2025 (5) TMI 230 - HC - GST

Violation of principles of natural justice - Service of SCN - SCN was uploaded on Additional Notices Tab and did not come to the knowledge of the Petitioner - impugned order passed without providing the Petitioner a personal hearing and in the absence of a reply on behalf of the Petitioner - Challenge to adjudication order - challenge to N/N. 09/2023-Central Tax dated 31st March 2023 issued by the Central Board of Indirect Taxes and Customs - HELD THAT - This Court in Neelgiri Machinery through its Proprietor Mr. Anil Kumar V. Commissioner Delhi Goods And Service Tax And Others 2025 (3) TMI 1308 - DELHI HIGH COURT under similar circumstances where the SCN was uploaded vide Additional Notices Tab had remanded the matter. It is relevant to note that post 17th January 2024 the Department has effected changes in the portal to ensure that the SCNs become visible to parties. However considering the SCN in the present case is of September 2023 following the above decision this Court inclined to set aside the impugned order and grant the Petitioner a fresh hearing. Let the entire matter be considered afresh and an order be passed on merits after duly considering the reply and the submissions made by the Petitioner in the personal hearing - Petition disposed off.

Summary

The core legal questions considered in this judgment are as follows:

1. Whether the impugned show cause notice (SCN) and consequent order passed under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act) are valid, particularly in light of procedural fairness and opportunity of hearing afforded to the petitioner.

2. Whether the impugned Notification No. 9/2023-Central Tax dated 31st March 2023, issued under Section 168A of the CGST Act, is valid, having regard to the requirement of prior recommendation by the GST Council.

3. The broader question of the validity of extension notifications issued under Section 168A of the CGST Act, including Notification No. 56/2023-Central Tax, and whether such notifications were issued in compliance with statutory mandates and procedural requirements.

4. The impact of ongoing litigation and conflicting High Court decisions on the validity of these notifications, and the extent to which this Court should proceed with adjudication pending final Supreme Court determination.

5. Whether the petitioner was denied a fair opportunity to respond to the SCN and to participate in personal hearings, given the manner in which notices were uploaded on the GST portal.

Issue-wise Detailed Analysis

1. Validity of the Impugned Show Cause Notice and Order under Section 73 of the CGST Act

Legal framework and precedents: Section 73 of the CGST Act mandates issuance of a show cause notice and affords the recipient an opportunity of being heard before passing an order of demand. Principles of natural justice require that the notice be properly communicated and that the party be given a fair chance to reply and participate in hearings.

Court's interpretation and reasoning: The Court noted that the impugned SCN dated 24th September 2023 was uploaded on the 'Additional Notices Tab' of the GST portal, which the petitioner contended did not come to their knowledge. The consequent order dated 21st December 2023 was passed ex-parte, without personal hearing or petitioner's reply. The Court relied on earlier decisions where similar procedural deficiencies led to remand of matters to ensure fair opportunity.

Key evidence and findings: The Court referred to the petitioner's submission and prior judgments in W.P.(C) 13727/2024 and others where the uploading of notices under 'Additional Notices Tab' was held insufficient for effective communication. The Department has since made portal changes post-January 2024 to improve notice visibility, but the SCN in question predates these changes.

Application of law to facts: The Court applied the principle that orders should not be passed in default without proper notice and hearing. It set aside the impugned demand orders and directed that replies be filed within 30 days. Further, personal hearings must be granted with notices sent by email and phone, not merely uploaded on the portal.

Treatment of competing arguments: While the Department argued the notices were properly issued, the Court emphasized procedural fairness and prior rulings favoring effective communication of SCNs. The petitioner's inability to access the SCN and absence of personal hearing weighed heavily in the Court's decision.

Conclusion: The impugned order was set aside, and the matter remanded for fresh adjudication after due opportunity to the petitioner to file reply and appear for hearing.

2. Validity of Notification No. 9/2023-Central Tax and Other Notifications Issued under Section 168A of the CGST Act

Legal framework and precedents: Section 168A of the CGST Act empowers the government to extend time limits for adjudication upon recommendation of the GST Council. The validity of notifications issued under this provision depends on compliance with procedural mandates, including prior recommendation and timely issuance.

Court's interpretation and reasoning: The Court observed that the petitioner challenged Notification No. 9/2023-Central Tax and other extension notifications. It noted that various High Courts have delivered conflicting judgments on these notifications - Allahabad and Patna High Courts upheld them, while Guwahati High Court quashed Notification No. 56/2023. The Telangana High Court's observations on invalidity are under Supreme Court consideration in SLP No. 4240/2025.

