scrutinized the procedural fairness in handling responses to show cause notices under Section 73 of the Central Goods and Services Tax Act, 2017. This judgment sets a critical precedent for how GST Proper Officers must approach replies submitted by taxpayers.
Detailed Analysis: The petitioner, Pasricha Enterprises, contested an order demanding a penalty of Rs. 32,07,115.80. The contention revolved around the alleged under-declaration of output tax, excess claim of Input Tax Credit (ITC), and other discrepancies. Despite the petitioner submitting a detailed reply, the GST Proper Officer deemed the response unsatisfactory without substantive evaluation, leading to the demand notice.
Upon review, the Delhi High Court identified a procedural flaw in the adjudication process. The judgment emphasized that the GST Proper Officer’s duty is not merely to acknowledge the receipt of a reply but to consider its merits thoroughly. The court found that the officer had dismissed the detailed response as unsatisfactory without proper examination or engagement with the content, demonstrating a failure to consider the taxpayer’s explanation genuinely.
The court further highlighted that if additional information was necessary, it was incumbent upon the officer to seek the same from the petitioner explicitly. This step was overlooked, indicating a lack of due process in evaluating the taxpayer’s submissions.
Legal Implications
This ruling underscores several critical legal principles in the realm of GST adjudication:
- Due Process in Adjudication: Proper Officers must engage substantively with the replies to show cause notices, ensuring taxpayers’ responses are evaluated on merits.
- Opportunity for Clarification: If replies are deemed insufficient, officers should specifically request additional information, allowing taxpayers a fair chance to substantiate their claims.
- Procedural Fairness: The judgment reinforces the principle of procedural fairness in tax disputes, ensuring taxpayers are not penalized without a thorough and fair examination of their responses.
Conclusion: The Delhi High Court’s decision in the Pasricha Enterprises case serves as a crucial reminder of the principles of fairness and due diligence in GST adjudication processes. It mandates GST Proper Officers to thoroughly consider and engage with the replies submitted by taxpayers, ensuring a fair and transparent adjudication process. This ruling not only protects the rights of taxpayers but also enhances the credibility and accountability of the GST framework by reinforcing the need for procedural fairness in the examination of disputes.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns order dated 29.12.2023, whereby the show cause notice dated 26.09.2023, proposing a demand against the petitioner has been disposed and a demand of Rs. 32,07,115.80/- 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.
2. Learned counsel for the petitioner submits that a detailed reply dated 13.12.2023 to the show cause notice was filed, however, the impugned order dated 29.12.2023 does not take into consideration the reply submitted by the petitioner and is a cryptic order which merely records that reply was found not satisfactory and devoid of merits.
3. A perusal of the show cause notice shows that the Department has given specific details of alleged 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. To the said show cause notice, a detailed reply dated 13.12.2023 was furnished by the petitioner giving full disclosures under each of the heads.
4. The impugned order, however, after recording the narration, records that the reply uploaded by the tax payer is not satisfactory. It merely states that “neither the taxpayer nor their representative appeared for personal hearing despite giving sufficient opportunities, therefore, the undersigned is left with no other option but to issue ORC-07 on the basis of reply and documents available on the portal. And whereas, on examination of the reply/documents furnished by the taxpayer, it has been observed that since the reply is devoid of merits without any justification or proper reconciliation, the demand raised in SCN/DRC-01 is hereby upheld along with penalty.” The Proper Officer has opined that the reply is unsatisfactory.
5. The observation in the impugned order dated 13.12.2023 is not sustainable for the reasons that the reply filed by the petitioner is a detailed reply.
6. Proper officer had to at least consider the reply on merits and then form an opinion whether the explanation was sufficient or not. He merely held that no proper reply/explanation has been received which ex-facie shows that proper officer has not even looked at the reply submitted by the petitioner.
7. Further, if the Proper Officer was of the view that reply is incomplete and further details were required, the same could have been 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 order cannot be sustained and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order is set aside. The matter is remitted to the Proper Officer for re-adjudication.
9. As noticed hereinabove, the impugned order records that petitioner has not furnished the requisite details. Proper Officer is directed to intimate to the petitioner details/documents, as maybe required to be furnished by the petitioner within a period of one week from today. On such intimation being given, petitioner shall furnish the requisite explanation and documents within one week thereof. Thereafter, the Proper Officer shall re-adjudicate the show cause notice within a period of two weeks after giving an opportunity of personal hearing.
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.
Petition is disposed of in the above terms.
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