Mother Dairy Fruit & Vegetable Pvt Ltd Vs Sales Tax Officer

Petitioner impugns the order dated 23.12.2023, whereby the impugned Show Cause Notice dated 23.09.2023, proposing a demand against the petitioner, has been disposed of and a demand of Rs. 7,95,34,514.00, including penalty, has been raised 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). Learned counsel for Petitioner submits that a detailed reply dated 08.12.2023 was filed to the Show Cause Notice; however, the impugned order dated 23.12.2023 does not take into consideration the reply submitted by the petitioner and is a cryptic order. Perusal of the Show Cause Notice shows that the Department has given separate headings, inter alia, excess claim Input Tax Credit [“ITC”], under declaration of ineligible ITC, and ITC claim from canceled dealers, return defaulters, and tax non-payers. To the said Show Cause Notice, a detailed reply was furnished by the petitioner, giving full disclosures under each of the heads. The impugned order, however, after recording the narration, merely states that the reply uploaded by the taxpayer is not satisfactory. It states that “And whereas, the taxpayer had filed their objections/reply in DRC-06 and appeared personally. However, during the personal hearing, the taxpayer reiterated the contents of the reply filed in form DRC-06. On scrutiny of the same, it has been observed that the same is not acceptable, being incomplete, not duly supported by adequate documents, without proper justification, and thus unable to clarify the issue.” The Proper Officer has opined that the reply is unsatisfactory.

The lack of substantive engagement with the petitioner’s detailed reply is a significant point of contention. The petitioner’s counsel argues that the department’s failure to adequately address the explanations and evidence provided is a clear procedural oversight. The reply submitted by the petitioner was comprehensive, addressing each of the concerns raised in the Show Cause Notice with appropriate documentation and justification. The petitioner’s counsel highlights that the response was not merely a reiteration of form submissions but a detailed clarification aimed at resolving the alleged discrepancies.

The department’s conclusion that the reply was “not acceptable being incomplete” appears to be a blanket dismissal without any specific counterpoints or detailed rebuttals. This approach, as argued by the petitioner’s counsel, fails to uphold the principles of natural justice, which require a reasoned and transparent examination of all presented arguments and evidence. The petitioner contends that the order’s cryptic nature reflects a lack of due consideration and fairness in the adjudication process.

Furthermore, the impugned order’s failure to provide a detailed analysis or counter-arguments to the points raised in the petitioner’s reply undermines the procedural integrity expected in such proceedings. The petitioner insists that a proper adjudication would involve a meticulous examination of each point raised, followed by a reasoned explanation for the acceptance or rejection of those points. Instead, the impugned order’s summary rejection suggests a predetermined stance rather than an unbiased evaluation.

The petitioner’s counsel underscores that the issues at hand, such as excess ITC claims and transactions with canceled dealers, are complex and necessitate a thorough and nuanced examination. The petitioner’s detailed reply provided explanations and supporting documents addressing these issues, yet the order dismisses these explanations with a generic statement about their insufficiency. This blanket dismissal without engaging with the substance of the petitioner’s arguments is a procedural flaw that merits redress.

In light of these arguments, the petitioner seeks the quashing of the impugned order and a direction for re-adjudication. The petitioner requests that the proper officer be instructed to conduct a detailed and reasoned examination of the reply submitted, ensuring that each point is addressed with specific findings. This would entail providing the petitioner with a fair opportunity to present their case fully and ensuring that the adjudication process adheres to the principles of natural justice.

The petitioner also requests that the proper officer grant a personal hearing, during which the petitioner can further elucidate their position and respond to any queries or concerns raised by the department. This step is crucial for ensuring a transparent and fair resolution of the issues, allowing for an interactive and dynamic examination of the facts and arguments.

In conclusion, the petitioner’s counsel argues that the impugned order is procedurally deficient and fails to meet the standards of a fair and reasoned adjudication. The petitioner seeks a remittance of the matter for re-adjudication, with clear instructions for the proper officer to engage thoroughly with the detailed reply submitted and to provide a reasoned decision based on a comprehensive examination of all presented evidence and arguments. The petition is therefore brought before the court to ensure that the principles of natural justice are upheld and that the petitioner receives a fair and unbiased adjudication of the issues raised in the Show Cause Notice.

The observation in the impugned order dated 23.12.2023 is not sustainable for the reasons that the reply filed by the petitioner is a detailed reply. The Proper Officer had to at least consider the reply on merits and then form an opinion on whether the reply is clear and satisfactory. He merely held that the reply is not clear and satisfactory, which ex-facie shows that the Proper Officer has not applied his mind to the reply submitted by the petitioner. Further, if the Proper Officer was of the view that the reply was unsatisfactory 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. In view of the above, the order cannot be sustained, and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 23.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication. As noticed hereinabove, the impugned order records that the petitioner’s reply is not satisfactory. The Proper Officer is directed to intimate to the petitioner the details/documents that may be required to be furnished by the petitioner. Pursuant to the intimation being given, the petitioner shall furnish the requisite explanation and documents. Thereafter, the Proper Officer shall re-adjudicate the show cause notice after giving an opportunity for a personal hearing and shall pass a fresh speaking order in accordance with the law within the period prescribed under Section 75(3) of the Act. The procedural fairness and adherence to natural justice principles require that the Proper Officer considers the detailed reply filed by the petitioner and engages with each point raised in the reply. If further clarification or additional documents are needed, a specific request should be made to the petitioner. The lack of such a process in the current proceedings has led to a decision that is not adequately reasoned and thus not sustainable. The remittance of the matter to the Proper Officer is to ensure that a thorough and fair examination of the reply is conducted, and a reasoned decision is made based on the merits of the case. This approach is vital to uphold the integrity of the adjudication process and to ensure that the petitioner’s arguments and evidence are fully considered. The direction to provide an opportunity for a personal hearing is also crucial as it allows the petitioner to directly address any concerns or questions the Proper Officer may have, facilitating a transparent and fair adjudication. The requirement to pass a fresh speaking order ensures that the decision is well-reasoned, taking into account all the material facts and evidence presented by the petitioner. This process aligns with the principles of natural justice, ensuring that the petitioner receives a fair and unbiased hearing. The emphasis on a detailed and reasoned examination reflects the necessity of a robust adjudication process that not only follows the legal provisions but also ensures fairness and transparency. By directing the Proper Officer to specifically request any additional details or documents needed and by providing the petitioner with an opportunity for a personal hearing, the adjudication process is made more comprehensive and just. This remittance for re-adjudication aims to rectify the procedural deficiencies noted in the impugned order and to ensure that a fair and transparent decision is made in accordance with the law.

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Mother Dairy Fruit

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Delhi High Court 

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