2025 (5) TMI 231 - HC - GST

Compliance and the requirement of prior recommendation by the GST Council for extending time limits for adjudication under Section 73 of the CGST Act - Validity of the show cause notice issued - Challenged the Notification No. 9/2023-Central Tax and Notification No. 56/2023-Central Tax - N o opportunity for personal hearing - principles of natural justice - HELD THAT -Since the challenge to the above mentioned notifications is presently under consideration by the Supreme Court in M/s HCCSEW-MEIL-AAG JV v. Assistant Commissioner of State Tax Ors. 2025 (4) TMI 60 - SC ORDER the challenge made by the Petitioner to the impugned notification in the present proceeding shall also be subject to the outcome of the decision of the Supreme Court. Perusal of records reveal that a reply to the SCN was filed by the Petitioner on 11th December 2023. Subsequently a personal hearing notice is also stated to have been issued which was not attended by the Petitioner. The order dated 13th April 2024 does not record any specific date that was fixed for personal hearing of the Petitioner. Under these circumstances since the said order seems to be extremely cryptic and unreasoned in nature and given the order passed by this Court on 27th February 2024 this Court is of the opinion that the Petitioner shall be given an opportunity for personal hearing. The reply filed by the Petitioner to the SCN along with the submissions made during the personal hearing proceedings shall be duly considered by the Adjudicating Authority and fresh order with respect to the SCN shall be passed accordingly. The present writ petitions are disposed of in above terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

• Whether the impugned Notifications No. 9/2023-Central Tax dated 31st March, 2023 and No. 56/2023-Central Tax dated 28th December, 2023 issued under Section 168A of the Central Goods and Services Tax Act, 2017 (CGST Act) are valid and lawful, particularly regarding the procedural requirement of prior recommendation by the GST Council.
• Whether the extension of time limits for adjudication of show cause notices and passing of orders under Section 73 of the GST Act and corresponding State GST Acts for the financial year 2019-2020 could be validly effected by the said notifications.
• The legality and propriety of issuing Notification No. 56/2023-Central Tax retrospectively without prior GST Council recommendation, and whether subsequent ratification suffices.
• Whether the issuance of Notification No. 56/2023-State Tax after expiry of limitation under Notification No. 13/2022-State Tax is valid.
• The procedural fairness in adjudication proceedings initiated pursuant to the show cause notice dated 9th December, 2023, specifically concerning the opportunity for personal hearing and consideration of replies by the Petitioner.
• The impact of ongoing Supreme Court proceedings on the validity of the impugned notifications and the consequent effect on pending adjudication and writ petitions.

2. ISSUE-WISE DETAILED ANALYSIS

Validity of the Impugned Notifications 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 of show cause notices and passing of orders. Such extension requires prior recommendation of the GST Council. The impugned notifications were issued under this provision.

Various High Courts have delivered conflicting judgments on the validity of these notifications. The Allahabad High Court upheld Notification No. 9/2023, while the Patna High Court upheld Notification No. 56/2023. Conversely, the Guwahati High Court quashed Notification No. 56/2023. The Telangana High Court expressed doubts on the validity of Notification No. 56/2023, and this issue is presently under consideration before the Supreme Court in SLP No. 4240/2025.

Court's Interpretation and Reasoning: The Court noted that Notification No. 9/2023 was issued following the GST Council's recommendation, thus satisfying the procedural mandate under Section 168A. However, Notification No. 56/2023 was issued without prior GST Council recommendation, with ratification occurring only after issuance, which the Court found to be contrary to the statutory requirement.

Key Findings: The Court acknowledged the cleavage of judicial opinion on the issue and the pendency of the matter before the Supreme Court. It observed that the question of the notifications' validity is substantive and complex, warranting final adjudication by the apex court.

Application of Law to Facts: Given the ongoing Supreme Court proceedings, the Court refrained from expressing a definitive opinion on the validity of the impugned notifications and held that all pending writ petitions challenging these notifications shall be subject to the Supreme Court's decision.

Treatment of Competing Arguments: The Petitioners argued the notifications were invalid due to procedural lapses, while the Respondents contended the notifications were valid and necessary for administrative efficiency. The Court balanced these by deferring to the Supreme Court for final resolution.

Conclusion: The Court stayed its hand on the issue of validity, subjecting the petitions to the Supreme Court's forthcoming judgment.

Extension of Time Limits for Adjudication under Section 73 of the GST Act

Legal Framework and Precedents: Section 73 prescribes timelines for adjudication of tax demands. Extensions require compliance with Section 168A. The impugned notifications purportedly extended these timelines for the financial year 2019-2020.

