2025 (5) TMI 1111 - HC - GST

Challenge to SCN and impugned order - challenge to N/N. 09/2023-Central Tax dated 31st March 2023 09/2023-State Tax dated 22nd June 2023 - opportunity of hearing not provided - violation of principles of natural justice - 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 16th January 2024 the Department has effected changes in the portal to ensure that the Show Cause Notices become visible to parties. However in this case considering the Show Cause Notice in the present case has been issued on 26th September 2023 the Court is inclined to grant the Petitioner an opportunity to be properly heard. The impugned order dated 17th December 2023 is set aside and the Petitioner is permitted to file a reply to the Show Cause Notice dated 26th September 2023 on or before 10th July 2025 - Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether the impugned Show Cause Notice dated 26th September 2023 and the subsequent order dated 17th December 2023 passed by the Sales Tax Officer are valid, particularly in light of procedural fairness and opportunity to be heard.

- The validity and vires of Notification Nos. 09/2023-Central Tax and 09/2023-State Tax, and Notification No. 56/2023 (Central and State Tax) issued under Section 168A of the Central Goods and Services Tax Act, 2017 ("GST Act"), especially concerning the extension of time limits for adjudication.

- Whether the procedural requirements under Section 168A, including prior recommendation by the GST Council, were complied with before issuing the impugned notifications.

- The effect of differing judicial pronouncements by various High Courts on the validity of these notifications and the impact of ongoing Supreme Court proceedings on the present matter.

- Whether the Petitioner was denied a fair opportunity to respond to the Show Cause Notice due to the manner of its communication, specifically its upload under the 'Additional Notices Tab' on the GST Portal, and the implications thereof on natural justice.

- The appropriate relief and procedural directions to be granted pending the final adjudication of the validity of the notifications by the Supreme Court.

2. ISSUE-WISE DETAILED ANALYSIS

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

The Court examined the legal framework governing the issuance of notifications extending the time limit for adjudication of show cause notices under Section 168A of the GST Act. This section mandates that any extension of time must be preceded by a recommendation from the GST Council.

Precedents from various High Courts were considered, revealing a split in judicial opinion. The Allahabad High Court upheld the validity of Notification No. 9, while the Patna High Court upheld Notification No. 56. Conversely, the Guwahati High Court quashed Notification No. 56. The Telangana High Court raised concerns regarding the validity of Notification No. 56 but refrained from a final determination, and this issue is presently before the Supreme Court in S.L.P. No. 4240/2025.

The Supreme Court's interim order acknowledged the cleavage of opinion and issued notices, deferring final adjudication. The Punjab and Haryana High Court, in light of the Supreme Court's pending decision, refrained from expressing any opinion on the vires of Section 168A or the notifications and directed that the outcome of the Supreme Court proceedings would be binding.

The Court in the present matter recognized this judicial landscape and accordingly held that the challenge to the impugned notifications would be subject to the final outcome of the Supreme Court and this Court's decisions in related matters.

Procedural Fairness and Opportunity to be Heard

On the facts of the case, the Petitioner contended that the Show Cause Notice dated 26th September 2023 was uploaded on the GST Portal under the 'Additional Notices Tab', a location not readily visible or accessible, resulting in a lack of actual knowledge of the notice. Consequently, the Petitioner was unable to file replies or participate in personal hearings, leading to ex-parte orders and imposition of demands and penalties.

The Court relied on its prior decisions, including W.P.(C) 13727/2024, where similar circumstances led to remand of matters to ensure the Petitioner's right to be heard was protected. The Court emphasized the principles of natural justice, requiring that notices be communicated effectively and that parties be given a genuine opportunity to respond before adverse orders are passed.

It was noted that post 16th January 2024, the Department had amended the portal to improve visibility of notices, but since the impugned Show Cause Notice predated this change, the Petitioner deserved an opportunity to be heard afresh.

The Court directed that the impugned demand orders be set aside, the Petitioner be permitted to file replies within a stipulated time, and that personal hearings be conducted with hearing notices communicated not only via the portal but also through email and mobile phone, ensuring effective communication.

Interplay Between Central and State Notifications

The Court observed that challenges to Central Notifications were disposed of with directions that outcomes would be subject to the Supreme Court's ruling. However, challenges to parallel State Notifications were retained for consideration by the High Court. Since the present petition challenged both Central and State Notifications, the Court held that the challenge to the notifications would remain subject to the outcomes of ongoing proceedings before the Supreme Court and this Court.

Application of Law to Facts and Treatment of Competing Arguments

The Court balanced the procedural safeguards guaranteed under the Constitution with the statutory framework for GST adjudication. While acknowledging the statutory provisions permitting extension of time limits via notifications under Section 168A, the Court refrained from expressing a final view on their validity, respecting the principle of judicial discipline pending the Supreme Court's decision.

On the procedural fairness issue, the Court gave primacy to the Petitioner's right to be heard, noting that the manner of communication of the Show Cause Notice was inadequate and prejudicial. The Court rejected any argument that mere uploading on the portal sufficed without effective notice to the Petitioner.

The Court's directions ensured that the Petitioner would have a meaningful opportunity to contest the demands, thereby upholding the principles of natural justice.

3. SIGNIFICANT HOLDINGS

"The issue in respect of the validity of the impugned notifications is left open and the order of the adjudicating authority shall be subject to the outcome of the decision of the Supreme Court and this Court."

"The Petitioner is permitted to file a reply to the Show Cause Notice dated 26th September, 2023 on or before 10th July, 2025. Upon filing such a reply a personal hearing ought to be provided to the Petitioner. The personal hearing notices shall be communicated to the Petitioner on the following email address and mobile nos."

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

Core principles established include:

- The necessity of prior GST Council recommendation under Section 168A for valid extension notifications.

- The importance of effective communication of Show Cause Notices to ensure compliance with natural justice.

- The recognition that judicial discipline requires deferring to the Supreme Court's ultimate determination on contentious legal questions.

- The requirement that adjudication orders not be passed ex-parte where the Petitioner has not been given a proper opportunity to respond.

Final determinations on each issue:

- The validity of the impugned notifications under Section 168A remains undecided and is to be determined by the Supreme Court.

- The impugned Show Cause Notice and demand order were set aside due to failure to provide proper notice and opportunity to be heard.

- The Petitioner is entitled to file replies and be heard personally before any fresh adjudication.

- The proceedings and orders are to be governed by the outcome of the Supreme Court's decision on the notifications.