2025 (5) TMI 1197 - HC - GST

Extension of time limit of issuance of Show Cause Notice (SCN) u/s 73 / 74 - Validity of the Notification No. 9/2023-Central Tax and Notification No. 56/2023-Central Tax as also the Notification No. 9/2023-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 -Challenge to SCN and impugned order - HELD TAHT - In the present case the submission of the Petitioner on facts is that the impugned order has already been challenged by the Petitioner before the appellate authority in accordance with Section 107 of the Central Goods and Service Tax Act 2017 and the mandatory pre-deposit has already been furnished before the appellate authority. Hence in light of the said facts it is directed that the appeal filed by the Petitioner shall be adjudicated upon merits by the appellate authority and the same 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 and this Court in Engineers India Limited v. Union of India Ors. The present petition is disposed of in said terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in the judgment are:

• Whether the impugned notifications issued under Section 168A of the Central Goods and Services Tax Act, 2017 (CGST Act) and corresponding State Tax notifications extending the time limit for adjudication of show cause notices and passing of orders under Section 73 of the CGST Act and SGST Act are valid and legally sustainable.
• Whether the proper procedure, including prior recommendation of the GST Council as mandated under Section 168A of the CGST Act, was followed before issuance of these notifications.
• The impact of conflicting High Court decisions on the validity of these notifications and the effect of pending Supreme Court proceedings on the adjudication of these issues.
• Whether the appeals filed against the impugned orders, which rely on these notifications, should be entertained despite the limitation period and whether the appellate authorities should proceed with adjudication on merits.
• The scope of relief available to petitioners who have been unable to file replies or avail personal hearings, resulting in ex-parte orders and imposition of penalties.

2. ISSUE-WISE DETAILED ANALYSIS

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

Relevant Legal Framework and Precedents: Section 168A of the CGST Act mandates that any extension of the time limit for adjudication of show cause notices and passing orders under Section 73 requires prior recommendation of the GST Council. The notifications under challenge (Nos. 9/2023 and 56/2023 Central and State Tax) purportedly extend these time limits.

Several High Courts have delivered conflicting judgments on the validity of these notifications. The Allahabad and Patna High Courts upheld the validity of Notifications 9 and 56 respectively, whereas the Guwahati High Court quashed Notification 56. The Telangana High Court raised doubts about Notification 56's validity, and this issue is now pending before the Supreme Court in SLP No. 4240/2025.

Court's Interpretation and Reasoning: The Delhi High Court noted that the validity of these notifications is a substantial legal question currently sub judice before the Supreme Court. The Court acknowledged the divergent judicial opinions and the ongoing Supreme Court proceedings as determinative of the issue.

Key Evidence and Findings: The Court examined the procedural history and the timelines of issuance of the notifications, noting that Notification No. 56/2023 (Central Tax) was issued without prior GST Council recommendation and ratification was given only after issuance, which is contrary to the statutory mandate. The State Tax Notification No. 56/2023 was issued after expiry of limitation as per Notification No. 13/2022 (State Tax).

Application of Law to Facts: Given the conflicting judicial precedents and the pendency of the Supreme Court's decision, the Delhi High Court refrained from expressing a definitive opinion on the validity of the impugned notifications.

Treatment of Competing Arguments: The Court noted the submissions of petitioners challenging the notifications on procedural grounds and the respondents' reliance on the notifications to justify extended limitation periods. The Court deferred the issue to the Supreme Court, emphasizing judicial discipline and the need for uniformity.

Conclusions: The validity of the impugned notifications remains an open question pending the Supreme Court's ruling. The Delhi High Court aligned with other High Courts in awaiting the apex court's decision before adjudicating on this issue.

Effect of Pending Supreme Court Proceedings on Adjudication and Appeals

Relevant Legal Framework and Precedents: Section 73 of the CGST Act prescribes the time limit for adjudication of show cause notices. The impugned notifications seek to extend this time limit. Section 107 of the CGST Act provides for appellate remedies against orders passed under the Act, subject to limitation.

