2025 (5) TMI 234 - 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 - Validity of show cause notice and consequent order - Challenged the Notification No. 9/2023-Central Tax and 56/2023-Central Tax as also Notification No. 09/2023-State Tax and Notification No. 56/2023-State Tax - No 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

The core legal questions considered by the Court in this matter include:

1. Whether the impugned notifications issued under Section 168A of the Central Goods and Services Tax Act, 2017 ("CGST Act") extending the time limit for adjudication of show cause notices and passing of orders under Section 73 of the CGST Act are valid and lawful.

2. Whether the proper procedure, including prior recommendation of the GST Council as mandated by Section 168A, was followed before issuance of the impugned notifications.

3. Whether the impugned order passed under Section 73 of the CGST Act against the petitioner is sustainable, given the alleged denial of opportunity to file a reply to the show cause notice ("SCN") and to be heard.

4. The scope and effect of conflicting High Court decisions on the validity of the impugned notifications and the impact of pending Supreme Court proceedings on these issues.

5. The procedural fairness and natural justice principles applicable in adjudication proceedings under the CGST Act, specifically whether ex-parte orders can be passed without affording personal hearing or opportunity to file replies.

Issue-wise Detailed Analysis

1. Validity of Impugned Notifications under Section 168A of the CGST Act

Legal Framework and Precedents: Section 168A of the CGST Act empowers the Central Government to extend the time limits for adjudication and passing of orders by issuing notifications, subject to prior recommendation by the GST Council. This provision ensures that extensions are not arbitrary and maintain legislative oversight through the GST Council's recommendation.

Several High Courts have examined the validity of the impugned notifications Nos. 9/2023 and 56/2023 (Central and State Tax) which purportedly extended the limitation period for adjudication for the financial year 2019-2020. The Allahabad and Patna High Courts upheld the validity of these notifications, whereas the Guwahati High Court quashed Notification No. 56/2023 (Central Tax). The Telangana High Court raised serious doubts about the procedural validity of Notification No. 56/2023 (Central Tax), particularly noting that the ratification by GST Council was post-facto, contrary to the statutory mandate.

The Supreme Court has admitted Special Leave Petitions (SLPs) challenging these notifications and issued notices, recognizing the cleavage of opinion among High Courts and the importance of the issue.

Court's Interpretation and Reasoning: The Delhi High Court acknowledged the conflicting judicial opinions and the pendency of the matter before the Supreme Court. It refrained from expressing any opinion on the validity of the impugned notifications, deferring the issue to the Supreme Court's final adjudication.

Application of Law to Facts: Since the notifications are under challenge and the Supreme Court is seized of the matter, the Court held that the validity of these notifications in the present petition is subject to the Supreme Court's decision.

Treatment of Competing Arguments: The petitioner challenged the notifications on procedural grounds, primarily the absence of prior GST Council recommendation or improper issuance after expiry of limitation. The respondents relied on the notifications and the purported GST Council recommendations. The Court noted these contentions but did not resolve them due to ongoing Supreme Court proceedings.

Conclusion: The Court left the question of validity of the impugned notifications open, pending the Supreme Court's ruling.

2. Procedural Fairness and Opportunity to be Heard in Adjudication Proceedings under Section 73 of the CGST Act

Legal Framework and Precedents: Principles of natural justice mandate that a person against whom adverse action is proposed must be given an opportunity to be heard before passing any order. Section 73 of the CGST Act provides for adjudication of cases involving tax demands. The procedure typically requires issuance of a SCN, opportunity to file reply, and personal hearing before any order is passed.

Court's Interpretation and Reasoning: The petitioner contended that no opportunity was granted to file a reply to the SCN dated 23rd May 2024, and the impugned order dated 30th July 2024 was passed without hearing, rendering it a non-speaking and invalid order. The Court examined the impugned order which stated that the taxpayer neither deposited the demand nor filed any objections or appeared for personal hearing despite multiple opportunities.

However, the Court found that the petitioner was effectively denied a meaningful opportunity to be heard, as no reply was filed and no personal hearing was availed. The Court emphasized that without affording a proper opportunity to contest the SCN, passing an adverse order violates the principles of natural justice.

Key Evidence and Findings: The records revealed no reply was filed by the petitioner. The adjudicating authority claimed to have offered personal hearings, but the petitioner did not appear. The Court noted that the petitioner's inability to file replies or appear for hearings was due to various reasons, and the adjudication was largely ex-parte.

Application of Law to Facts: The Court set aside the impugned order on the ground of denial of opportunity to be heard. It granted the petitioner 30 days to file a reply to the SCN and directed the adjudicating authority to issue a personal hearing notice. The fresh order would be passed after considering the petitioner's submissions.

Treatment of Competing Arguments: The respondents argued that sufficient opportunities were granted and the petitioner failed to avail them. The Court balanced this against the petitioner's inability to participate effectively and held that procedural fairness requires a fresh opportunity.

Conclusion: The impugned order was quashed, and the petitioner was granted opportunity to be heard and file reply, with fresh adjudication to follow.

3. Impact of Conflicting High Court Decisions and Pending Supreme Court Proceedings

Legal Framework and Precedents: When multiple High Courts have divergent views on a legal question, the Supreme Court's intervention is necessary for uniformity and finality. Judicial discipline requires lower courts to refrain from expressing opinions on issues pending before the Supreme Court.

Court's Interpretation and Reasoning: The Court noted that the Punjab and Haryana High Court had disposed of similar petitions in light of the pending Supreme Court SLP, and the Bombay High Court was also seized of related matters. The Court followed this judicial discipline and declined to decide on the validity of the impugned notifications, deferring to the Supreme Court's forthcoming judgment.

Application of Law to Facts: The Court disposed of the present petition subject to the Supreme Court's decision, ensuring that any order passed by the adjudicating authority would be without prejudice to the outcome of the Supreme Court's ruling.

Conclusion: The Court maintained the status quo on the validity issue and emphasized that the adjudication would proceed consistent with the Supreme Court's eventual decision.

Significant Holdings

"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 Court is of the opinion that since the Petitioner has not been afforded an opportunity to be heard and the said SCN and the consequent impugned order have been passed without hearing the Petitioner, an opportunity ought to be afforded to the Petitioner to contest the matter on merits."

"Accordingly, the impugned order is set aside. The Petitioner is granted 30 days' time to file the reply to SCN. Upon filing of the reply, the Adjudicating Authority shall issue to the Petitioner, a notice for personal hearing... The reply filed by the Petitioner to the SCN along with the submissions made in the personal hearing proceedings shall be duly considered by the Adjudicating Authority and fresh order with respect to the SCN shall be passed accordingly."

Core principles established include the necessity of adherence to natural justice in tax adjudication proceedings, the requirement of prior GST Council recommendation under Section 168A for extension notifications, and the judicial discipline to defer to the Supreme Court in matters of conflicting High Court opinions.

Final determinations are that the impugned notifications' validity remains undecided and subject to Supreme Court adjudication, and the impugned order under Section 73 of the CGST Act is quashed for denial of opportunity to be heard, with directions for fresh adjudication after hearing the petitioner.