Non-Considering the Taxpayer’s Reply Violate the Natural Justice:
Delhi High Court Quashes GST Order Passed Without Considering Taxpayer’s Reply
Summary of
the Case
In a significant decision
safeguarding procedural fairness in tax adjudication, the Delhi High Court
quashed an order passed under the Central Goods and Services Tax (CGST) Act,
2017, against BAWA TOYS, a registered taxpayer. The adjudicating GST
authority had accused the petitioner of fraudulently passing Input Tax Credit
(ITC) without actual supply of goods and had passed an ex parte order
dated 24 January 2025, alleging non-compliance and non-response from the
petitioner.
However, BAWA TOYS had
in fact submitted detailed replies, including a consolidated response in
November 2024. The adjudicating authority completely ignored this reply and
proceeded as if no defense had been filed. Finding this to be a clear
violation of the principles of natural justice, the High Court quashed the
impugned order and directed the authority to pass a fresh, reasoned decision
after considering the petitioner’s reply.
Case
Information
- Case Title:
BAWA TOYS vs. The Additional Commissioner of GST
- Case No.:
W.P.(C) 2799/2025 & CM APPL. 13323/2025
- Date of Judgment:
05 March 2025
- Court:
High Court of Delhi at New Delhi
Facts of
the Case
1. Issuance
of Show Cause Notices (SCNs)
The GST department issued two SCNs to BAWA TOYS on 01 August 2024 and 03
August 2024, alleging that the firm had:
o Issued
invoices without any actual supply of goods.
o Avail
and passed fraudulent ITC.
o Operated
from a non-existent business location.
2. Petitioner’s
Reply and Prior Litigation
o BAWA
TOYS initially replied to the SCNs on 15 October 2024.
o Later,
they filed a consolidated reply on 20 November 2024, pursuant to earlier
litigation (W.P.(C) 14863/2024) in which the petitioner had sought
consolidation of SCN proceedings.
3. Allegations
by the Department
o The
department alleged that the petitioner was a fictitious entity operating
via common mobile numbers and email addresses.
o It
accused BAWA TOYS of helping others to evade GST by issuing goods-less
invoices.
4. Impugned
Order Passed
On 24 January 2025, the Additional Commissioner passed an ex parte Order-in-Original,
alleging that:
o No
reply was received from the petitioner.
o The
petitioner failed to appear for personal hearings.
o The
case was decided on available records, treating allegations as admitted.
5. Writ
Petition Filed
BAWA TOYS filed the present writ petition, W.P.(C) 2799/2025,
challenging the legality of the said order.
Petitioner’s
Submissions
Counsel for BAWA TOYS
submitted the following:
- The finding that no reply was
submitted is factually incorrect.
- Detailed replies had been filed
twice: once individually and once as a consolidated response.
- The adjudication order shows no
reference to these replies, reflecting non-application of mind.
- This omission amounts to a gross
violation of natural justice, especially since the petitioner was
being accused of fraud.
- The adjudicating authority cannot
assume silence when clear submissions were on record.
Respondent’s
Submissions
The GST department
argued:
- The petitioner failed to attend three
personal hearings despite being granted ample opportunity.
- The notices were validly served
through the GST portal using DRC-01.
- In the absence of personal appearance
and documentary defense, the order was passed based on records.
- The department insisted that the
petitioner was non-existent and part of a fraudulent network.
However, the department
did not dispute the actual filing of replies, nor could it justify why
those replies were not considered.
Observations
and Findings of the Court
1. Replies Were Filed –
Ignored by Authority
The Court noted that the
petitioner had filed replies, including a consolidated response on 20
November 2024, but:
“The competent authority
failed to notice or engage with the reply which was submitted, and proceeded on
the premise that no response had been submitted at all.”
2. Violation of Natural
Justice
The Court highlighted
that even if allegations involve tax fraud, the principles of natural justice cannot
be bypassed. The impugned order concluded that no defense was filed, which
was factually wrong and legally indefensible.
“Such an adjudication
cannot be sustained in law when it is based on the erroneous foundation that
the assessee failed to respond.”
3. Order Quashed
Given the blatant
procedural flaw, the Court quashed the order insofar as it concerned BAWA
TOYS, who was arrayed as Noticee No. 18.
“We allow the present
writ petition and quash the order dated 24 January 2025… It shall be open for
the competent authority to pass a fresh order after taking into consideration
the reply submitted.”
4. Merits Left Open
The Court made it clear
that it had not adjudicated the merits of the allegations and that both
sides were free to argue their cases afresh.
“All rights and
contentions of respective parties on merits are kept open.”
Conclusion
This case is a stark
reminder that procedural safeguards are not mere formalities—they are foundational
to justice, especially under tax laws where the consequences can be severe.
The High Court stepped in to correct a critical lapse where the adjudicating
authority ignored available defense submissions and declared the case as if no
reply had ever existed.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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