2025 (5) TMI 1196 - HC - GST

Extension of time limit of issuance of Show Cause Notice (SCN) u/s 73 / 74 - validity of Notification No. 9/2023-Central Tax and Notification No. 56/2023-Central Tax - procedural requirements under Section 168A for prior to the issuance of notification - Order passed in haste without duly considering the reply as well as the documents - Challenging the SCN and impugned order - HELD THAT - Upon considering the impugned order this Court is of the opinion that the same does not merit any interference of this Court and a challenge if any shall be taken up by the Petitioner before the appellate authority in appeal. Accordingly the Petitioner is granted time till 10th July 2025 to file an appeal before the appellate authority under Section 107 of the Central Goods and Service Tax Act 2017. If the appeal is filed by the Petitioner before 10th July 2025 along with the mandatory pre-deposit the same shall be adjudicated upon merits and shall not be dismissed on the ground of limitation. 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 appellate 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 present petition is disposed of in said terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

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

- Whether the show cause notice dated 21st May, 2024 issued by the Department of Trade and Taxes, GNCTD, and the consequent adjudication order dated 29th August, 2024, are valid and sustainable in law.

- The vires and validity of Notification No. 9/2023-Central Tax dated 31st March, 2023 and Notification No. 56/2023-Central Tax dated 28th December, 2023, issued under Section 168A of the Central Goods and Services Tax Act, 2017 (hereinafter "GST Act").

- Whether the extension of time limits for adjudication under Section 73 of the GST Act and SGST Act for the financial year 2019-20, through the impugned notifications, was legally permissible.

- The procedural fairness in the adjudication process, specifically whether the petitioner was afforded adequate opportunity to file replies and participate in hearings before the imposition of demands and penalties.

- The applicability and binding nature of interim judicial pronouncements and ongoing proceedings before the Supreme Court concerning the validity of the impugned notifications.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Show Cause Notice and Impugned Order

Legal Framework and Precedents: The adjudication process under GST is governed by Sections 73 and 74 of the GST Act, which prescribe timelines for issuance of show cause notices and passing of orders. The petitioner challenged the impugned order on the ground that it was passed mechanically without due consideration of the reply and supporting documents filed.

Court's Interpretation and Reasoning: The Court examined the impugned order and noted that it was detailed and contained specific observations addressing the petitioner's reply. The adjudicating authority partially accepted the petitioner's submissions but rejected others based on the incomplete nature of supporting documents and the existence of issues such as fake invoices and non-compliance by dealers linked to the petitioner.

Key Evidence and Findings: The order reflected a reasoned consideration of the petitioner's reply, including verification through the GST portal. The demand was partially dropped, indicating a nuanced approach rather than a mechanical confirmation.

Application of Law to Facts: The Court found no ground to interfere with the impugned order at this stage, suggesting that the petitioner's remedy lies in appellate proceedings rather than writ jurisdiction.

Treatment of Competing Arguments: The petitioner's plea of haste and lack of opportunity was considered but found unsubstantiated given the record of reply and examination by the adjudicating authority.

Conclusion: The impugned order is sustainable in law and not liable to be set aside by this Court.

Issue 2: Validity of Notification Nos. 9/2023 and 56/2023 (Central Tax) Issued under Section 168A of the GST Act

Legal Framework and Precedents: Section 168A of the GST Act empowers the government to extend time limits for adjudication upon recommendation of the GST Council. The petitioner challenged the notifications on procedural grounds, alleging non-compliance with the mandatory requirement of prior GST Council recommendation.

Several 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, while the Guwahati High Court quashed Notification No. 56. The Telangana High Court made observations questioning the validity of Notification No. 56, which is currently under consideration by the Supreme Court in S.L.P No. 4240/2025.

Court's Interpretation and Reasoning: The Court acknowledged the conflicting judicial precedents and noted that the issue is sub judice before the Supreme Court. It referred to the Supreme Court's order dated 21st February, 2025, which highlighted the cleavage of opinion and issued notice on the special leave petition.

Key Evidence and Findings: The Court noted that Notification No. 56 was issued after the expiry of the limitation period prescribed by an earlier notification, and the ratification by the GST Council was post-facto, contrary to statutory requirements.

Application of Law to Facts: Given the ongoing Supreme Court proceedings, the Court refrained from expressing any definitive opinion on the validity of the impugned notifications, leaving the matter open for final adjudication by the apex court.

