2025 (3) TMI 668 - HC - GST

Validity of Order-in-Original given the procedural irregularities - failure to consider the reply filed by the petitioner in response to the SCNs -principles of natural justice complied with or not - HELD THAT - In view of the recitals and which concededly proceed on the incorrect premise of the writ petitioner having filed no reply the order cannot be sustained which is impugned here. The present writ petition is allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered by the Court was whether the Order-in-Original dated 24 January 2025 was valid, given the procedural irregularities alleged by the petitioner. Specifically, the Court examined whether the competent authority failed to consider the reply filed by the petitioner in response to the Show Cause Notices (SCNs) issued on 01 August 2024 and 03 August 2024. Additionally, the Court considered whether the principles of natural justice were adhered to during the adjudication proceedings.

ISSUE-WISE DETAILED ANALYSIS

1. Consideration of the Petitioner's Reply

Relevant legal framework and precedents: The legal framework centers around the principles of natural justice, which require that all parties in a legal proceeding be given a fair opportunity to present their case. The Central Goods and Services Tax (CGST) Act, 2017, particularly Section 16(2), was also relevant, as it governs the entitlement to Input Tax Credit (ITC).

Court's interpretation and reasoning: The Court noted that the impugned order proceeded on the incorrect premise that the petitioner had not filed a reply to the SCNs. The Court highlighted that the petitioner had indeed filed a detailed reply on 15 October 2024 and a common reply on 20 November 2024, following a previous writ petition seeking consolidation of the SCN proceedings.

Key evidence and findings: The impugned order explicitly stated that no reply had been received from the petitioner, which the Court found to be factually incorrect. The Court emphasized that the competent authority failed to notice or engage with the petitioner's submissions.

Application of law to facts: By failing to consider the petitioner's reply, the competent authority did not adhere to the principles of natural justice. The Court found this procedural oversight significant enough to invalidate the order.

Treatment of competing arguments: The respondent's argument that ample opportunities were provided to the petitioner was undermined by the evidence that the petitioner's submissions were not considered. The Court concluded that the procedural fairness required under the law was not met.

Conclusions: The Court concluded that the order was unsustainable due to the procedural irregularity of not considering the petitioner's reply. The principles of natural justice were violated, necessitating the quashing of the order.

2. Allegations of Fraudulent ITC Claims

Relevant legal framework and precedents: The allegations centered on the misuse of ITC under the CGST Act, 2017, specifically the issuance of invoices without actual supply of goods, violating Section 16(2).

Court's interpretation and reasoning: The Court did not delve deeply into the substantive allegations of fraudulent ITC claims, as the procedural flaw in not considering the petitioner's reply was sufficient to quash the order.

Key evidence and findings: The impugned order alleged that the petitioner engaged in fraudulent ITC claims by issuing invoices without actual supply. However, the Court's focus remained on the procedural aspect rather than the substantive allegations.

Application of law to facts: The Court did not make a determination on the substantive allegations, as the procedural error took precedence. The competent authority was directed to reconsider the matter after taking into account the petitioner's submissions.

Treatment of competing arguments: The Court kept all rights and contentions of the respective parties on merits open, indicating that the substantive issues could be revisited upon proper procedural adherence.

Conclusions: The Court did not make a final determination on the allegations of fraudulent ITC claims, leaving the matter open for reconsideration by the competent authority.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Court stated, "In view of the aforesaid recitals and which concededly proceed on the incorrect premise of the writ petitioner having filed no reply, we find ourselves unable to sustain the order which is impugned before us."

Core principles established: The decision reinforced the principle that procedural fairness and adherence to natural justice are paramount in adjudicatory proceedings. The authority must consider all submissions made by the parties before reaching a decision.

Final determinations on each issue: The Court quashed the Order-in-Original dated 24 January 2025 concerning the petitioner, Noticee no. 18, due to the failure to consider the petitioner's reply. The competent authority was directed to pass a fresh order after considering the petitioner's submissions. All substantive issues and contentions were left open for future determination.