Merely describing a claim unacceptable or false without affording reasons unacceptable
In a recent judgment, the Hon’ble Allahabad High Court has quashed the order passed u/s 73(1) of UPGST Act holding that merely describing a claim as unacceptable or false without dealing the explanation furnished by affording adequate reasons is unacceptable.
ABCAUS Case Law Citation:
ABCAUS 4053 (2024) (05) HC
In the instant case, the assessee had challenged the order passed by the adjudicating authority under Section 73 of the UPGST Act, 2017 (the Act). The petitioner was visited with the show cause notice dated 30.9.2023. Amongst others, it was alleged as below :
According to the Petitioner, he had filed the monthly returns i.e. Form GSTR-3B. However, he could not file his annual return on Form GSTR-9 and the audit reconciliation on Form GSTR-9C due to technical difficulties faced by him in operating the GSTN portal.
The petitioner received a show cause notice issued under Section 73(1) of the Act. Later, a reminder was also issued to him. As per the SCN, in the absence of annual return, the tax payable from the Petitioner was worked out @ 28% on the gross turnover.
The petitioner claimed that he had submitted his reply along with copies of his ledger, balance sheet and copy of books of accounts. Further, another reply was also submitted to bring on record the working sheets etc.
The grievance of the petitioner was that the said replies had been completely ignored. Without returning any finding to reject the explanation furnished by the petitioner, the adjudicating authority had reached a conclusion that the explanation furnished by the petitioner was not worthy of acceptance.
The Petitioner argued that without making any discussion as to nature and identity of the commodities dealt with by the petitioner and without considering the issue of rate of tax specified under the Schedule to the Act, wholly whimsically, entire turnover has been subjected to tax @ 28%. Also, without specifying any rate of interest or the period for which such interest may be charged, against demand and interest had been demanded. Thus, the adjudication order was described as wholly arbitrary and unreasoned.
The Hon’ble High Court observed that the adjudicating authority had admitted that the Petitioner had filed balance sheet and books of account but demand was confirmed because the Petitioner did not produce any evidence of technical difficulties.
The Hon’ble High Court held that the impugned order was wholly non-speaking both with respect to rejection of the explanation furnished by the petitioner and also with respect to application of rate of tax on the commodities dealt with by the petitioner.
The Hon’ble High Court observed that according to the Petitioner, he had dealt with both taxable and exempt commodities. The turnover of both commodities was disclosed in the monthly returns as also in the documents submitted. However, no discussion was made in the impugned order to consider any of the materials relied upon by the petitioner. Such approach adopted by the adjudicating authority was unacceptable.
The Hon’ble High Court stated that once explanation was furnished to the show cause notice, irrespective of its worthiness in the eyes of the adjudicating authority, it remained obligated in law to deal with the same by affording adequate reasons. Merely describing a claim as unacceptable or false or rejected would not fulfill the requirements of a proper adjudication proceeding.
The Hon’ble High Court noted that the Revenue could not dispute the correctness of the submission of the petitioner that the impugned order was non-speaking.
The Hon’ble High Court observed that such conclusion is the essence of fairness of an adjudication proceeding. Unless such reasons are given in black and white, the adjudication order may remain laconic. Second, assuming for the sake of submission that the adjudicating authority had chosen to reject the explanation submitted by the petitioner and such rejection may have been valid, another fatal error has been committed in the adjudication proceedings, insofar as no reason had been assigned by the adjudicating authority in taxing the turn over on best judgement basis. Here the turnover disclosed has not been disturbed. Once that was the case, the adjudicating authority had obviously accepted the disclosure made by the petitioner on Form GSTR-3B to the extent the accounts maintained by the petitioner were found credible. Therefore, the adjudicating authority had not assigned any reason to submit such turnover at the highest rate of tax i.e. @ 28%. In doing that he had acted unmindful of the fact that it was the further claim of the petitioner arising from the same books of accounts and that part of turnover was exempt.
The Hon’ble High Court further observed that the compulsion arising from the rule of limitation may not be seen favourably to allow rules of natural justice to be broken. In the present case, the petitioner was not at fault for the delay in the proceedings. The notice was issued late. The petitioner responded in writing and submitted his application. That had been rejected without assigning any reasons. The adjudication order is clearly laconic.
Accordingly, the adjudication order was set aside. The matter was remitted to the adjudicating authority to pass a fresh reasoned order.
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