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2025 (5) TMI 243 - HC - GSTChallenge to SCN consequent order and N/N. 9/2023-Central Tax dated 31st March 2023 and 56/2023-Central Tax dated 28th December 2023 - reply of petitioner was not considered by the Sales Tax Officer and the impugned order was passed in complete disregard of the reply filed by the Petitioner - violation of principles of natural justice - HELD THAT - This Court is of the opinion that the reply filed by the Petitioner along with the supporting documents have not been duly considered before the passing of impugned order. Additionally the Petitioner has not been afforded an opportunity to be heard. It is also unclear as to whether a personal hearing notice was uploaded on the GST Portal or not or was communicated in any other manner to the Petitioner. In view of the fact that the impugned order has 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 and the matter is relegated to the Adjudicating Authority. The reply to the SCN that is already been filed by the Petitioner 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 - petition disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court are:
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 Central Government to extend the time limit for adjudication of show cause notices and passing orders relating to tax demands, subject to prior recommendation of the GST Council. The impugned Notifications Nos. 9/2023 and 56/2023 were issued purportedly under this provision to extend limitation periods for tax periods including April 2018 to March 2019. Several High Courts have taken divergent views on the validity of these notifications. The Allahabad and Patna High Courts upheld the notifications' validity, while the Guwahati High Court quashed Notification No. 56/2023 (Central Tax). The Telangana High Court observed potential invalidity of Notification No. 56/2023 but did not decide on its vires. The Supreme Court has admitted a Special Leave Petition (SLP) challenging these notifications and issued notice, indicating the issue is sub judice. Court's Interpretation and Reasoning: The Court acknowledged the conflicting judicial opinions and the pendency of the Supreme Court's decision. It noted that Notification No. 9/2023 was issued after prior GST Council recommendation, whereas Notification No. 56/2023 was issued before such recommendation, which was given subsequently, thus allegedly contravening Section 168A's mandate. The Court refrained from expressing a final opinion on the validity of the notifications, deferring to the Supreme Court's forthcoming ruling. Application of Law to Facts: Given the ongoing Supreme Court proceedings and divergent High Court rulings, the Court held that the challenge to the impugned notifications must be subject to the Supreme Court's final decision. The Court further noted that the Punjab and Haryana High Court had stayed its own proceedings pending the Supreme Court's outcome, emphasizing judicial discipline. Validity of the Impugned Order under Section 73 of the CGST Act Legal Framework and Precedents: Section 73 of the CGST Act deals with determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by the taxpayer. The procedure mandates issuance of a show cause notice and opportunity to the taxpayer to be heard before passing an order. Court's Interpretation and Reasoning: The Petitioner contended that it had filed a detailed reply to the show cause notice on 26th February, 2024 along with supporting documents, but the Assessing Authority failed to consider the reply and passed the impugned order ex-parte on 21st April, 2024, confirming a demand of Rs. 13,01,562/-. The order's extract indicated that the reply was deemed irrelevant, no reconciliation between GSTR-1 and GSTR-3B was produced, and the Petitioner allegedly failed to appear for personal hearing or produce supporting documents, leading to the demand. The Court examined the record and found that the reply and supporting documents filed by the Petitioner were not duly considered before passing the impugned order. It was also unclear whether a personal hearing notice was issued or communicated to the Petitioner. The Court emphasized the fundamental principle of natural justice that no order should be passed without affording the affected party an opportunity to be heard. Application of Law to Facts: The Court concluded that the impugned order was passed in violation of the principles of natural justice and procedural fairness. Therefore, the order was set aside, and the matter was remitted to the Adjudicating Authority for fresh adjudication after affording the Petitioner a personal hearing and due consideration of the reply and documents already filed. Treatment of Competing Arguments: While the Respondents contended that the order was valid due to non-compliance by the Petitioner, the Court found that the Petitioner's inability to appear for personal hearing and the failure of the authority to consider the reply warranted setting aside the order. The Court balanced the procedural requirements against the Respondents' assertions and ruled in favor of procedural fairness. Effect of Pending Supreme Court Proceedings on the Present Case The Court recognized that the validity of the impugned notifications is a critical issue pending before the Supreme Court in SLP No. 4240/2025. It noted that various High Courts have stayed or disposed of petitions on the subject pending the Supreme Court's decision. The Court decided to keep the issue of validity of the notifications open and subject to the Supreme Court's outcome, without expressing any opinion on the merits at this stage. The Court also observed that the Petitioner's challenge to the impugned notifications in the present petition would be governed by the Supreme Court's decision. Thus, any fresh order passed by the Adjudicating Authority following remand would be subject to the final ruling on the notifications' validity. Opportunity of Hearing and Procedural Fairness The Court emphasized the necessity of affording the Petitioner an opportunity of personal hearing before passing any adjudication order. It directed the Adjudicating Authority to issue a personal hearing notice to the Petitioner, communicated through specified mobile number and email address, and to consider the reply already filed along with any submissions made during the hearing. This direction underscores the Court's commitment to upholding the principles of natural justice and ensuring that tax demands and penalties are not imposed without adequate procedural safeguards. 3. SIGNIFICANT HOLDINGS "The reply filed by the Petitioner along with the supporting documents have not been duly considered before the passing of impugned order. Additionally, the Petitioner has not been afforded an opportunity to be heard." "In view of the fact that the impugned order has been passed without hearing the Petitioner, an opportunity ought to be afforded to the Petitioner to contest the matter on merits." "The challenge to the impugned notifications is presently under consideration before the Supreme Court ... Any order passed by the Adjudicating Authority shall be subject to the outcome of the decision of the Supreme Court." Core principles established include:
Final determinations:
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