2025 (5) TMI 1193 - HC - GST

Extension of time limit of issuance of SCN u/s 73 / 74 - validity of Notification Nos. 09/2023 (Central Tax) and 56/2023 (Central Tax) - procedural requirements under Section 168A for prior to the issuance of notification - non-participation in hearings and non-filing of replies - form GST DRC-01A issued as mandated under Rule 142(1A) - Challenging the SCN and impugned order - HELD THAT - The Court has perused the records. It is noticed that prior to the issuance of impugned SCN a notice in form GST ASMT-10 was issued by the Respondent-GST Department on 1st February 2023 in regards to the same subject matter (i.e. to scrutinise the returns for the period April 2018 to March 2019 under Section 61 of the CGST Act 2017). The Petitioner is stated to have filed a reply for the same in form GST ASMT-11 on 23rd May 2023 as well. Subsequently the impugned order seems to have been passed on 26th April 2024. Thus considering the fact that no reply has been filed and personal hearings have not been availed by the Petitioner in respect of the impugned SCN this Court is of the opinion that the Petitioner ought to be provided another opportunity to be heard on merits. Accordingly the impugned order is set aside and the matter is relegated to the Adjudicating Authority to be heard on merits. All the rights and remedies of the parties are left open. Access to the GST Portal if not already available shall be ensured to be provided to the Petitioner to file a reply and enable access to the notices and related documents. It is again made clear that 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 in M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax Ors . 2025 (4) TMI 60 - SC ORDER . The petition is disposed of in the above terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) The validity and legality of Notification Nos. 09/2023 (Central Tax) and 56/2023 (Central Tax) issued under Section 168A of the Central Goods and Services Tax Act, 2017 (CGST Act), specifically whether these notifications were issued following the mandatory procedure, including prior recommendation of the GST Council.

(b) Whether the time limits for adjudication of show cause notices and passing of orders under Section 73 of the CGST Act for the financial year 2019-2020 could be extended by the impugned notifications.

(c) The procedural compliance by the Respondent CGST Department, particularly whether the pre-consultation notice in form GST DRC-01A was issued as mandated under Rule 142(1A) of the Central Goods and Services Tax Rules, 2017.

(d) The entitlement of the Petitioner to a personal hearing and opportunity to file replies in the adjudication proceedings, given the factual circumstances of non-participation in hearings and non-filing of replies.

(e) The effect of pending Supreme Court proceedings on the validity of the impugned notifications and consequential orders passed by the adjudicating authorities.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Validity of Notifications Nos. 09 and 56 of 2023 under Section 168A of the CGST Act

Relevant legal framework and precedents: Section 168A of the CGST Act empowers the Central Government to extend the time limit for adjudication of show cause notices and passing of orders. However, such extension requires prior recommendation of the GST Council. The impugned notifications were challenged on the ground that this mandatory procedural requirement was not complied with, particularly for Notification No. 56/2023 (Central Tax), where the recommendation was given post issuance, and the notification incorrectly stated that it was issued on the GST Council's recommendation.

Various High Courts have taken divergent views on the validity of these notifications: Allahabad High Court upheld Notification No. 9, Patna High Court upheld Notification No. 56, while Guwahati High Court quashed Notification No. 56. The Telangana High Court raised observations on the invalidity of Notification No. 56 without deciding the vires, and this issue is currently pending before the Supreme Court in SLP No. 4240/2025.

Court's interpretation and reasoning: The Delhi High Court acknowledged the conflicting judicial opinions and the ongoing Supreme Court proceedings. It refrained from expressing any definitive opinion on the validity of the impugned notifications, deferring to the Supreme Court's final adjudication. The Court noted the principle of judicial discipline and the binding nature of the Supreme Court's forthcoming decision.

Application of law to facts: Given the pendency of the Supreme Court proceedings, the Court held that the question of validity of the notifications would remain open and subject to the Supreme Court's ruling. The Court also observed that the notifications' validity impacts the extension of limitation for adjudication under Section 73 of the CGST Act.

Treatment of competing arguments: The Petitioner challenged the notifications' validity on procedural grounds, while the Respondents relied on the notifications to justify the extension of limitation for adjudication. The Court balanced these arguments by reserving the issue for the Supreme Court's determination but proceeded to address procedural fairness in the interim.

Conclusions: The Court did not decide on the validity of the impugned notifications but kept the issue open pending the Supreme Court's decision. It directed that the adjudication orders passed under these notifications would be subject to the outcome of the Supreme Court proceedings.

