2025 (5) TMI 466 - HC - GST

Extension of Time limit for issue of SCN - Challenge to SCN and N/N. 09/2023-Central Tax dated 31st March 2023 - invalid service of SCN - SCN uploaded on the Additional notices tab and did not come to the knowledge of the Petitioner - violation of principles of natural justice - HELD THAT - In the opinion of this Court considering that the show cause notice was uploaded on the Additional notices tab following the decision 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 SCN is set aside. After hearing the Petitioner the Adjudicating Authority shall pass the order of adjudication. Needless to add that the adjudication order shall be subject to the outcome of the SLP pending in the Supreme Court where the impugned notification is challenged. Conclusion - The demand order dated 27th December 2023 is set aside due to invalid service of the Show Cause Notice. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether the impugned Notification No. 09/2023-Central Tax dated 31st March 2023 and Notification No. 56/2023 (Central Tax) issued under Section 168A of the Central Goods and Services Tax Act, 2017 (GST Act) are valid, particularly regarding compliance with the procedural requirement of prior GST Council recommendation.

- Whether the extension of time limits for adjudication of show cause notices and passing of orders under Section 73 of the GST Act and the corresponding State GST Act for the financial year 2019-2020 could be validly effected through the impugned notifications.

- The effect of conflicting judicial pronouncements from various High Courts on the validity of the impugned notifications and the implications of the pendency of the matter before the Supreme Court.

- Whether the Show Cause Notice dated 29th September 2023 was properly served on the Petitioner, given that it was uploaded only on the "Additional Notices" tab of the GST portal, and the consequences of such mode of communication on the validity of subsequent demand orders.

- The entitlement of the Petitioner to an opportunity of personal hearing and to file replies to the show cause notices before adjudication, especially in light of orders passed ex parte.

- The appropriate procedural reliefs that can be granted pending the Supreme Court's final decision on the validity of the impugned notifications.

2. ISSUE-WISE DETAILED ANALYSIS

Validity of Impugned Notifications under Section 168A of the GST Act

The impugned notifications were challenged primarily on the ground that they were issued without following the mandatory procedural requirement under Section 168A, which mandates prior recommendation of the GST Council before extending deadlines for adjudication of show cause notices.

The Court noted that the validity of these notifications has been considered by various High Courts with divergent outcomes: the Allahabad High Court upheld Notification No. 9, the Patna High Court upheld Notification No. 56, while the Guwahati High Court quashed Notification No. 56. The Telangana High Court made observations on the invalidity of Notification No. 56, and this issue is currently sub judice before the Supreme Court in S.L.P No. 4240/2025.

The Supreme Court has issued notice and is considering whether the time limits for adjudication under Section 73 of the GST Act and the respective State GST Act could be extended by the impugned notifications issued under Section 168A. The Court recognized the cleavage of opinion among High Courts and deferred to the Supreme Court's eventual ruling.

The Court emphasized judicial discipline and refrained from expressing an opinion on the vires of Section 168A and the notifications, directing that all connected cases be governed by the Supreme Court's decision.

Service of Show Cause Notice via GST Portal and Consequences of Non-Receipt

The Petitioner contended that the Show Cause Notice dated 29th September 2023 was not brought to its knowledge as it was uploaded only under the "Additional Notices" tab on the GST portal, which was not directly visible or accessible to the Petitioner. This mode of communication was challenged as inadequate for valid service.

The Court examined the factual matrix and relied on its earlier decision in W.P.(C) 13727/2024 ('Neelgiri Machinery'), which held that uploading notices under the "Additional Notices and Orders" tab, which is not readily visible to taxpayers, does not constitute valid service. The Court noted the Department's concession that the GST portal functions differently on the Department's side and the taxpayer's side, which led to the notices being effectively concealed from the Petitioner.

In light of these findings, the Court set aside the demand order dated 27th December 2023, which was passed ex parte, without the Petitioner having an opportunity to respond to the Show Cause Notice.

Right to Personal Hearing and Opportunity to File Reply

The Court underscored the fundamental principle that orders should not be passed in default without affording the affected party a fair opportunity to be heard. It referred to precedents such as 'Satish Chand Mittal' and 'Anant Wire Industries' where similar circumstances led to remand of matters to ensure the Petitioner's right to be heard.

The Court directed that the Petitioner be allowed to file a reply to the Show Cause Notices within thirty days and be granted a personal hearing. It mandated that hearing notices should not only be uploaded on the portal but also emailed to the Petitioner to ensure effective communication.

The Court further ordered that the adjudicating authority shall pass orders only after considering the Petitioner's submissions and that such orders shall be subject to the outcome of the Supreme Court's decision on the validity of the impugned notifications.

Interim Relief and Procedural Directions Pending Supreme Court Decision

Recognizing the pendency of the Supreme Court's ruling on the validity of the impugned notifications, the Court adopted a pragmatic approach. It categorized the petitions and proposed that, irrespective of the ultimate validity of the notifications, the Petitioners should be given an opportunity to place their case before the adjudicating authority.

The Court refrained from delving into the merits of the notifications at this stage but ensured that the Petitioners' procedural rights are protected by permitting them to pursue appellate remedies and participate in adjudication.

The Court directed the GST portal to be opened within one week to enable the Petitioner to file replies and participate in hearings, ensuring no prejudice arises from procedural lapses in communication.

3. SIGNIFICANT HOLDINGS

- "The challenge to the above mentioned notification is presently under consideration before the Supreme Court... the challenge made by the Petitioner to the impugned notifications in the present proceedings shall also be subject to the outcome of the decision of the Supreme Court."

- "Considering that the show cause notice was uploaded on the Additional notices tab, following the decision in W.P.(C) 13727/2024 titled 'Neelgiri Machinery Through Its Proprietor Mr. Anil Kumar V. Commissioner Delhi Goods And Service Tax And Others', the order dated 27th December, 2023 is set aside."

- "The 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 show cause notices shall be adjudicated in accordance with law."

- "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 adjudication order shall be subject to the outcome of the SLP pending in the Supreme Court, where the impugned notification is challenged."

- "The Portal shall be opened within 1 week to enable the Petitioner to file a reply within thirty days from today."

Core principles established:

- Procedural fairness requires that show cause notices and hearing notices issued via electronic portals must be accessible and brought to the notice of the taxpayer in a manner that ensures actual knowledge, failing which orders passed ex parte are liable to be set aside.

- Extension of limitation periods under GST law through notifications must comply strictly with the procedural mandate of prior GST Council recommendation under Section 168A, and this issue is subject to final adjudication by the Supreme Court.

- Pending final adjudication on the validity of such notifications, courts should safeguard the procedural rights of taxpayers by allowing them to file replies and be heard, preventing prejudice due to procedural irregularities.

- Courts must exercise judicial discipline by deferring to the Supreme Court on contentious points of law involving conflicting High Court judgments.

Final determinations:

- The demand order dated 27th December 2023 is set aside due to invalid service of the Show Cause Notice.

- The Petitioner is granted thirty days to file replies to the Show Cause Notices and a personal hearing shall be conducted.

- The adjudicating authority shall pass orders only after hearing the Petitioner and subject to the Supreme Court's ruling on the validity of the impugned notifications.

- The GST portal shall be made accessible to the Petitioner within one week to facilitate filing of replies.

- The petitions are disposed of in these terms, with pending applications also disposed of.