2025 (5) TMI 1187 - HC - GST

Extension of time limit of issuance of SCN u/s 73 / 74 - Validity of Notification No. 9/2023-Central Tax Notification No. 56/2023-Central Tax as also the Notification No. 09/2023-State Tax and Notification No. 56/2023-State Tax - procedural requirements under Section 168A for prior to the issuance of notifications - No opportunity to file a reply to the SCN - violation of the principles of natural justice - Challenging the SCN and impugned order - HELD THAT - This Court is of the opinion that since the Petitioner has not been afforded an opportunity to be heard and the said SCN and the consequent impugned order have 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. The reply filed by the Petitioner to the SCN 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. However it is made clear that the issue in respect of the validity of the impugned notifications is left open. Any order passed by the Adjudicating Authority shall be subject to the outcome of the decision of the Supreme Court in M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax Ors. and of this Court in Engineers India Limited v. Union of India Ors. 2025 (4) TMI 60 - SC ORDER . All rights and remedies of the parties are left open. Access to the GST Portal shall be provided to the Petitioner to enable uploading of the reply as also access to the notices and related documents. The present writ petition is disposed of in above terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

• Whether the impugned show cause notice dated 27th May, 2024 and the consequent adjudication order dated 30th August, 2024 issued by the Sales Tax Officer were valid, particularly in light of the Petitioner not being afforded an opportunity to file a reply or to be heard.
• The vires (validity) of the impugned notifications issued under the Central Goods and Services Tax Act, 2017 and the corresponding State Tax Acts, namely Notification Nos. 9/2023-Central Tax, 56/2023-Central Tax, 09/2023-State Tax, and 56/2023-State Tax, which purportedly extended the time limit for adjudication of show cause notices under Section 168A of the GST Act.
• Whether the procedural requirements under Section 168A of the GST Act, including the prior recommendation of the GST Council, were complied with in the issuance of these notifications.
• The impact of differing High Court rulings on the validity of these notifications and the ongoing proceedings before the Supreme Court concerning these issues.
• The appropriate relief to be granted to the Petitioner in light of the pending Supreme Court adjudication on the validity of the impugned notifications.

2. ISSUE-WISE DETAILED ANALYSIS

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

Relevant Legal Framework and Precedents: Section 168A of the Central Goods and Services Tax Act, 2017, governs the extension of time limits for adjudication of show cause notices and passing of orders under GST. It mandates that any extension of such time limits must be preceded by a recommendation from the GST Council. The impugned notifications purportedly extend the limitation period for adjudication for the financial year 2019-20.

Several High Courts have rendered conflicting decisions on the validity of these notifications. The Allahabad High Court upheld Notification No. 9/2023 (Central Tax), the Patna High Court upheld Notification No. 56/2023 (Central Tax), while the Guwahati High Court quashed Notification No. 56/2023 (Central Tax). The Telangana High Court made observations questioning the validity of Notification No. 56/2023 (Central Tax), a matter now under Supreme Court consideration in SLP No. 4240/2025.

The Supreme Court, in its order dated 21st February, 2025, recognized the cleavage of opinion among the High Courts and issued notice in the SLP, focusing on whether the time limits for adjudication under Section 73 of the GST Act and corresponding State GST Acts could be extended by the impugned notifications under Section 168A.

Court's Interpretation and Reasoning: The Delhi High Court acknowledged the conflicting judicial opinions and the pendency of the matter before the Supreme Court. It refrained from expressing any opinion on the validity of the impugned notifications, deferring the issue to the Supreme Court's final adjudication.

Treatment of Competing Arguments: The Court noted the submissions challenging the procedural compliance in issuing the notifications, particularly the absence or post-facto ratification of GST Council recommendations, and the issuance of State notifications beyond prescribed limitation periods. However, given the ongoing Supreme Court proceedings, the Court declined to delve into these issues.

Conclusion: The Court held that the question of validity of the impugned notifications remains open and subject to the Supreme Court's decision in SLP No. 4240/2025 and related proceedings.

