An assessment order without proper reasoning is invalid.
Unreasoned Demand Order Set Aside; Lack of Application of Mind
Issue: Whether a demand order passed under Section 73 of the CGST Act, 2017, should be set aside when it is unreasoned and reflects a lack of application of mind, particularly when a detailed reply was submitted by the assessee.
Facts:
- The respondents-department issued a show cause notice to the petitioner-assessee concerning the tax period from April 2019 to March 2020.
- The petitioner submitted a detailed reply addressing the issues raised in the show cause notice.
- The respondents rejected the petitioner’s reply, stating that the petitioner failed to attend a personal hearing.
- The respondents also claimed that the petitioner’s reply was unclear, ambiguous, and incomprehensible.
- Consequently, the respondents confirmed the proposed demand by passing an order dated August 25, 2024.
- The petitioner challenged the order on the ground that it was unreasoned.
Decision:
- The court held that in Xerox India Limited v. Assistant Commissioner, an order was set aside in similar circumstances on the ground that it lacked reasoning and reflected non-application of mind.
- Following the judgment in Xerox India Limited, the impugned order was set aside.
- However, the respondents were allowed to finalize the show cause notice proceedings, bearing in mind the reply furnished by the petitioner.
Key Takeaways:
- Reasoned Orders: Orders passed by tax authorities must be reasoned and reflect a proper application of mind.
- Lack of Application of Mind: Unreasoned orders or orders based on vague or unsubstantiated grounds indicate a lack of application of mind.
- Detailed Reply: When an assessee submits a detailed reply, the authorities must consider it properly and provide reasons for rejecting it.
- Personal Hearing: While failure to attend a personal hearing can be a ground for adverse action, it should not be the sole basis for rejecting a detailed reply.
- Precedent: Courts rely on precedents set in similar cases to ensure consistency in judicial decisions.
- Opportunity to Re-Adjudicate: Even when an order is set aside, the authorities are often given an opportunity to re-adjudicate the matter after considering the relevant submissions.
- The court is reinforcing the need for tax authorities to provide reasoned orders, and to properly consider tax payer replies.
HIGH COURT OF DELHI
Sarens Heavy Lift India (P.) Ltd.
v.
Assistant Commissioner DGST
Yashwant Varma and Dharmesh Sharma, JJ.
W.P.(C) 16300 of 2024
DECEMBER 4, 2024
Pradeep Singh Rawat, Adv. for the Petitioner. Ms. Renu, Kamlesh Kumar Mishra, Ms. Shivani Verma, Fareeduddin, Swagat Gupta and Prem Shankar Jha, Advs. for the Respondent.
ORDER
1. The writ petitioner is aggrieved by the final order referable to Section 73(9) of the Central Goods and Services Tax Act, 2017 [“Act”] which has come to be passed and in terms of which a Show Cause Notice [“SCN”] dated 30 May 2024 pertaining to the tax period April 2019 to March 2020 has come to be finalized.
2. From the record, we gather that on receipt of the aforesaid notice, the petitioner had furnished a detailed reply on 12 June 2024. However and on consideration thereof, all that the Assistant Commissioner has chosen to observe is as follows: –
“In view of the above, as the taxpayer has failed to attend the personal hearing despite ample opportunity given and after having gone through the reply filed by the taxpayer in r/o each point no explanation could be given in want of personal hearing by the taxpayer till date. Since, the reply filed by the taxpayer is not comprehensible, conceivable, not perspicuous and is ambiguous. Therefore, the proposed demand mentioned in the Show Cause Notice is confirmed.”
3. While dealing with an identically worded order passed by the said officer, we had in Xerox India Limited v Assistant Commissioner1 held 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., 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.
6. The writ petition is, accordingly, allowed. For reasons assigned above, the impugned order of 16 August 2024 is quashed and set aside. We leave it open to the respondents to proceed further in terms of the earlier SCN issued in accordance with law and bearing in mind the reply which had been submitted by the writ petitioner.
7. All rights and contentions of respective parties on merits are kept open.”
Accordingly, we for the aforesaid reasons, find ourselves unable to sustain the final order.
4. We accordingly allow the instant writ petition and quash the order dated 25 August 2024. However, we leave it open for the respondents to finalize the SCN proceedings bearing in mind the reply as furnished by the writ petitioner. All rights and contentions of the respective parties on merits are kept open.
5. The writ petition shall stand disposed of on the above terms.