Motilal And Sons Vs Assistant Commissioner DGST (Delhi High Court)
Summary: The Delhi High Court, in M/s Motilal And Sons Vs Assistant Commissioner DGST Ward 201, 207, 208 & Anr., set aside a GST adjudication order dated 20 August 2024 passed under Section 73(9) of the Central Goods and Services Tax Act, 2017, holding that an order which fails to disclose reasons for rejecting the taxpayer’s explanation cannot be sustained. The dispute concerned the financial year 2019-20, covering April 2019 to March 2020. The petitioner challenged the demand confirmed pursuant to a show cause notice dated 29 May 2024, notwithstanding its detailed written response submitted through Form GST DRC-06 on 26 June 2024.
The show cause notice raised four principal issues: reconciliation of GSTR-01 with GSTR-09, reconciliation of e-way bill turnover with GSTR-01, scrutiny of input tax credit availed, and reversal of ITC attributable to non-business transactions and exempt supplies. The adjudicating authority recorded that the petitioner had failed to attend the personal hearing scheduled for 2 July 2024 and had also not appeared following a reminder dated 26 July 2024 fixing another hearing on 1 August 2024. Although the authority acknowledged receipt of the taxpayer’s written reply, it rejected the explanation as incomprehensible, unclear and ambiguous, without setting out any substantive reasons addressing the issues raised in that reply. Consequently, the proposed demand was confirmed.
The High Court examined the impugned order and found that the adjudicating authority had merely declared the petitioner’s reply unsatisfactory without explaining why its submissions deserved rejection. The Court held that the absence of reasoning rendered the order unsustainable. During the proceedings, counsel for the respondents submitted that the interests of justice would be served by permitting the tax authorities to reconsider the entire matter instead of retaining the petition before the Court.
Accepting this course, the Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja allowed the writ petition and quashed the order dated 20 August 2024. The competent authority was directed to dispose of the original show cause notice afresh, keeping in view the High Court’s observations regarding the necessity of providing reasons. Importantly, the Court expressly preserved all rights and contentions of both parties on the merits. The judgment therefore addresses the inadequacy of reasoning in the adjudication order without determining the underlying GST liability or the substantive correctness of the disputed ITC and turnover reconciliation issues.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
Allowed, subject to all just exceptions.
The application stands disposed of.
W.P.(C) 14916/2024, CM APPL. 62590/2024 (Interim Relief)
1. The writ petitioner impugns the final order dated 20 August 2024 framed under Section 73(9) of the Central Goods and Services Tax Act, 2017 [“CGST Act”]. The aforesaid order was preceded by a Show Cause Notice [“SCN”] dated 29 May 2024 and in response to which the petitioner had furnished a detailed explanation. However, the aforesaid has come to be cursorily rejected with the authority observing as follows:-
“The taxpayer M/s Moti Lal & Sons, GSTIN- 07AAAFM7180KlZ2 was served upon a notice under section 73 of CGST/DGST Act, 2017 regarding (Voluntary Payment Intimation, if applicable) along with GST DRC-01vide reference No. ZD070524040619A (Summary of SCN) on 29.05.2024 for the period April-2019 to March-2020, asking him to furnish the reply by 29.06.2024 and avail personal hearing 02.07.2024.
In response to DRC-01 issued to the taxpayer u/s 73 of CGST/ DGST Act, 2017 for the year 2019-20, the taxpayer filed reply through DRC-06 on 26.06.2024, but not availed personal hearing on the scheduled date.
Observing the principle of natural justice reminder was issued on 26.07.2024 and personal hearing was fixed for 01.08.2024. However, till date none has appeared in personal hearing to explain the issues mentioned in the Show Cause Notice.
In view of the above, the taxpayer has failed to attend the personal hearing despite ample opportunity and after having gone through the reply filed by the taxpayer in r/o following points raised in the Show Cause Notice.
(1) Reconciliation of GSTR-01 with GSTR-09
(2) Reconciliation of E-way bill turnover with GSTR-0 1
(3) Scrutiny of ITC availed
(4) ITC to be reversed on non-business transactions & exempt supplies
The explanation given in the reply is not comprehensible, conceivable, not perspicuous and is ambiguous.
Apart from above, no explanation could be given in want of personal hearing by the taxpayer till date. Therefore, the proposed demand mentioned in the Show Cause Notice is confirmed”
2. As is manifest from the above, all that the competent authority has chosen to observe is that the reply has not been found to be satisfactory. Since the order impugned is bereft of any reasoning, it is rendered unsustainable.
3. On our expressing the aforesaid opinion, Mr. Aggarwal, learned counsel for the respondent, submitted that rather than the matter being retained on our board, the ends of justice would warrant the respondents being accorded an opportunity to revisit the entire issue.
4. Accordingly, we allow the present writ petition and quash the impugned order dated 20 August 2024.The competent authority shall now proceed to dispose of the SCN afresh and bearing in mind the observations made hereinabove.
5. All rights and contentions of respective parties on merit are kept open.
