The Punjab and Haryana High Court has quashed an order confirming an Input Tax Credit (ITC) demand holding that the adjudicating authority failed to consider the taxpayer’s reply to the show cause notice before passing the order.
The Bench of Acting Chief Justice Ashwani Kumar Mishra and Justice Rohit Kapoor has observed that an adjudicating authority is required to examine the taxpayer’s response before determining any tax liability. Passing an order without considering the reply submitted in response to the show cause notice amounts to a breach of the principles of natural justice and cannot be sustained in law.
The petitioner challenged an Order-in-Original through which the GST authorities confirmed a demand relating to Input Tax Credit (ITC). The order had been passed pursuant to a show cause notice dated May 28, 2024.
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According to the petitioner, the department issued the show cause notice through two parallel modes—one via e-mail and the other by uploading it on the GST portal. In response to the notice received through e-mail, the petitioner submitted a detailed reply on June 15, 2024. However, while adjudicating the matter, the authority allegedly ignored this reply and proceeded to pass the demand order without considering the taxpayer’s submissions.
The petitioner argued that once the department adopts multiple modes of service, any reply submitted through any valid mode must necessarily be considered before an adverse order is passed. Ignoring such a reply, it contended, amounted to arbitrariness and violated the principles of natural justice.
The GST department did not dispute that the petitioner had indeed submitted a reply and that it had not been taken into account while passing the impugned order. The department fairly suggested that, instead of prolonging the litigation, the matter could appropriately be remitted to the adjudicating authority for fresh consideration.
The High Court observed that it was undisputed that the petitioner’s reply dated June 15, 2024, had not been considered before the Order-in-Original was passed. The Bench held that such non-consideration rendered the adjudication legally unsustainable.
Allowing the writ petition, the High Court quashed the Order-in-Original dated August 30, 2024. The Court granted liberty to the concerned authority to pass a fresh order in accordance with law after duly considering the petitioner’s reply dated June 15, 2024. All pending applications were also disposed of.
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