2025 (5) TMI 253 - HC - GST

Violation of principles of natural justice - submission of the Petitioner is that the SCN was not brought to the knowledge of petitioner - Challenge to adjudication order and N/Ns. 9/2023-Central Tax dated 31st March 2023 and 56/2023- Central Tax dated 28th December 2023 issued by the Central Board of Indirect Taxes and Customs - HELD THAT - The Court has heard the parties. In fact this Court in NEELGIRI MACHINERY THROUGH ITS PROPRIETOR MR. ANIL KUMAR VERSUS 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 subject to terms imposed. The impugned demand orders dated 23rd April 2024 and 5th December 2023 are accordingly set aside. In response to show cause notices dated 04th December 2023 and 23th September 2023 the Petitioner shall file its replies within thirty days. The hearing notices shall now not be merely uploaded on the portal but shall also be e-mailed to the Petitioner and upon the hearing notice being received the Petitioner would appear before the Department and make its submissions. The show cause notices shall be adjudicated in accordance with law. Petition disposed off.

Summary

The core legal questions considered by the Court are:

1. Whether the impugned adjudication order passed under Section 73 of the Delhi/Central Goods and Services Tax Act, 2017 (DGST/CGST Act, 2017) is valid, particularly in light of procedural fairness and opportunity to be heard.

2. The validity and legality of Notification Nos. 09/2023-Central Tax and 56/2023-Central Tax issued by the Central Board of Indirect Taxes and Customs under Section 168A of the CGST Act, 2017, specifically whether the notifications were issued following the proper procedure, including the requirement of prior recommendation of the GST Council.

3. The effect of the ongoing judicial controversy and conflicting High Court decisions on the notifications' validity, and the impact of pending Supreme Court proceedings on the present petition.

4. Whether the petitioner was denied a fair opportunity to respond to the Show Cause Notice (SCN) due to the manner of its issuance and communication, and the consequent validity of the adjudication order passed ex-parte.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Notifications under Section 168A of the CGST Act, 2017

Legal Framework and Precedents: Section 168A of the CGST Act mandates that any extension of the time limit for adjudication of show cause notices and passing orders requires a prior recommendation of the GST Council. The notifications challenged were issued purportedly under this provision.

Multiple High Courts have taken divergent views on the validity of these notifications. The Allahabad High Court upheld Notification No. 9, the Patna High Court upheld Notification No. 56, whereas the Guwahati High Court quashed Notification No. 56. The Telangana High Court observed invalidity issues with Notification No. 56 but did not decide on its vires. This conflicting judicial stance underscores the unsettled nature of the law on this point.

The Supreme Court has admitted a Special Leave Petition (SLP No. 4240/2025) concerning the legality of these notifications and issued notices, highlighting the importance and complexity of the issue. The Supreme Court's order indicates that the key question is whether the time limits for adjudication under Section 73 of the GST Act can be extended by issuing these notifications under Section 168A.

Court's Interpretation and Reasoning: The Court acknowledged the ongoing judicial divergence and the pendency of the Supreme Court proceedings. It refrained from expressing any opinion on the validity of the notifications, deferring to the Supreme Court's final adjudication.

Application of Law to Facts: The Court held that the challenge to the notifications in the present petition would be subject to the Supreme Court's decision in the pending SLP. It recognized the notifications' centrality to the adjudication proceedings but did not decide their validity at this stage.

Treatment of Competing Arguments: The Court noted the petitioner's challenge to the notifications on procedural grounds and the respondents' reliance on the notifications' validity. Given the conflicting High Court rulings and the Supreme Court's intervention, the Court chose judicial restraint.

Conclusion: The issue of the notifications' validity remains open and pending before the Supreme Court. The Court's orders and directions are without prejudice to the final outcome of the Supreme Court's decision.

2. Procedural Fairness in Issuance of Show Cause Notice and Adjudication Order

Legal Framework and Precedents: Principles of natural justice require that a party must be given adequate notice and an opportunity to be heard before adverse orders are passed. The GST portal's practice of uploading notices under an 'Additional Notices' tab, which was not prominently visible, has been challenged in several cases.

Precedents from this Court and others (e.g., W.P.(C) 13727/2024, Satish Chand Mittal, Anant Wire Industries) have held that failure to bring SCNs to the petitioner's actual notice and denial of a personal hearing renders the adjudication order liable to be set aside and remanded for fresh adjudication.

Court's Interpretation and Reasoning: The Court found that the petitioner was not aware of the SCN dated 22nd May 2024 because it was uploaded under the 'Additional Notices' tab on the GST portal and was not brought to the petitioner's attention. This resulted in the petitioner being deprived of the opportunity to file a reply or appear for a personal hearing.

The Court noted that the respondents had rectified the portal after 16th January 2024 to make such notices more visible, but this did not assist the petitioner in the present case.

Key Evidence and Findings: The petitioner's submissions and the procedural history showed that the SCN was effectively concealed from the petitioner. The impugned demand orders were passed ex-parte without the petitioner's participation.

Application of Law to Facts: Applying the settled principles of natural justice, the Court concluded that the impugned orders were passed in violation of the petitioner's right to be heard and thus could not stand.

Treatment of Competing Arguments: While the respondents argued that the SCN was issued after the portal was fixed, the Court held that this did not cure the procedural defect in the present case.

Conclusion: The Court set aside the impugned demand orders and directed that the petitioner be given a fresh opportunity to file replies and be heard through personal hearings. It mandated that hearing notices not only be uploaded on the portal but also communicated via email and phone to ensure actual notice.

3. Impact of Pending Supreme Court Proceedings and Judicial Discipline

The Court recognized that the issue of the validity of the impugned notifications is sub judice before the Supreme Court and that several High Courts have either stayed or disposed of related petitions in deference to the Supreme Court's forthcoming decision.

Respecting judicial discipline, the Court declined to decide on the notifications' validity and directed that the adjudicating authority's orders be subject to the Supreme Court's final ruling.

This approach ensures uniformity and avoids conflicting decisions on a matter of national importance.

Significant Holdings:

"The challenge made by the Petitioner to the notification in the present proceedings shall also be subject to the outcome of the decision of the Supreme Court."

"Be that as it may, 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."

"The impugned demand orders dated 23rd April, 2024 and 5th December, 2023 are accordingly set aside."

"The hearing notices shall now not be merely uploaded on the portal but shall also be e-mailed to the Petitioner and upon the hearing notice being received, the Petitioner would appear before the Department and make its submissions."

Core principles established include the mandatory nature of procedural fairness in tax adjudication proceedings, the necessity of effective communication of notices, and judicial restraint in matters pending before the Supreme Court.

Final determinations on each issue are:

- The validity of the impugned notifications under Section 168A of the CGST Act remains undecided and subject to the Supreme Court's ruling.

- The impugned adjudication orders passed without affording the petitioner a fair opportunity to respond are set aside.

- The petitioner is entitled to file replies and be heard through personal hearings, with proper communication of notices ensured.

- The adjudicating authority shall pass fresh orders in accordance with law, subject to the Supreme Court's final decision on the notifications' validity.