2025 (5) TMI 232 - HC - GST

Challenged the Notification No. 9/2023-Central Tax dated 31st March 2023 issued by the Central Board of Indirect Taxes ( the impugned notification ) - show cause notice - HELD THAT - Since the challenge to the above mentioned notifications is presently under consideration before the Supreme Court in S.L.P No 4240/2025 titled M/s HCC-SEW-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 proceedings shall also be subject to the outcome of the decision of the Supreme Court. On facts however the submission of the Petitioner in the present petition is that in a span of a few days two show cause notices have been issued upon the Petitioner dated 26th September 2023 and 20th September 2023. Though the demands raised in both the show cause notices are different both the show cause notices pertain to the same tax period i.e. July 2017-March 2018. A perusal of record reveals that the Respondents have not filed any counter affidavit in this matter. Affidavit to be filed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) The validity and legality of Notification No. 9/2023-Central Tax and Notification No. 56/2023-Central Tax issued under Section 168A of the Central Goods and Services Tax Act, 2017 ("GST Act"), particularly whether the procedural requirements, including prior recommendation of the GST Council, were complied with before issuing these notifications.

(b) Whether the 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 extended by the impugned notifications.

(c) The implications of conflicting High Court decisions on the validity of these notifications and the extent to which these decisions impact the present petition.

(d) Whether the petitioner was denied a fair opportunity to respond to the show cause notices and avail personal hearings, resulting in ex-parte adjudication orders imposing demands and penalties.

(e) The scope of relief available to petitioners in light of the pending Supreme Court proceedings on the validity of the impugned notifications.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Validity and legality of Notifications Nos. 9/2023 and 56/2023 under Section 168A of the GST Act

The legal framework for this issue is Section 168A of the Central GST Act, which mandates that any extension of time limits for adjudication of show cause notices and passing orders must be made on the prior recommendation of the GST Council. The notifications in question purportedly extend such time limits.

Several High Courts have taken divergent views 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 observed invalidity in Notification No. 56/2023 but did not delve into the vires of the notifications generally.

The Supreme Court has taken cognizance of these conflicting views and issued notice in SLP No. 4240/2025, focusing on whether the time limits for adjudication under Section 73 of the GST Act and corresponding State Acts could be extended by the impugned notifications. The Supreme Court's order highlights the cleavage of opinion among High Courts and has stayed the matter for final adjudication.

The Court noted that Notification No. 9/2023 was issued following the GST Council's prior recommendation, whereas Notification No. 56/2023 was challenged on the ground that the extension was granted contrary to Section 168A, with ratification occurring only after issuance, thus breaching procedural mandates.

The Court's reasoning emphasizes strict adherence to the statutory procedure under Section 168A, underscoring that any deviation undermines the validity of such notifications. The competing arguments revolve around whether the notifications were issued in compliance with the statutory requirement of prior GST Council recommendation and whether retrospective ratification suffices.

Conclusion: The Court refrained from expressing a definitive opinion on the validity of the notifications, deferring to the Supreme Court's impending decision, thereby acknowledging the legal uncertainty and the need for uniformity.

Issue (b): Extension of time limits for adjudication under Section 73 of the GST Act

The core legal question is whether the impugned notifications validly extended the limitation period for adjudication of show cause notices for the financial year 2019-2020.

Section 73 of the GST Act prescribes timelines for adjudication of tax demands. The impugned notifications purportedly extend these timelines via Section 168A. The Court's analysis, supported by the Supreme Court's notice, centers on the procedural correctness of such extensions.

The Court observed that the extension of limitation periods is a legislative power delegated to the executive, exercisable only upon compliance with the GST Council's recommendation. The notifications' validity is thus contingent upon adherence to this procedural safeguard.

The Court also took note of the practical consequences of these extensions, including the issuance of multiple show cause notices for the same tax period and the resultant demands and penalties.

Conclusion: The Court deferred the final determination on the validity of time limit extensions to the Supreme Court, while recognizing the procedural irregularities alleged by the petitioners.

Issue (c): Impact of conflicting High Court decisions and pending Supreme Court proceedings

The Court acknowledged the divergent rulings of various High Courts on the validity of the impugned notifications and the ongoing Supreme Court proceedings.

In line with judicial discipline, the Punjab and Haryana High Court had refrained from expressing views on the vires of Section 168A and related notifications, directing that the matters be governed by the Supreme Court's eventual ruling.

The Court adopted a similar stance, holding that the present petition's challenge to the impugned notifications shall be subject to the Supreme Court's decision in SLP No. 4240/2025.

This approach preserves consistency and avoids conflicting judicial pronouncements on a matter of significant public importance.

Conclusion: The Court deferred to the Supreme Court's jurisdiction and held that its decision will be binding on the present and related cases.

Issue (d): Alleged denial of opportunity to respond and ex-parte adjudications

The petitioners contended that they were unable to file replies or avail personal hearings in response to the show cause notices, resulting in ex-parte orders imposing substantial demands and penalties.

The Court considered this grievance seriously, noting that irrespective of the validity of the impugned notifications, principles of natural justice require that petitioners be given a fair opportunity to present their case.

The Court indicated a prima facie view that, depending on the category of cases, relief could be granted by allowing petitioners to place their stand before the adjudicating authorities and pursue appellate remedies.

This approach balances the procedural correctness of the notifications with the fundamental right to be heard, ensuring that adjudications are not rendered in default without due process.

Conclusion: The Court proposed to grant interim relief by permitting petitioners to participate in proceedings and challenge demands, without prejudging the validity of the notifications.

Issue (e): Scope of relief pending Supreme Court decision

Given the pending Supreme Court adjudication on the validity of the impugned notifications, the Court sought to categorize the petitions and tailor relief accordingly.

The Court suggested that in some cases, proceedings could continue with due opportunity to the petitioners, while in others, appellate remedies might be allowed, all subject to the final outcome of the Supreme Court's ruling.

This pragmatic approach aims to mitigate hardship to petitioners while maintaining judicial discipline and respecting the apex court's authority.

Conclusion: The Court invited parties to consider the proposed categories and reliefs and sought further instructions, signaling a flexible interim framework pending final adjudication.

3. SIGNIFICANT HOLDINGS

The Court held that:

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

This underscores the principle that lower courts should refrain from deciding on issues pending before the Supreme Court to maintain uniformity and judicial discipline.

The Court further observed: "Broadly, there are six categories of cases which are pending before this Court... this Court is of the prima facie view that, depending upon the categories of petitions, orders can be passed affording an opportunity to the Petitioners to place their stand before the adjudicating authority."

This establishes the core principle that procedural fairness and the right to be heard cannot be sacrificed even when substantive legal questions are pending final determination.

Finally, the Court emphasized the need for filing of counter affidavits and rejoinders, reflecting adherence to procedural norms in adjudication of writ petitions.

Overall, the Court's final determinations were to stay its own decision on the validity of the impugned notifications pending Supreme Court ruling, while allowing procedural relief to petitioners to ensure fair adjudication and opportunity to be heard.