Proper Officer had to at least consider the reply on merits and then form an opinion

The Delhi High Court has ruled that a Proper Officer must thoroughly consider a taxpayer's reply on its merits before forming an opinion and issuing an order. In this case, Mitsubishi Electric India (P.) Ltd. had submitted detailed replies to a show cause notice, but the Proper Officer issued an order without adequately considering them. The court found this approach unsustainable and set aside the order, directing a fresh adjudication with a personal hearing.

The Hon'ble Delhi High Court Mitsubishi Electric India (P.) Ltd. v. Union of India [W.P. (Civil) No. 7443 of 2024 dated May 22, 2024] set aside the order and held that the Proper Office must atleast consider the reply furnished by the Assessee on merits and then form an opinion.

Facts

Mitsubishi Electric India (P.) Ltd. ("the Petitioner") was issued a Show Cause Notice dated December 02, 2023 ("the Impugned SCN") by the Proper Officer ("the Respondent") proposing a demand of INR 6,27,53,208/- including the penalty. The Petitioner had filed a detailed reply against the Impugned SCN on January 02, 2024 for each head with the supporting documents. However, a reminder notice was issued to the Petitioner on February 21,2024 which was also duly replied to by the Petitioner on April 23, 2024.

The Respondent did not consider the replies furnished by the Petitioner and passed an Order dated April 26, 2024 ("the Impugned Order") under Section 73 of the Central Goods and Services Tax, 2017 ("the CGST Act")which was cryptic.

The Impugned Order recorded that the reply uploaded by the Petitioner was not properly explained despite of sufficient and repeated opportunities provided. Further, a special audit had been conducted, where the auditor did not observe this matter of the Impugned SCN in findings, which indicated that the Petitioner had nothing to say anymore in this matter.

Hence, aggrieved by the circumstances, the Petitioner filed the present writ petition.

Issue

Whether theProper Officer had to at least consider the reply on merits and then form an opinion?

Held

The Hon'ble Delhi High Court in W.P. (Civil) No. 7443 of 2024 held as under:

• Observed that, the Impugned Order is not sustainable for the reasons that the reply dated January 02, 2024 filed by the Petitioner was a detailed reply with supporting documents. The Respondent had to at least consider the reply on merits and then form an opinion. He merely held that the reply is not properly filed/explained without any justification which ex-facie shows that the Respondent did not apply his mind to the reply submitted by the Petitioner.
• Noted that, if the Respondent was of the view that any further details were required, the same could have been specifically sought from the Petitioner. However, the records did not reflect that any such opportunity was given to the Petitioner to clarify its reply or furnish further documents/details.
• Held that, the Respondent shall re-adjudicate the Impugned SCN after giving an opportunity of personal hearing and shall pass a fresh speaking order in accordance with law within the period of under Section 75 (3) of the CGST Act. The Hon'ble Court neither considered nor commented upon the merits of the contentions of either party. The Impugned Order was set aside.

Our Comments

In Pari Materia case, the Hon'ble Delhi High Court in the case of Bagga Link Motors Ltd. v. Commissioner, State Goods and Services Tax Delhi [Writ Petition (Civil) No. 5903 of 2024 dated April 26, 2024] held that the observation in the Order dated December 30, 2023 were not sustainable for the reasons that the reply dated October 23, 2023 filed by the Petitioner was a detailed reply with supporting documents. Therefore, the Proper Officer had to at least consider the reply on merits and then form an opinion. He merely held that the reply was incomplete, not duly supported by adequate documents, and unable to clarify the issue which ex-facie shows that the Proper Officer did not apply his mind to the reply submitted by the petitioner.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED