Ethos Limited vs. Sales Tax Officer Class Ii Avato Ward 206 Zone 11 Delhi & Anr.
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The petitioner, Ethos Limited, challenged an order dated 24.04.2024, which disposed of a Show Cause Notice (SCN) dated 10.12.2023 and imposed a demand of Rs. 2,92,00,063.00, including penalty, under Section 73 of the Central Goods and Services Tax Act, 2017. The SCN raised issues concerning under-declaration of output tax, reconciliation of GSTR-09 data, E-way bill turnover, excess Input Tax Credit (ITC) claims, scrutiny of ITC on reverse charge, and under-declaration of ineligible ITC. The petitioner submitted a detailed reply on 20.02.2024. The impugned order noted that the petitioner had paid the demand for under-declared output tax on outward supplies, which was dropped. However, it stated that the reply on other issues was devoid of merit without justification or proper reconciliation, and upheld the demand raised in the SCN.
Held
The Court held that the impugned order dated 24.04.2024 could not be sustained in respect of the issues that were decided against the petitioner. The Court found that the Proper Officer had not applied his mind to the detailed reply submitted by the petitioner, which was accompanied by supporting documents. The observation that the reply was devoid of merits without justification or proper reconciliation was not sustainable, as the petitioner had provided full particulars. The Court also noted that if the Proper Officer required further details, he should have sought them from the petitioner, which did not happen. Therefore, the impugned order was set aside in so far as it related to the issues decided against the petitioner. The Court remitted the Show Cause Notice to the Proper Officer for re-adjudication on these limited issues. The order regarding the demand for taxes on output supply, which was already dropped, was not interfered with. The petitioner was granted 30 days to file a further reply, and the Proper Officer was directed to pass a fresh speaking order after providing an opportunity for a personal hearing within the period prescribed under Section 75(3) of the Act. The Court clarified that it had not commented on the merits of the contentions of either party.
Key Issues
1. Whether the impugned order dated 24.04.2024, disposing of the Show Cause Notice dated 10.12.2023, has been passed without considering the detailed reply filed by the petitioner on 20.02.2024, thereby violating principles of natural justice? Petitioner's contention: The petitioner argued that the impugned order is a cryptic one and fails to consider the detailed reply submitted by the petitioner, which included responses under each head raised in the SCN with supporting documents. The petitioner contended that the Proper Officer did not apply his mind to the reply and merely stated it was devoid of merit without justification or proper reconciliation. The petitioner also argued that if further details were required, the Proper Officer should have sought them, which was not done. Revenue's contention: The judgment records no specific arguments from the respondent revenue.
Sections Cited
Section 73, Section 75(3)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT SANJEEV SACHDEVA, J. (ORAL)
Petitioner impugns order dated 24.04.2024 whereby the impugned Show Cause Notice dated 10.12.2023, proposing a demand of Rs.2,92,00,063.00 against the petitioner had been disposed of and a demand including penalty has been created against the petitioner. The order has been passed under Section 73 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the Act). WP (C)6989/2024 2. Issue notice. Notice is accepted by learned counsel appearing for respondent. With the consent of the parties, the petition is taken up for final disposal today.
Learned counsel for Petitioner submits that Petitioner had filed a detailed reply dated 20.02.2024, however, the impugned order dated 24.04.2024 does not take into consideration the reply submitted by the Petitioner and is a cryptic order.
Perusal of the Show Cause Notice dated 10.12.2023 shows that the Department has raised grounds under separate headings i.e., under declaration of output tax; the tax on outward supplies under declared on reconciliation of data in GSTR-09; reconciliation of E-way bill turnover with GSTR-09; excess claim of Input Tax Credit [“ITC”]; Scrutiny of ITC availed on reverse charge and under declaration of ineligible ITC. To the said Show Cause Notice, a detailed reply was furnished by the petitioner giving response under each of the heads with supporting documents.
The impugned order, however, after recording the narration records that the reply uploaded by the taxpayer is devoid of merits without any justification or proper reconciliation. It states that “And whereas, on examination of the reply/documents furnished by the taxpayer, it has been observed that the taxpayer has paid the demand towards the tax on outward supplies under declared on reconciliation of data in GSTR-09 through DRC- 03 dated 25.12.2020, hence, this demand is dropped. Further, the reply on other issues is found devoid of merits without any justification or proper reconciliation, therefore, the demand raised with detailed WP (C)6989/2024 reasons/explanations in SCN/DRC-01 is upheld. DRC-07 is issued accordingly.” The Proper Officer has opined that the reply is devoid of merits without any justification or proper reconciliation.
The reply filed by the petitioner gave full particulars with regard to the tax paid on outward supplies under declared on reconciliation of data in GSTR-09 through DRC-03 as pointed out by the department by the impugned order. The demand towards the taxes on the output supplies which were alleged to be under declared have been dropped.
With regard to the other issues, the observation in the impugned order dated 24.04.2024 is not sustainable for the reasons that the reply dated 20.02.2024 filed by the Petitioner is a detailed reply with supporting documents. Proper Officer had to at least consider the reply on merits and then form an opinion. He merely held that the reply is found devoid of merits without any justification or proper reconciliation which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner.
Further, 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/details.
In view of the above, the impugned order dated 24.04.2024 cannot be sustained and is set aside in respect of the issues that have been held against the Petitioner. The order in so far as it relates to the demand WP (C)6989/2024 towards the taxes on output supply, which has already been dropped by the proper officer is not interfered with. The Show Cause Notice to the said limited extent is remitted to the Proper Officer for re-adjudication.
Petitioner may file a further reply to the Show Cause Notice within a period of 30 days from today. Thereafter, the Proper Officer shall re- adjudicate the Show Cause Notice after giving an opportunity of personal hearing and shall pass a fresh speaking order in accordance with law within the period prescribed under Section 75 (3) of the Act.
It is clarified that this Court has neither considered nor commented upon the merits of the contentions of either party. All rights and contentions of parties are reserved.
Petition is disposed of in the above terms. SANJEEV SACHDEVA, J RAVINDER DUDEJA, J MAY 17, 2024/sk
Reproduced from the public record of the Delhi High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.