2025 (5) TMI 244 - 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 the SCN in the present case is of December 2023 therefore following the above decision the impugned order is set aside. 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 include:

1. Whether the show cause notice (SCN) dated 16th December 2023 and the consequent order dated 20th March 2024, issued under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act), were validly issued and adjudicated, particularly in light of procedural fairness and opportunity of hearing to the petitioner.

2. The validity and vires of Notification No. 9/2023-Central Tax dated 31st March 2023 and Notification No. 56/2023-Central Tax, issued under Section 168A of the CGST Act, which purportedly extended limitation periods for adjudication of show cause notices.

3. Whether the procedure mandated under Section 168A of the CGST Act, including prior recommendation of the GST Council, was complied with before issuance of the impugned notifications.

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

5. The procedural propriety regarding the issuance and communication of show cause notices and hearing notices, specifically the issue of notices being uploaded only under an 'Additional Notices Tab' on the GST portal, which allegedly prevented the petitioner from receiving proper notice and opportunity to respond or appear personally.

6. The appropriate relief and procedural direction in cases where adjudication orders have been passed ex-parte due to lack of opportunity to the petitioner to file replies or appear for hearings.

Issue-wise Detailed Analysis

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

The petitioner challenged the SCN dated 16th December 2023 and the consequential order dated 20th March 2024, contending that the SCN was uploaded under an 'Additional Notices Tab' on the GST portal, which was not adequately brought to the petitioner's attention. Consequently, the petitioner did not file any reply nor was afforded a personal hearing before the order was passed, leading to an ex-parte adjudication.

The Court referred to its earlier decisions in similar matters, notably W.P.(C) 13727/2024, where it was held that notices uploaded solely under an 'Additional Notices & Orders' tab without proper communication do not satisfy the requirement of effective service. The Court emphasized the principle that orders should not be passed in default without affording the party a fair opportunity to be heard, which is a fundamental tenet of natural justice.

Relying on precedents such as M/s ACE Cardiopathy Solutions Private Ltd. v. Union of India and Kamla Vohra v. Sales Tax Officer, the Court reiterated that the petitioner must be given an opportunity to file replies and be heard before any order is passed. The Court noted that post-17th January 2024, the Department had made changes to the portal to improve visibility of notices, but since the impugned SCN was dated December 2023, the petitioner's grievance was valid.

The Court set aside the impugned order and remanded the matter to the adjudicating authority with directions to afford the petitioner a fresh opportunity to file replies within thirty days and to provide a personal hearing. The hearing notices were to be communicated not only via the portal but also by email and phone, ensuring effective notice.

2. Validity of Notification No. 9/2023-Central Tax and Notification No. 56/2023-Central Tax issued under Section 168A of the CGST Act

The petitioner also challenged the validity of Notification No. 9/2023 and Notification No. 56/2023, which purported to extend the limitation period for adjudication of SCNs under Section 168A of the CGST Act. The core legal issue was whether these notifications were validly issued in compliance with the statutory requirement of prior recommendation of the GST Council.

The Court noted that this issue was part of a batch of petitions pending before various High Courts and the Supreme Court. The Allahabad and Patna High Courts had upheld the validity of Notifications 9 and 56 respectively, while the Guwahati High Court had quashed Notification 56. The Telangana High Court had made observations on the invalidity of Notification 56, which was currently under Supreme Court consideration in S.L.P No. 4240/2025.

The Supreme Court had issued notices and acknowledged the cleavage of opinion among High Courts on this matter, specifically focusing on whether the time limit for adjudication could be extended by these notifications issued under Section 168A. The Supreme Court's decision was awaited.

Given the pendency of the Supreme Court proceedings, this Court refrained from expressing any opinion on the validity of the impugned notifications. It held that any order passed by the adjudicating authority pursuant to these notifications would be subject to the outcome of the Supreme Court's decision.

3. Procedural Fairness and Opportunity of Hearing

Independent of the validity of the notifications, the Court recognized the fundamental right of the petitioner to be heard. It acknowledged submissions that even if the notifications were upheld, the petitioner had been prejudiced by the absence of opportunity to file replies or appear for hearings, resulting in ex-parte orders and imposition of huge demands and penalties.

The Court categorized the pending cases and indicated that, depending on the category, appropriate relief could be granted to allow petitioners to place their stand before the adjudicating authority and pursue appellate remedies, without delving into the validity of the notifications at this stage.

Accordingly, the Court directed that hearing notices should be communicated effectively, including by email and phone, and not merely uploaded on the portal. It emphasized that the adjudicating authority must consider the petitioner's replies and submissions in a personal hearing before passing any order.

4. Treatment of Conflicting High Court Decisions and Pending Supreme Court Proceedings

The Court noted the conflicting decisions of various High Courts regarding the impugned notifications and the ongoing Supreme Court proceedings. It referred to the Punjab and Haryana High Court's order, which had stayed its own consideration pending the Supreme Court's decision and directed that all connected cases be governed by the Supreme Court's ruling.

This Court followed the same approach, refraining from expressing any opinion on the validity of the notifications and deferring to the Supreme Court's eventual determination. It made clear that the adjudicating authority's orders would be subject to the Supreme Court's outcome.

5. Application of Law to Facts and Conclusions

On the facts, the Court found that the petitioner had not received effective notice of the SCN due to the departmental practice of uploading notices under an obscure tab on the GST portal. This procedural deficiency violated the principles of natural justice by depriving the petitioner of a fair opportunity to respond and be heard.

Consequently, the impugned order passed without personal hearing and in absence of any reply was set aside. The matter was remanded for fresh adjudication after affording the petitioner proper notice and hearing.

Regarding the notifications extending limitation periods, the Court held that the issue was sub judice before the Supreme Court and therefore left open, with the petitioner's challenge to the notifications to be decided in that forum.

Significant Holdings

"Intention is to ensure that the Petitioner is given an opportunity to file its reply and is heard on merits and that orders are not passed in default."

"Since there is no clarity on behalf of the Department, this Court follows the order dated 9th September, 2024 in Satish Chand Mittal (Trade Name National Rubber Products) vs. Sales Tax Officer SGST, Ward 25-Zone 1... where the Court under similar circumstances has remanded back the matter to ensure the Noticee/Petitioners get a fair opportunity to be heard."

"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."

Core principles established include:

- The fundamental requirement of effective service of show cause notices and hearing notices, including communication beyond mere portal uploading, to satisfy principles of natural justice.

- Orders under the CGST Act, particularly under Section 73, must not be passed ex-parte without affording the noticee an opportunity to reply and be heard.

- Extension of limitation periods under Section 168A of the CGST Act requires compliance with statutory procedure, including prior recommendation of the GST Council, and such issues are subject to judicial scrutiny.

- Where conflicting High Court decisions exist and Supreme Court proceedings are pending, lower courts should refrain from expressing opinions on the validity of impugned notifications and await the Supreme Court's ruling.

Final determinations included setting aside the impugned adjudication order dated 20th March 2024, remanding the matter for fresh adjudication after proper notice and hearing, and leaving the challenge to the impugned notifications open pending the Supreme Court's decision.