Treatment of Competing Arguments: The Court balanced the petitioner's challenge with the need for judicial discipline and respect for the Supreme Court's jurisdiction, opting to stay its hand on this issue.

Conclusion: The validity of the impugned notifications remains an open question pending Supreme Court determination.

Issue 3: Procedural Fairness and Opportunity to the Petitioner

Legal Framework and Precedents: Principles of natural justice require that a party be given a fair opportunity to present its case before adverse orders are passed. The petitioner contended that due to inability to file replies and avail personal hearings, adjudication orders were passed ex-parte, resulting in unjust demands and penalties.

Court's Interpretation and Reasoning: The Court recognized the petitioner's grievance regarding procedural lapses but observed that the petitioner had filed a reply dated 20th June, 2024 with supporting documents. The impugned order evidenced consideration of the petitioner's submissions.

Key Evidence and Findings: The adjudicating authority's order showed partial acceptance of the petitioner's reply and specific reasons for rejecting other contentions, indicating procedural fairness.

Application of Law to Facts: While the Court did not find sufficient ground to interfere with the impugned order, it granted the petitioner liberty to file an appeal before the appellate authority within an extended timeline, ensuring further opportunity for redressal.

Treatment of Competing Arguments: The Court balanced the petitioner's procedural concerns with the record of proceedings and the availability of appellate remedies.

Conclusion: Procedural fairness has been sufficiently observed, and the petitioner is entitled to pursue appellate remedies.

Issue 4: Interim Judicial Discipline and Binding Effect of Supreme Court Proceedings

Legal Framework and Precedents: The principle of judicial discipline mandates that lower courts and tribunals refrain from expressing opinions on issues pending before the Supreme Court to avoid conflicting rulings.

Court's Interpretation and Reasoning: The Court noted interim orders passed by the Punjab and Haryana High Court, which disposed of connected writ petitions subject to the Supreme Court's final decision, and observed that similar judicial discipline is warranted.

Key Evidence and Findings: The Supreme Court's order in S.L.P No. 4240/2025 explicitly recognized the cleavage of opinion among High Courts and issued notice, indicating the importance and complexity of the issues.

Application of Law to Facts: The Court disposed of the present petition with liberty to appeal and clarified that any appellate orders shall be subject to the Supreme Court's final ruling.

Treatment of Competing Arguments: The Court refrained from adjudicating the validity of the impugned notifications to maintain consistency and respect for the apex court's jurisdiction.

Conclusion: The matter is to be finally decided by the Supreme Court, and interim judicial restraint is appropriate.

3. SIGNIFICANT HOLDINGS

- "The impugned order is detailed in nature and has been passed after duly considering the reply of the Petitioner."

- "The reply of the taxpayer has been examined from GST portal and found that the reply of the taxpayer is partially satisfactory. Further, it is submitted that out of 11 cancelled dealer 02 dealers was cancelled due to return defaulters (dropped) and 09 dealer has been cancelled due to Non-existence of firm/Fake invoices issue/payment due/reference received from CGST/Non/High GTO/Non-Compliance/fictious transactions and the taxpayer has submitted incompleted supporting documents. Hence, demand is created."

- "The validity of the impugned notifications is left open. Any order passed by the appellate authority shall be subject to the outcome of the decision of the Supreme Court in S.L.P No 4240/2025."

- "Since the matter is pending before the Hon'ble Supreme Court, the interim order passed in the present cases, would continue to operate and would be governed by the final adjudication by the Supreme Court on the issues in the aforesaid SLP."

- The Court established the principle that challenges to the validity of notifications issued under Section 168A of the GST Act, particularly regarding procedural compliance with GST Council recommendations, require final adjudication by the Supreme Court due to divergent High Court rulings.

- The Court confirmed that adjudication orders passed after consideration of replies and evidence cannot be lightly interfered with in writ proceedings and that appellate remedies under Section 107 of the GST Act are the appropriate forum for such challenges.

- The Court granted the petitioner an extended timeline to file an appeal with the appellate authority, emphasizing that such appeals shall not be dismissed on limitation grounds pending the Supreme Court's decision.

- The Court underscored the importance of judicial discipline by deferring to the Supreme Court's pending adjudication on the validity of the impugned notifications, thereby avoiding conflicting judicial pronouncements.