(b) Procedural compliance regarding issuance of pre-consultation notice and opportunity of hearing

Relevant legal framework and precedents: Rule 142(1A) of the Central Goods and Services Tax Rules, 2017 mandates issuance of a pre-consultation notice in form GST DRC-01A before initiating adjudication proceedings. The principles of natural justice require that a party be given an opportunity to file replies and attend personal hearings before adverse orders are passed.

Court's interpretation and reasoning: The Court found that the Petitioner had not been issued the pre-consultation notice as required under Rule 142(1A). Consequently, the Petitioner did not file replies nor attend personal hearings, despite multiple opportunities being provided. The Court emphasized the importance of providing a fair opportunity to be heard and noted that the impugned adjudication order was passed ex-parte.

Key evidence and findings: The record showed that prior to the impugned show cause notice, a notice in form GST ASMT-10 was issued, to which the Petitioner had responded. However, for the impugned show cause notice dated 7th November 2023, the Petitioner neither replied nor attended hearings scheduled on four separate dates.

Application of law to facts: The Court held that failure to issue the pre-consultation notice and the resultant ex-parte adjudication violated principles of natural justice. It opined that the Petitioner must be afforded another opportunity to file replies and be heard on merits.

Treatment of competing arguments: The Respondents argued that opportunities for hearings were provided, but the Petitioner did not avail them. The Petitioner contended that absence of the pre-consultation notice prevented meaningful participation. The Court sided with the Petitioner's position on procedural fairness, emphasizing the need for compliance with statutory requirements.

Conclusions: The Court set aside the impugned order and directed the Adjudicating Authority to provide the Petitioner an opportunity to file a reply by 10th July 2025 and to grant personal hearing thereafter. The Court also directed the Respondents to send hearing notices to specified email addresses and phone numbers and to ensure the Petitioner's access to the GST Portal for filing replies.

(c) Impact of pending Supreme Court proceedings and interim relief

Relevant legal framework and precedents: The principle of judicial discipline and binding effect of Supreme Court decisions require lower courts to refrain from deciding issues pending before the Supreme Court. Interim orders passed by High Courts in connected matters must be respected until final adjudication.

Court's interpretation and reasoning: The Court noted that various High Courts had passed interim orders in connected matters, and the Supreme Court had issued notice and interim directions in SLP No. 4240/2025. The Punjab and Haryana High Court had disposed of petitions with interim orders to be governed by the Supreme Court's decision. The Delhi High Court aligned with this approach, refraining from deciding the validity of the notifications and leaving the issue open.

Application of law to facts: The Court disposed of the petitions while expressly stating that the validity of the impugned notifications would be subject to the Supreme Court's outcome. The Court preserved all rights and remedies of the parties pending final adjudication.

Treatment of competing arguments: The parties agreed that the Supreme Court's decision would be determinative. The Court ensured that procedural fairness was maintained without prejudicing the parties' substantive rights pending the Supreme Court's ruling.

Conclusions: The Court disposed of the petitions with directions for further proceedings on merits, subject to the Supreme Court's decision. Interim relief granted in other High Courts was noted and respected.

3. SIGNIFICANT HOLDINGS

The Court held:

"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 in S.L.P No 4240/2025."

"Considering the fact that no reply has been filed and personal hearings have not been availed by the Petitioner in respect of the impugned SCN, this Court is of the opinion that the Petitioner ought to be provided another opportunity to be heard on merits."

"Accordingly, the impugned order is set aside and the matter is relegated to the Adjudicating Authority to be heard on merits. The Petitioner is permitted to file a reply by 10th July, 2025. Upon such reply being filed, the Adjudicating Authority shall provide a personal hearing to the Petitioner."

"All the rights and remedies of the parties are left open. Access to the GST Portal, if not already available, shall be ensured to be provided to the Petitioner to file a reply and enable access to the notices and related documents."

Core principles established include:

(i) The necessity of compliance with procedural mandates such as issuance of pre-consultation notices under Rule 142(1A) before initiating adjudication proceedings.

(ii) The fundamental right to a fair hearing and opportunity to file replies before adverse orders are passed under the GST regime.

(iii) The importance of judicial discipline in deferring to the Supreme Court's final determination on contentious legal questions affecting multiple jurisdictions.

(iv) The Court's willingness to provide interim procedural relief to safeguard parties' rights pending final adjudication on substantive issues.