Proper Officer Has To Consider Reply On Merits And Then Form An Opinion: Delhi High Court

The Delhi High Court has held that the proper officer has to consider the reply on merits and then form an opinion.

The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that the proper officer merely held that the reply is incomplete, not clear, and unsatisfactory, which ex-facie shows that the proper officer has not applied his mind to the reply submitted by the petitioner.

The petitioner, Canara Bank, has challenged the order by which the Show Cause Notice proposing a demand of Rs. 20,07,15,517.00 against the petitioner has been disposed of and a demand including a penalty has been raised against the petitioner. The order has been passed under Section 73 of the Central Goods and Services Tax Act, 2017.

The petitioner contended that it has filed a detailed reply; however, the order does not take into consideration the reply submitted by the petitioner and is a cryptic order.

The Show Cause Notice shows that the Department has given separate headings, i.e., excess claim input tax credit (ITC); under the declaration of ineligible ITC, ITC will be reversed on non-business transactions and exempt supplies; under the declaration of ineligible ITC, ITC will be claimed from cancelled dealers, return defaulters, and tax non-payers. To the Show Cause Notice, a detailed reply was furnished by the petitioner, giving full disclosures under each of the heads.

The order passed by the proper officer, however, after recording the narration, records that the reply uploaded by the taxpayer is incomplete, not duly supported by adequate documents, not clear, and unsatisfactory. It merely states that “on the basis of the reply uploaded by the taxpayer, it has been observed that the same is incomplete, not duly supported by adequate documents, and unable to clarify the issue. As such, the taxpayer is not entitled to benefit on the basis of its plain reply, which is not supported by proper calculations, reconciliation, or relevant documents. Since the reply filed is not clear and satisfactory, the demand for tax and interest conveyed via DRC-01 is confirmed, with the direction to deposit the amount mentioned in DRC-07 within one month from the date of receipt of this demand notice, failing which recovery proceedings under Section 79 of the 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 not clear and unsatisfactory.

The court has held that if the proper officer was of the view that any further details were required, the same could have been specifically sought 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 or details.

The court quashed the order and remitted the matter to the proper officer for re-adjudication.

Counsel For Petitioner: G. Shivadass

Counsel For Respondent: Rajiv Aggarwal

Case Title: Canara Bank Versus Assistant Commissioner, DGST

Citation: 2024 LiveLaw (Del) 419

Case No.: W.P.(C) 4689/2024 & CM APPL. 19233-34/2024

Click Here To Read The Order