Top Stories Claim of ITC denied without Considering Reply: Delhi HC Directs Re Adjudication [Read Order] The court observed that the Proper officer had to at least consider the reply on merits and then form an opinion on whether the explanation was sufficient or not By Yogitha S. Yogesh – On March 11, 2024 4:38 pm – 2 mins read The Delhi High Court directed the proper officer to re adjudicate the denial of the Claim of Input Tax Credit ( ITC ). The proper officer failed to consider the reply of the assessee. The court observed that the Proper officer had to at least consider the reply on merits and then form an opinion on whether the explanation was sufficient or not. Sandeep Jain, the petitioner challenged the order whereby the show cause notice dated 23.09.2023, proposing a demand against the petitioner has been confirmed and a demand of Rs. 10,03,08,628.00/- 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. Counsel for the petitioner submitted that a detailed reply dated 20.10.2023 to the show cause notice was filed on 23.10.2023. He further submitted that after the said reply Petitioner filed a DRC-06 on 11.12.2023, whereby the petitioner had given party-wise details and return filing status. Further, on 21.12.2023 petitioner filed another reply reiterating the submissions made by him on 23.10.2023 and 11.12.2023.  However, the impugned order dated 29.12.2023 does not take into consideration the replies submitted by the petitioner and is a cryptic order that merely records that the reply was found not satisfactory and devoid of merits. The Department has given specific details of alleged under declaration of output tax, excess claim Input Tax Credit [ ITC ], under declaration of ineligible ITC and ITC claim from cancelled dealers, return defaulters and tax non-payers. To the said show cause notice, detailed replies dated 23.10.2023, 11.12.2023 and 21.12.2023 were furnished by the petitioner giving full disclosures under each of the heads. The impugned order, however, after recording the narration, records that the reply uploaded by the taxpayer is not satisfactory. It merely states

“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 incomplete, not duly supported by adequate documents and unable to clarify the issue. Since the reply filed is not clear and satisfactory, the demand of tax and interest conveyed via DRC-01 is confirmed, with the direction to deposit the amount mentioned in DRC-07 within one month from the date of receipt of this demand notice, failing which recovery proceedings w/s 79 of CGST Act will be initiated and the actions as per law will be initiated without further reference.” The Proper Officer has opined that the reply is unsatisfactory. Justice Sanjeev Sachdeva and Justice Ravinder Dudeja Judgment observed that “Proper officer had to at least consider the reply on merits and then form an opinion whether the explanation was sufficient or not. He merely held that no proper reply/explanation has been received which ex-facie shows that the proper officer has not even looked at the reply submitted by the petitioner. “ The court remitted the matter to the Proper Officer for re-adjudication.

The impugned order records that the petitioner has not furnished the requisite details. The proper Officer is directed to intimate to the petitioner details/documents, as may be required to be furnished by the petitioner within one week from today.