Case Law Details
Knowledge Infrastructure Systems Pvt Ltd Vs Union of India & Ors (Delhi High Court)
The case of Knowledge Infrastructure Systems Pvt Ltd Vs Union of India & Ors before the Delhi High Court revolves around a dispute regarding a demand of tax and penalty under the Central Goods and Services Tax Act, 2017. The petitioner challenges an order where a substantial demand was raised against them, contending that their detailed reply to the Show Cause Notice was not considered adequately.
The petitioner, Knowledge Infrastructure Systems Pvt Ltd, raised objections against the demand raised by the Department under Section 73 of the CGST Act, 2017. They argued that their reply to the Show Cause Notice, submitted on 08.12.2023, was comprehensive and addressed the issues raised. However, the impugned order dated 30.12.2023 dismissed their reply as unsatisfactory, citing reasons such as incompleteness and lack of proper documentation.
The Delhi High Court scrutinized the contentions of both parties. It observed that the Department’s decision to confirm the demand without adequately considering the petitioner’s reply was unsustainable. The court emphasized that the Proper Officer should have evaluated the reply on its merits before reaching a conclusion. Furthermore, if further details or documents were needed, the petitioner should have been given the opportunity to provide them.
The court found fault with the process followed by the Proper Officer and directed a remittance of the matter for re-adjudication. It instructed the Proper Officer to intimate the petitioner about any specific details or documents required for re-evaluation. The petitioner was granted the opportunity to furnish additional explanation and documents, following which the Proper Officer was mandated to re-adjudicate the matter and pass a fresh order within the prescribed timeline.
It’s crucial to note that the court clarified that its decision neither favored nor opposed the contentions of either party, maintaining neutrality. Additionally, it left open the challenge to Notification No. 9 of 2023 regarding the initial extension of time.
The Delhi High Court’s decision in the case of Knowledge Infrastructure Systems Pvt Ltd Vs Union of India & Ors highlights the importance of fair procedure in adjudicating tax disputes under the GST Act. The court’s directive for re-adjudication underscores the significance of proper evaluation of replies submitted by taxpayers and providing them with opportunities to address any deficiencies.
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 against the petitioner has been disposed of and a demand of Rs 2,72,81,448.00 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. Learned counsel for Petitioner submits that a detailed reply dated 08.12.2023 was filed to the Show Cause Notice, however, the impugned order dated 30.12.2023 does not take into consideration the reply submitted by the petitioner and is a cryptic order.
3. Perusal of the Show Cause Notice shows that the Department has given separate headings i.e., excess claim Input Tax Credit [“ITC”]; and ITC to be reversed on non-business transactions and exempt supplies. To the said Show Cause Notice, a detailed reply 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 clear and satisfactory. It merely states that “The taxpayer filed their reply. On scrutiny of the same, it has been observed that the same is not acceptable as incomplete, not duly supported by adequate documents, without proper justification and thus 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, with the direction to deposit the amount mentioned in DRC-07 within three months from the date of receipt of this demand notice, failing which recovery proceedings u/s 79 of CGST Act will be initiated and the actions as per law will be initiated without further reference.” The Proper Officer has opined that the reply is unsatisfactory and incomplete.
5. The observation in the impugned order dated 30.12.2023 is not sustainable for the reasons that the reply filed by the petitioner is a detailed reply. Proper Officer had to at least consider the reply on merits and then form an opinion whether the reply was unsatisfactory. He merely held that the reply is incomplete, not duly supported by adequate documents and is not clear and unsatisfactory which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner.
6. Further, if the Proper Officer was of the view that reply is unsatisfactory, incomplete and not duly supported by adequate documents, and if any further details were required, the same could have been specifically sought for 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.
7. 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 dated 30.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication.
8. As noticed hereinabove, the impugned order records that petitioner’s reply is incomplete, not duly supported by adequate documents and unsatisfactory. Proper Officer is directed to intimate to the petitioner details/documents, as maybe required to be furnished by the petitioner. Pursuant to the intimation being given, petitioner shall furnish the requisite explanation and documents. 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.
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