Court's Reasoning: The Court recognized that the extension of limitation periods is permissible only if the statutory procedure is strictly followed, i.e., prior GST Council recommendation. Notification No. 9/2023 complied, while Notification No. 56/2023 did not.

Key Findings: The Court noted that the extension under Notification No. 56/2023 was granted contrary to the statutory mandate, raising questions about its validity.

Conclusion: The Court refrained from deciding on this issue pending Supreme Court adjudication but acknowledged the procedural infirmity in Notification No. 56/2023.

Validity of State Tax Notification No. 56/2023 Issued After Expiry of Limitation

Legal Framework: Notification No. 13/2022 (State Tax) prescribed limitation periods for adjudication. Notification No. 56/2023 (State Tax) was issued on 11th July 2024, after expiry of this limitation.

Court's Analysis: The Court noted the challenge that Notification No. 56/2023 (State Tax) was issued beyond the prescribed limitation period, potentially rendering it invalid.

Conclusion: This issue remains open and is linked to the broader question of notification validity, pending Supreme Court determination.

Procedural Fairness in Adjudication Proceedings

Legal Framework: Principles of natural justice require that a show cause notice recipient be given an opportunity to file replies and avail personal hearing before a final order is passed.

Court's Reasoning: The Petitioner filed a reply to the SCN dated 9th December 2023 but did not attend the personal hearing. The adjudication order dated 13th April 2024 was cryptic and did not record any specific date for personal hearing.

Key Findings: The Court found the order to be unreasoned and noted the Petitioner was not afforded a proper opportunity for personal hearing as mandated by the principles of natural justice and the Court's earlier order dated 27th February 2024.

Application of Law to Facts: The Court directed the adjudicating authority to issue a fresh notice for personal hearing to the Petitioner, consider the reply and submissions afresh, and pass a reasoned order accordingly.

Treatment of Competing Arguments: While the Respondents argued that proceedings should continue, the Court emphasized procedural fairness and the need for an opportunity to be heard.

Conclusion: The Court mandated fresh adjudication proceedings with opportunity for personal hearing, without prejudicing the question of notification validity.

Effect of Pending Supreme Court Proceedings

Legal Framework: Judicial discipline requires lower courts to defer to the Supreme Court on issues pending before it.

Court's Reasoning: Given the Supreme Court's notice and interim orders in SLP No. 4240/2025, the Court refrained from deciding on the validity of the impugned notifications and directed that all pending writ petitions be governed by the Supreme Court's eventual ruling.

Conclusion: The Court disposed of the writ petitions subject to the Supreme Court's decision, maintaining interim reliefs as applicable.

3. SIGNIFICANT HOLDINGS

"In terms of Section 168A, prior recommendation of the GST Council is essential for extending deadlines. In respect of Notification no. 9, the recommendation was made prior to the issuance of the same. However, insofar as Notification No. 56/2023 (Central Tax) the challenge is that the extension was granted contrary to the mandate under Section 168A of the Central Goods and Services Tax Act, 2017 and ratification was given subsequent to the issuance of the notification. The notification incorrectly states that it was on the recommendation of the GST Council."

"Since the challenge to the above mentioned notifications is presently under consideration by the Supreme Court in S.L.P No 4240/2025, the challenge made by the Petitioner to the impugned notification in the present proceeding shall also be subject to the outcome of the decision of the Supreme Court."

"The order dated 13th April, 2024 does not record any specific date that was fixed for personal hearing of the Petitioner. Under these circumstances, since the said order seems to be extremely cryptic and unreasoned in nature and given the order passed by this Court on 27th February, 2024, this Court is of the opinion that the Petitioner shall be given an opportunity for personal hearing."

"The Adjudicating Authority shall issue upon the Petitioner, a notice for personal hearing. The personal hearing notice shall be communicated to the Petitioner on the following mobile no. and e-mail address: Mobile No.: 9810042928, E-mail Address: [email protected]."

"The reply filed by the Petitioner to the SCN along with the submissions made during the personal hearing proceedings shall be duly considered by the Adjudicating Authority and fresh order with respect to the SCN shall be passed accordingly."

"Any order passed by the Adjudicating Authority shall be subject to the outcome of the decision of the Supreme Court."

Core principles established include the mandatory nature of prior GST Council recommendation under Section 168A for extension notifications, the necessity of procedural fairness in adjudication including opportunity for personal hearing, and judicial discipline in deferring to the Supreme Court on contentious legal questions pending before it.

Final determinations on each issue are reserved pending Supreme Court adjudication, while procedural reliefs have been granted to ensure fair adjudication in the interim.