GST Demand Order Set Aside for Lack of Reasoning and Consideration of Assessee's Response

GST Demand Order Set Aside for Lack of Reasoning and Consideration of Assessee’s Response

Summary in Key Points:

Issue: Whether a GST demand order passed under Section 73 is valid when the tax authority fails to consider the assessee’s response to the show cause notice (SCN) and provide reasoning for its decision.
Facts: The assessee challenged a demand order issued under Section 73. The tax authority claimed that the assessee did not address the demand issue in their reply to the SCN. However, the authority failed to provide any reasoning or even acknowledge the assessee’s response in the demand order.
Decision: The High Court set aside the demand order and remanded the matter for fresh consideration, emphasizing the need for the tax authority to consider the assessee’s response and provide proper reasoning for its decision.

Decision:

The High Court ruled in favor of the assessee, setting aside the demand order and remanding the matter back to the tax authority. The court highlighted the following:

Lack of Reasoning: The tax authority failed to provide any reasons or justification for upholding the demand, rendering the order arbitrary.
Ignoring Assessee’s Response: The authority did not even acknowledge or consider the assessee’s response to the SCN, which is a violation of the principles of natural justice.
Remand for Fresh Consideration: The matter was remanded to the tax authority to reconsider the demand after duly considering the assessee’s response and providing proper reasoning for its decision.

Important Note: This case emphasizes the importance of providing reasoned orders and considering the assessee’s submissions in GST proceedings. Tax authorities cannot simply ignore the assessee’s response and issue demand orders without providing proper justification. This decision reinforces the principles of natural justice and ensures that taxpayers are given a fair opportunity to present their case and understand the reasons for any adverse decisions against them.

HIGH COURT OF DELHI

Syndicate Bank

Department of Trade and Taxes

Yashwant Varma and Dharmesh Sharma, JJ.

W.P.(C) 16372 of 2024
CM APPL. 69051 of 2024 (Interim Relief)

NOVEMBER 27, 2024

Prashanth Shivadass, Devashish Marwah and Sampath K.M., Advs. for the Petitioner. Udit Malik, ASC, Vishal Chanda and Ms. Rima Rao, Advs. for the Respondent.

ORDER

CM APPL. 69052/2024 (Ex.)

Allowed, subject to all just exceptions.

The application stands disposed of.

W.P.(C) 16372/2024 & CM APPL. 69051/2024 (Interim Relief)

1. The writ petitioner has approached this Court aggrieved by the order dated 20 August 2024 passed by the Goods and Services Tax [“GST”] Officer concluding proceedings referable to Section 73 of Central Goods and Services Tax Act, 2017.

2. On going through the final order passed, we find that insofar as issue Nos. 1 and 3 are concerned, the GST Officer has observed as follows:-

” Under declaration of output tax: Reconciliation of GSTR-01 with GSTR-09: The taxpayer in its reply has not addressed/replied the issue under the demand. Hence, the demand of Rs. 11491237 in CGST and SGST each along with interest and penalty is created.

xxxx xxxx xxxx

Under declaration of Ineligible ITC: ITC: The taxpayer has given a vague reply without proper reasoning and documents viz invoices etc. therefore demands of Rs. 534477 in the CGST and SGST alongwith interest and penalty is created.”

3. As is manifest from the above extracts, the authority has failed to assign or accord any reasoning or even allude to the response which had been submitted pursuant to the Show Cause Notice [“SCN”] which was issued. In view of the above, we are of the opinion that the said order, being unreasoned, would not sustain.

4. Faced with our aforenoted tentative conclusion, Mr. Malik, learned counsel for the respondent submitted that rather than the matter being kept pending on the board of this Court, the ends of justice may merit the matter being remanded for consideration of the GST Officer afresh.

5. Accordingly, we allow the instant writ petition and quash the impugned order dated 20 August 2024. It shall be open for the GST Officer to examine and conclude the SCN proceedings afresh and in accordance with law.