Court's Interpretation and Reasoning: The Court observed that despite the pendency of the validity challenge to the notifications, petitioners have filed appeals against the impugned orders and have furnished mandatory pre-deposits. The Court directed that such appeals must be adjudicated on merits and should not be dismissed on limitation grounds, given the uncertainty surrounding the notifications' validity.

Key Evidence and Findings: The petitioner in the present case had already filed an appeal before the appellate authority and complied with the pre-deposit requirement.

Application of Law to Facts: The Court applied a pragmatic approach, allowing appeals to proceed on merits without prejudging the validity of the notifications, thereby protecting the petitioners' rights and ensuring due process.

Treatment of Competing Arguments: The respondents argued for dismissal of appeals on limitation grounds based on the extended timelines under the notifications. The Court balanced this against the petitioners' inability to file replies or avail personal hearings, resulting in ex-parte orders and penalties, justifying the need to hear appeals on merits.

Conclusions: Appeals against impugned orders shall be adjudicated on merits and not dismissed on limitation grounds pending final determination of the notifications' validity.

Relief to Petitioners Affected by Ex-Parte Orders and Penalties

Relevant Legal Framework and Precedents: Principles of natural justice require that parties be given an opportunity to be heard before adverse orders are passed. The GST adjudication process includes provisions for personal hearings and filing of replies.

Court's Interpretation and Reasoning: The Court recognized that many petitioners were unable to file replies or avail personal hearings due to various reasons, leading to ex-parte orders and imposition of penalties. The Court indicated a prima facie view that relief could be granted by permitting petitioners to place their stand before adjudicating authorities and pursue appellate remedies.

Key Evidence and Findings: The Court noted submissions highlighting procedural lapses and the consequential prejudice to petitioners.

Application of Law to Facts: The Court proposed categorizing cases and affording appropriate opportunities to petitioners to ensure fair adjudication, without delving into the validity of the notifications at this stage.

Treatment of Competing Arguments: The respondents did not oppose such relief but emphasized the need to maintain the sanctity of the statutory timelines if notifications were upheld.

Conclusions: The Court allowed for procedural reliefs to petitioners to ensure natural justice, with adjudication and appellate processes to proceed accordingly.

Judicial Discipline and Deference to Supreme Court

Relevant Legal Framework and Precedents: The principle of judicial discipline mandates lower courts to refrain from deciding issues pending before the Supreme Court to maintain uniformity and avoid conflicting judgments.

Court's Interpretation and Reasoning: The Delhi High Court expressly refrained from pronouncing on the validity of the impugned notifications, noting that the Supreme Court was seized of the matter and that other High Courts have taken divergent views.

Key Evidence and Findings: The Court referred to the Punjab and Haryana High Court's order which stayed proceedings and awaited the Supreme Court's decision.

Application of Law to Facts: The Court disposed of the petition subject to the outcome of the Supreme Court's decision and the related matter pending before itself concerning State notifications.

Treatment of Competing Arguments: Both parties accepted the need to await the Supreme Court's decision. The Court emphasized adherence to judicial discipline.

Conclusions: The Court disposed of the petition with liberty to parties to pursue remedies, leaving the core question of notification validity open pending the apex court's ruling.

3. SIGNIFICANT HOLDINGS

The Court held:

"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 titled M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors. and this Court in W.P.(C) 9214/2024 titled Engineers India Limited v. Union of India & Ors."

The Court established the core principle that appeals against orders passed relying on the impugned notifications cannot be dismissed on limitation grounds pending final adjudication of the notifications' validity by the Supreme Court.

Further, the Court emphasized the necessity of affording petitioners an opportunity to be heard and pursue appellate remedies, especially where ex-parte orders and penalties have been imposed due to inability to file replies or avail hearings.

The Court also underscored the importance of judicial discipline by deferring the question of the notifications' validity to the Supreme Court, thereby promoting uniformity and avoiding conflicting decisions.

Finally, the Court disposed of the petition with directions to proceed with appeals on merits and left open the question of the notifications' validity for determination by higher courts.