2025 (5) TMI 1201 - HC - GST

Extension of time limits for adjudication of show cause notices - Validity of Notification No. 56/2023-Central Tax - procedural requirements for issuance of such notifications u/s 168A - seeking rectification of the impugned order before the adjudicating authority - Challenging the SCN and impugned order - HELD THAT - It is the case of the Petitioner that a detailed reply dated 25th July 2024 was filed by the Petitioner to the show cause notice dated 29th May 2024. Subsequently a personal hearing notice was issued to the Petitioner and the same was also attended on 30th August 2024. On the same date an additional reply was also submitted on behalf of the Petitioner and consequently on 31st August 2024 the impugned order was passed. In the opinion of this Court in this case the Petitioner ought to be permitted to pray for rectification of the impugned order before the adjudicating authority so that the above stand of the Petitioner in the reply can be properly considered by the adjudicating authority. Accordingly let the Petitioner approach the adjudicating authority under Section 161 of the Central Goods and Service Tax Act 2017 by 10th July 2025. If the rectification application is filed within the stipulated date the same shall be adjudicated on merits and shall not be dismissed on the ground of limitation. The reply filed by the Petitioner to the SCN on various occasions as also the submissions made by the Petitioner in the personal hearing shall be considered on merits and if there are any demands to be dropped the same shall be considered by the adjudicating authority. However it is made clear that the issue in respect of the validity of the impugned notification 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. 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 rectification application if any as also access to the notices and related documents if any. The present writ petition is disposed of in above terms.

Summary

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

1. Whether the impugned 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"), is valid and intra vires, particularly in light of the procedural requirements for issuance of such notifications.

2. Whether the extension of time limits for adjudication of show cause notices and passing of orders under Section 73 of the GST Act and corresponding State GST Acts for the financial year 2019-2020, as granted by the impugned notifications, was lawful.

3. The effect of conflicting High Court decisions on the validity of the impugned notifications and the impact of pending Supreme Court proceedings on the present case.

4. Whether the Petitioner was afforded a fair opportunity to present its case, including consideration of replies filed and personal hearings conducted, before passing the impugned order dated 31st August, 2024.

5. The scope for rectification of the impugned order under Section 161 of the GST Act, particularly regarding the Petitioner's submissions on Input Tax Credit (ITC) reversals and other factual contentions.

Issue-wise Detailed Analysis:

1. Validity of Notification No. 56/2023-Central Tax under Section 168A of the GST Act

The legal framework governing this issue is Section 168A of the GST Act, which mandates that any extension of time limits for adjudication of show cause notices and passing of orders must be preceded by a recommendation from the GST Council. The impugned notification purportedly extends such deadlines but was challenged on the ground that the procedural mandate under Section 168A was not complied with, as the recommendation was given only subsequent to the issuance of the notification.

The Court noted that this issue is the subject of multiple writ petitions across various High Courts, with divergent views. The Allahabad and Patna High Courts upheld the validity of the impugned notifications, whereas the Guwahati High Court quashed Notification No. 56 of 2023 (Central Tax). The Telangana High Court made observations on the invalidity of the notification, which are currently under consideration by the Supreme Court in S.L.P No. 4240/2025.

The Supreme Court has issued notice and is examining whether the time limit for adjudication under Section 73 of the GST Act and corresponding State GST Acts can be extended by such notifications. The Punjab and Haryana High Court has refrained from expressing an opinion on the validity of Section 168A and related notifications, deferring to the Supreme Court's decision.

Accordingly, the Court recognized that the validity of the impugned notification is a live issue pending before the Supreme Court and expressly left it open in the present proceedings.

2. Extension of Time Limits for Adjudication under Section 73 of the GST Act

This issue is closely linked with the validity of the impugned notifications issued under Section 168A. The question is whether the time limits for adjudication of show cause notices and passing of orders for the financial year 2019-2020 could be extended by the notifications in question.

The Court observed that this issue is also pending before the Supreme Court and is part of the batch of cases consolidated in S.L.P No. 4240/2025. The Court noted the cleavage of opinion among various High Courts and the ongoing adjudication at the Supreme Court level.

