Ethos Limited vs. Assistant Commissioner Department Of Trade And Taxes & Anr.

Facts

The petitioner, Ethos Limited, challenged an order dated 23.12.2023, which disposed of a Show Cause Notice dated 25.09.2023 and raised a demand of Rs. 1,36,98,144.00, including penalty, against the petitioner. This order was passed under Section 73 of the Central Goods and Services Tax Act, 2017. The petitioner contended that a detailed reply dated 08.11.2023 was filed to the Show Cause Notice, but the impugned order failed to consider it and was a cryptic order. The Show Cause Notice had raised issues concerning output tax, excess Input Tax Credit (ITC) claim, ITC reversal on non-business transactions and exempt supplies, and ineligible ITC.

Held

The Court held that the impugned order dated 23.12.2023 was not sustainable. The reasoning was that the Proper Officer had merely stated that the petitioner's reply was "unsatisfactory," "incomplete," and "not duly supported by adequate documents," without applying their mind to the detailed reply submitted. The Court noted that if the Proper Officer required further details or clarification, they should have specifically sought them from the petitioner, and the record did not indicate that such an opportunity was provided. Consequently, the Court set aside the impugned order and remitted the matter to the Proper Officer for re-adjudication. The Proper Officer was directed to intimate the petitioner about any required details or documents, after which the petitioner would furnish them. Subsequently, the Proper Officer must re-adjudicate the show cause notice after granting a personal hearing and pass a fresh speaking order within the period prescribed under Section 75(3) of the Act. The Court clarified that it had not commented on the merits of either party's contentions and reserved all rights. The challenge to Notification No. 9 of 2023 regarding the initial extension of time was left open.

Key Issues

1. Whether the impugned order dated 23.12.2023, passed under Section 73 of the Central Goods and Services Tax Act, 2017, is sustainable in law, given that the petitioner alleges it failed to consider their detailed reply to the Show Cause Notice? Petitioner's Arguments: The petitioner argued that their reply dated 08.11.2023 was detailed and provided full disclosures under each head mentioned in the Show Cause Notice. They contended that the impugned order was cryptic and did not apply its mind to the merits of their reply. The petitioner further argued that if the Proper Officer found the reply unsatisfactory, they should have sought specific clarifications or further documents, which was not done. The petitioner relied on the principle that a proper adjudication requires consideration of the submitted reply. Revenue's Arguments: The judgment records that the revenue's counsel appeared, but it does not explicitly detail their arguments in response to the petitioner's specific contentions regarding the non-consideration of the reply. The impugned order itself stated that the taxpayer's reply was unsatisfactory, incomplete, not duly supported by adequate documents, and failed to clarify the issue, and that the taxpayer failed to avail the personal hearing opportunity.