Validity of the Show Cause Notice and Adjudication Order - Principles of Natural Justice

Relevant Legal Framework and Precedents: The principles of natural justice require that a person affected by an adverse order must be given a fair opportunity to be heard before such order is passed. This includes the right to file a reply to a show cause notice and to participate in personal hearings before adjudication.

Key Evidence and Findings: The Petitioner contended that it was not afforded an opportunity to file a reply to the show cause notice dated 27th May, 2024. The impugned order dated 30th August, 2024 was passed ex-parte, without hearing the Petitioner. The adjudicating authority's order itself noted that the Petitioner had not uploaded any reply and thus created the demand.

Court's Interpretation and Reasoning: The Court found that the impugned order was nonspeaking, cryptic, and vague, violating the principles of natural justice. Since no opportunity was given to the Petitioner to contest the allegations or present its case, the order could not stand.

Application of Law to Facts: The Court set aside the impugned order and granted the Petitioner a timeline until 10th July, 2025 to file its reply to the show cause notice. It directed the adjudicating authority to issue a notice for personal hearing upon receipt of the reply and to pass a fresh order considering the Petitioner's submissions.

Treatment of Competing Arguments: The Respondents did not dispute the lack of opportunity but argued the validity of the notifications and the consequent orders. The Court, however, prioritized adherence to natural justice principles irrespective of the pending validity issues of the notifications.

Conclusion: The Court emphasized that the Petitioner must be afforded a fair opportunity to be heard, and the adjudication must be done on merits after such hearing. The prior impugned order was set aside on this ground.

Interim Relief and Procedural Directions Pending Supreme Court Decision

Relevant Legal Framework: Judicial discipline requires lower courts to respect and await the Supreme Court's ruling on substantial questions of law, especially where there is a divergence of High Court opinions.

Court's Interpretation and Reasoning: The Court noted that various High Courts had taken differing stands on the validity of the impugned notifications and that the Supreme Court's decision in SLP No. 4240/2025 would be binding on all.

Application of Law to Facts: The Court disposed of the petitions with the direction that the validity of the impugned notifications would be subject to the Supreme Court's outcome. It allowed the Petitioner to pursue appellate remedies and to file replies and seek personal hearings, thus protecting substantive rights without prejudicing the larger legal question pending before the Supreme Court.

Conclusion: The Court struck a balance between procedural fairness to the Petitioner and judicial restraint pending higher adjudication.

3. SIGNIFICANT HOLDINGS

The Court, while refraining from deciding the validity of the impugned notifications, laid down the following crucial legal principles and determinations:

• "Since the Petitioner has not been afforded an opportunity to be heard and the said SCN and the consequent impugned order have been passed without hearing the Petitioner, an opportunity ought to be afforded to the Petitioner to contest the matter on merits."
• The impugned adjudication order is "nonspeaking, cryptic and vague in nature" and issued "in complete violation of the principles of natural justice" and is therefore liable to be set aside.
• The Petitioner is granted time till 10th July 2025 to file a reply to the show cause notice, after which the adjudicating authority must issue a notice for personal hearing and pass a fresh order considering the Petitioner's submissions.
• "The issue in respect of the validity of the impugned notifications is left open. Any order passed by the Adjudicating Authority shall be subject to the outcome of the decision of the Supreme Court in S.L.P No 4240/2025... and of this Court in W.P.(C) 9214/2024."
• All rights and remedies of the parties are expressly left open, and the Petitioner shall be provided access to the GST Portal for uploading replies and accessing notices and related documents.

These holdings establish that irrespective of the ongoing legal dispute over the validity of the notifications extending limitation periods under GST law, the principles of natural justice must be strictly observed in tax adjudication proceedings. The Court's directions ensure that the Petitioner's right to be heard is protected and that any adjudication is conducted transparently and on merits, subject to the eventual authoritative ruling by the Supreme Court.