Given the pendency of the Supreme Court's decision, the Court refrained from deciding on the extension's validity and indicated that the adjudicating authority's orders would remain subject to the Supreme Court's final determination.

3. Impact of Conflicting High Court Decisions and Pending Supreme Court Proceedings

The Court acknowledged the divergent views of various High Courts on the validity of the impugned notifications and the extensions granted under Section 168A. The Supreme Court's intervention in S.L.P No. 4240/2025 was recognized as the authoritative adjudication on these issues.

The Court followed the principle of judicial discipline, refraining from expressing any opinion on the vires of Section 168A and the impugned notifications, and directed that the outcome of the Supreme Court proceedings would be binding on the parties.

4. Fair Opportunity to the Petitioner and Consideration of Replies and Personal Hearings

The Petitioner contended that despite filing detailed replies to the show cause notice dated 29th May, 2024, and attending personal hearings, these submissions were not properly considered while passing the impugned order dated 31st August, 2024, which raised a substantial demand of over Rs. 4 crores.

The Court examined the Petitioner's reply dated 25th July, 2024, which included detailed explanations regarding reversal of Input Tax Credit (ITC) on account of mismatches, cancelled dealers, and suppliers with nil turnover, amounting to Rs. 31,38,984/-. The Petitioner also pointed out excess payments made and reversed, supported by documentary evidence such as GSTR-9 filings and DRC-03 payment challans.

Based on these facts, the Court opined that the Petitioner ought to be allowed to seek rectification of the impugned order so that these factual submissions and evidences could be properly considered by the adjudicating authority.

5. Scope for Rectification under Section 161 of the GST Act

The Court permitted the Petitioner to file an application for rectification of the impugned order under Section 161 of the GST Act by 10th July, 2025. It was directed that such rectification applications shall be adjudicated on merits and shall not be dismissed on the ground of limitation.

The Court mandated that the adjudicating authority consider the Petitioner's replies to the show cause notice, submissions made during personal hearings, and any other relevant documents. If any demands are found to be unsustainable, they shall be dropped accordingly.

However, the Court clarified that any order passed pursuant to the rectification application would remain subject to the final decision of the Supreme Court in S.L.P No. 4240/2025 regarding the validity of the impugned notification and related issues.

Additionally, the Petitioner was granted access to the GST Portal to facilitate uploading of the rectification application and accessing notices and related documents.

Significant Holdings:

"Considering the stand in the reply dated 25th July, 2024 filed by the Petitioner, it is evident the Input Tax Credit (ITC) in respect of various dealers have been reversed by the Petitioner itself... The reversal of Rs. 31,38,984/-... has not been considered by the Notice when calculating the difference in ITC availed as per GSTR-3B vis-a-vis ITC available in 8A of GSTR-9."

"In the opinion of this Court, in this case, the Petitioner ought to be permitted to pray for rectification of the impugned order before the adjudicating authority so that the above stand of the Petitioner in the reply can be properly considered by the adjudicating authority."

"If the rectification application is filed within the stipulated date, the same shall be adjudicated on merits and shall not be dismissed on the ground of limitation. The reply filed by the Petitioner to the SCN on various occasions as also the submissions made by the Petitioner in the personal hearing shall be considered on merits and if there are any demands to be dropped, the same shall be considered by the adjudicating authority."

"However, it is made clear that the issue in respect of the validity of the impugned notification 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 titled M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors."

The Court established the core principle that while the validity of the impugned notification and extensions under Section 168A are pending before the Supreme Court and remain undecided, the Petitioner must be afforded a meaningful opportunity to have its factual and legal submissions considered by the adjudicating authority through the rectification process. This approach balances the procedural rights of the taxpayer with the ongoing judicial scrutiny of the statutory provisions and notifications in question.

Final determinations include:

- The validity of Notification No. 56/2023-Central Tax remains undecided and is subject to the Supreme Court's ruling.

- The Petitioner is entitled to file a rectification application under Section 161 of the GST Act to have its submissions considered on merits.

- The adjudicating authority must consider the Petitioner's replies and personal hearing submissions and decide on demands accordingly, without limitation objections.

- All rights and remedies of the parties are preserved, and access to relevant GST Portal facilities must be provided to the Petitioner.