GST Demand Order Quashed: Unreasoned Order Demonstrates Non-Application of Mind

Summary in Key Points:

Issue: Was the demand order valid when it was unreasoned and demonstrated a lack of application of mind?
Facts: The impugned order under Section 73 followed a show cause notice to which the assessee submitted a detailed response. The order stated the reply was “not comprehensive, conceivable, and not perspicuous” and that no opinion could be formed without a personal hearing, despite the assessee allegedly being given ample opportunity.
Decision: The court held that the respondent authority used a template response, merely stating the reply was incomprehensible. This exhibited a clear non-application of mind. The impugned order, being unreasoned, was set aside.

Important Note: This decision highlights the importance of reasoned orders. Simply stating that a reply is “not comprehensive” without specifying why, and using boilerplate language, is insufficient. It demonstrates a lack of proper consideration of the assessee’s submissions. The court’s decision emphasizes that tax authorities must apply their minds to the facts and arguments presented and provide specific reasons for their conclusions. A lack of reasoning invalidates the order.

HIGH COURT OF DELHI

ICICI Lombard General Insurance Co. Ltd.

Union of India

Yashwant Varma and Dharmesh Sharma, JJ.

W.P.(C) 16744 of 2024

DECEMBER 4, 2024

Yogendra Aldak, Kuna Kapoor and Ms. Purvi Sinha, Advs. for the Petitioner. Premtosh K. Mishra, Manish Vashisth, Ms. Sanya Kalsi, Naved Ahmed, Vivek Kr. Singh and Shubham Kr., Advs. and Avishkar Singhvi, ASC for the Respondent.

ORDER

CM APPL. 70903/2024 (Ex.)

Allowed, subject to all just exceptions.

The application stands disposed of.

W.P.(C) 16744/2024 & CM APPL. 70902/2024 (Interim Stay)

1. The writ petitioner is aggrieved by the final order referable to Section 73 of the Central Goods and Services Tax Act, 201 which has come to be passed by the Goods and Services TaxOfficer, observing as follows:-

“Whereas, a notice GST DRC-01 was issued to the taxpayer for the Financial Year 2019-20 along with the details of proposed tax, interest and Penalty with the direction to pay the due tax along with interest and Penalty along with opportunity of personal hearing.

And whereas, the taxpayer was also conveyed that if the said demand has already been paid or in case any objection, the taxpayer may file objections in DRC-06 within the stipulated period of time given in the notice and also granted opportunity of personal hearing to explain the same.

And Whereas, the taxpayer submitted its reply in DRC-06, but the same is found not comprehensive, conceivable, perspicuous and also no one appeared on behalf of the firm to provide explanation/clarification with regard to the reply submitted against DRC-01.

In view of the above, as the taxpayer failed to attend the personal hearing despite ample opportunity given and after having gone through the reply filed on the GST portal by the taxpayer in respect of each point, no opinion could be drawn in absence of personal hearing by the taxpayer. Since, the reply filed by the taxpayer is not comprehensible, conceivable, perspicuous and ambiguous, therefore, the proposed demand mentioned in the Show Cause Notice i.e. conveyed through notice DRC-01 is confirmed.”

2. We take note of the fact that pursuant to the original Show Cause Notice which had come to be issued, the petitioner had furnished a detailed response. However, the same has been perfunctorily brushed aside and the observations as extracted hereinabove rendered.

3. We take note of an identical challenge which formed the subject matter of Xerox India Limited v. Assistant Commissioner W.P.(C) 16451/2024 decided on 28 November 2024. Dealing with an identically worded order framed by the said GST Officer, we had observed as follows:-

“3. We are constrained to observe that the order as passed follows lines identical to those which have come before us and have fallen for our notice on earlier occasions. The Assistant Commissioner has clearly adopted a template where the only reason assigned is that the reply filed was “not comprehensible, conceivable, not perspicuous and is ambiguous”. This clearly exhibits an abject non-application of mind and the officer repeatedly employing identical phraseology to deal with such matters.

4. Despite caution having been sounded by us of the said language having attained the status of a template and the concerned officer having chosen to replicate an identical pattern while framing orders, in Indian Highways Management Company Limited v. Assistant Commissioner & Anr. W.P.(C) 15701/2024 dated 12 November 2024, we find that the officer has failed to make any amends.

5. Accordingly, while we are convinced that the impugned order being wholly unreasoned is liable to be set aside on this short score alone, we also require Mr. Aggarwal, learned counsel for the respondents to place a copy of this order before the Principal Commissioner concerned, so that an appropriate review of the manner in which such applications of assessees are adjudicated is undertaken.”

Following the aforesaid reasoning, we find ourselves unable to sustain the impugned order dated 31 August 2024.

4. We, consequently, quash the aforesaid order and allow the present writ petition.

5. The respondents shall have liberty to proceed afresh in light of the SCN already issued and the reply submitted. All rights and contentions of respective parties on merits are kept open.

6. The challenge to Notification No.9/2023- Central Tax dated 31 March 2023 and Notification No. 56/2023- Central Tax dated 28 December 2023, issued under Section 168A of the CGST Act/Delhi Goods & Services Tax Act, 2017is kept open to be raised afresh, if need so arises.