Key evidence and findings: The Court referred to the Supreme Court's order dated 21st February 2025 in the SLP, which highlighted the cleavage of opinion among High Courts and issued notice on the legality of these notifications. The Supreme Court's intervention indicates the issue's complexity and unsettled nature.

Application of law to facts: Given the ongoing Supreme Court proceedings and divergent High Court rulings, this Court refrained from expressing a definitive view on the validity of the notifications. It held that the challenge to the impugned notifications would be subject to the Supreme Court's final decision.

Treatment of competing arguments: While the petitioner urged invalidation of the notifications, the Court acknowledged the Department's reliance on them to extend adjudication timelines. The Court balanced these by deferring the issue pending higher adjudication.

Conclusion: The Court left the question of the notifications' validity open and directed that any orders passed by the adjudicating authority shall be subject to the Supreme Court's outcome.

3. Impact of Ongoing Litigation and Conflicting High Court Decisions

Legal framework and precedents: Judicial discipline and principles of comity require lower courts to respect ongoing Supreme Court proceedings and avoid conflicting rulings on identical issues.

Court's interpretation and reasoning: The Court noted that the Punjab and Haryana High Court had disposed of connected petitions with interim orders pending Supreme Court's decision. It observed that the matter is squarely before the Supreme Court and that this Court should refrain from expressing views on the vires of Section 168A and related notifications.

Key evidence and findings: The Court relied on the Punjab and Haryana High Court's order and the Supreme Court's notice in SLP No. 4240/2025. It recognized the importance of judicial discipline and consistency in adjudication.

Application of law to facts: The Court adopted a cautious approach, limiting its intervention to procedural fairness issues and leaving substantive questions to the Supreme Court.

Treatment of competing arguments: The Court balanced the petitioner's need for relief against the ongoing appellate process, ensuring that procedural rights are protected without prejudicing the larger legal question.

Conclusion: The Court disposed of the petitions with directions for fresh adjudication on merits post personal hearing, subject to the Supreme Court's final ruling on the notifications' validity.

4. Procedural Fairness in Communication of Notices and Opportunity of Hearing

Legal framework and precedents: Principles of natural justice require that notices be effectively communicated and parties be given a meaningful opportunity to be heard before adverse orders are passed. Prior judgments of this Court have emphasized that uploading notices in obscure tabs on the GST portal does not constitute adequate service.

Court's interpretation and reasoning: The Court reiterated that the petitioner was denied a fair opportunity as the SCN was uploaded under 'Additional Notices Tab' and no personal hearing was granted. It referred to prior decisions where similar procedural lapses led to setting aside of orders and remand for fresh adjudication.

Key evidence and findings: The Court noted that post-January 2024, the Department improved the portal to make notices more visible, but the impugned SCN predates these changes. It also mandated that hearing notices be sent by email and phone to ensure actual receipt.

Application of law to facts: Applying these principles, the Court set aside the impugned demand orders and directed issuance of fresh notices with proper communication and personal hearings.

Treatment of competing arguments: While the Department contended that notices were issued as per procedure, the Court prioritized effective communication and procedural fairness to safeguard the petitioner's rights.

Conclusion: The Court mandated fresh opportunity to the petitioner to file replies and appear for hearings, ensuring compliance with natural justice.

Significant Holdings

"The impugned show cause notice dated 24th September, 2023, being uploaded on the 'Additional Notices Tab' did not come to the knowledge of the petitioner and the consequent order dated 21st December, 2023 was passed without providing the petitioner a personal hearing and in the absence of a reply on behalf of the petitioner."

"Orders should not be passed in default without proper notice and opportunity to be heard. The impugned demand orders dated 23rd April, 2024 and 5th December, 2023 are accordingly set aside."

"The petitioner shall file replies within thirty days. The hearing notices shall now not be merely uploaded on the portal but shall also be e-mailed to the petitioner and upon the hearing notice being received, the petitioner would appear before the Department and make its submissions."

"The issue in respect of the validity of the impugned notifications is left open. Any order passed by the Adjudicating Authority shall be subject to the outcome of the decision of the Supreme Court."

"Keeping in view the judicial discipline, we refrain from giving our opinion with respect to the vires of Section 168-A of the Act as well as the notifications issued in purported exercise of power under Section 168-A of the Act which have been challenged, and we direct that all these present connected cases shall be governed by the judgment passed by the Hon'ble Supreme Court and the decision thereto shall be binding on these cases too."

The Court thus established the core principles that procedural fairness in communication and hearing is paramount in tax adjudications under the CGST Act, and that substantive challenges to extension notifications under Section 168A must await the Supreme Court's authoritative ruling. It emphasized judicial discipline by deferring to the apex court on contentious legal questions, while ensuring that taxpayers are not prejudiced by procedural lapses in the interim.