2024 (3) TMI 331 - HC - GST

Claim of Input Tax Credit from a dealer whose registration had been cancelled - demand alongwith penalty - non-application of mind by the proper officer - violation of principles of natural justice - HELD THAT - The observation in the impugned order is not sustainable for the reasons that the reply filed by the petitioner is a detailed reply. Proper officer had to at least consider the reply on merits and then form an opinion whether the reply was vague or failed to counter the demands made. He merely held that the reply is vague 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 reply was vague and 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. The impugned order records that petitioner has not furnished the requisite details. Proper Officer is directed to intimate to the petitioner details/documents, as maybe required to be furnished by the petitioner within a period of one week from today. On such intimation being given, petitioner shall furnish the requisite explanation and documents within one week thereof. Thereafter, the Proper Officer shall re-adjudicate the show cause notice after giving an opportunity of personal hearing - matter is remitted to the Proper Officer for re-adjudication. Petition disposed off.

Summary

Issues Involved:
The judgment involves the challenge against an order raising a demand under Section 73 of the Central Goods and Services Tax Act, 2017, based on the claim of Input Tax Credit from a dealer whose registration had been cancelled. The petitioner contests the order on grounds of lack of investigation by the respondents and failure to consider the detailed reply submitted.

Detailed Summary:

Issue 1: Impugned Order and Demand Raised
The petitioner challenges the order dated 27.12.2023, which raised a demand of Rs. 22,10,220.00, including penalty, against the petitioner under Section 73 of the CGST Act, 2017. The demand was based on the claim of Input Tax Credit from a dealer whose registration had been cancelled, without sufficient details provided by the petitioner to substantiate the underlying supplies.

Issue 2: Lack of Investigation by Respondents
The petitioner argues that the respondents failed to conduct a proper investigation into the cancelled dealer and did not determine whether the cancellation was due to non-filing of returns or defects in the supplies before passing the impugned order. The petitioner contends that a detailed reply was submitted but not considered adequately in the order.

Issue 3: Failure to Consider Petitioner's Reply
The petitioner asserts that a detailed reply was filed to the Show Cause Notice, providing full disclosures under each of the heads mentioned in the notice. However, the impugned order dismissed the reply as unsatisfactory without proper consideration, stating it was vague and failed to counter the demands made.

Conclusion:
The High Court found that the impugned order was unsustainable as it did not properly consider the detailed reply submitted by the petitioner. The matter was remitted to the Proper Officer for re-adjudication, directing them to seek further details if necessary and provide an opportunity for the petitioner to clarify and furnish required documents. The Court clarified that it did not comment on the merits of the case, and the challenge to Notification No. 9 of 2023 was left open.