2025 (5) TMI 1259 - HC - GST

Challenge to SCN and adjudication orders - challenge to N/N. 09/2023-Central Tax dated 31st March 2023 and 56/2023-Central Tax dated 28th December 2023 - extension of time limit for adjudication of show cause notices and passing of order - HELD THAT - Considering the fact that the present petitions involve a challenge to the Notifications and a legal issue regarding the non-availability of the utility for submission of IGST at the relevant point in time this Court is of the opinion that the impugned orders are liable to be set aside. The matter is remanded back in respect of both impugned Show Cause Notices to enable the Petitioner to be heard on merits and then for the Adjudicating Authority to pass a detailed adjudication order - Petition disposed off by way of remand.

Summary

The core legal questions considered by the Court include:

(i) The validity and legality of Notification Nos. 09/2023-Central Tax dated 31st March, 2023 and 56/2023-Central Tax dated 28th December, 2023 issued under Section 168A of the Central Goods and Services Tax Act, 2017 (hereinafter 'the GST Act'), particularly whether these notifications were issued following the proper procedure including prior recommendation of the GST Council, and whether extensions of time limits for adjudication under Section 73 of the GST Act were validly granted;

(ii) The challenge to Show Cause Notices dated 9th December, 2023 and 25th January, 2024, and the adjudication orders dated 10th April, 2024 and 30th April, 2024 passed by the Sales Tax Officer under Section 73 of the GST Act;

(iii) Whether the adjudication orders were passed without proper consideration of the Petitioner's replies and without affording adequate opportunity for personal hearings, resulting in ex-parte orders;

(iv) The legal implications of the absence of a statutory utility for submission of details of Integrated Goods and Services Tax (IGST) paid on imports or supplies from Special Economic Zone (SEZ) units during the relevant assessment year, and the effect of the subsequent insertion of Rule 60(6) of the Central Goods and Service Tax Rules effective 1st January, 2021;

(v) The procedural propriety of passing two separate adjudication orders by the same authority in respect of related Show Cause Notices;

(vi) The scope of relief that can be granted to Petitioners pending the final determination of the validity of the impugned notifications by the Supreme Court.

Issue-wise Detailed Analysis:

1. Validity of Notifications Nos. 09/2023 and 56/2023 under Section 168A of the GST Act

Legal Framework and Precedents: Section 168A of the GST Act 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 notifications in question purportedly extended deadlines for adjudication under Section 73 of the GST Act for certain financial years.

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

Court's Interpretation and Reasoning: The Court noted the conflicting judicial opinions and the pendency of the matter before the Supreme Court. It observed that Notification No. 56 was issued without prior recommendation of the GST Council and ratification was given only post issuance, which was contrary to the statutory mandate.

Application of Law to Facts: The Court refrained from expressing an opinion on the validity of these notifications due to ongoing Supreme Court proceedings but recognized the importance of the issue and the cleavage of opinion among High Courts.

Treatment of Competing Arguments: The Petitioner challenged the notifications on procedural grounds, while the Department defended their validity relying on prior recommendations or subsequent ratifications. The Court deferred the ultimate decision to the Supreme Court.

Conclusion: The validity of the impugned notifications remains an open question pending the Supreme Court's decision. The Court emphasized judicial discipline and adherence to the apex court's ruling.

2. Challenge to Show Cause Notices and Adjudication Orders under Section 73 of the GST Act

Legal Framework: Section 73 of the GST Act empowers the tax authorities to issue show cause notices and pass adjudication orders for recovery of wrongly claimed Input Tax Credit (ITC) and other tax liabilities.

Key Evidence and Findings: The first Show Cause Notice dated 9th December, 2023 related to alleged wrongful claims of ITC. The second dated 25th January, 2024 concerned reconciliation discrepancies between GSTR-3B and GSTR-2A forms identified through a special audit.

Court's Reasoning: The Petitioner contended that replies to the first notice were filed but not duly considered, and that the second notice pertained to the assessment year 2018-19 when no statutory utility existed to submit IGST details on imports or SEZ supplies. The insertion of Rule 60(6) of the CGST Rules effective 1st January, 2021, which mandated electronic availability of such details in GSTR-2A, was cited as a critical factor.

The Department contended that replies were considered and detailed orders passed. However, the Court found merit in the Petitioner's submissions about the non-availability of the statutory utility during the relevant period and the procedural lapse of passing separate orders for related notices.

Application of Law to Facts: The Court held that the impugned orders were liable to be set aside on grounds of procedural unfairness and incomplete consideration of relevant facts, especially the non-availability of statutory mechanisms at the time of the alleged discrepancies.

Treatment of Competing Arguments: The Court balanced the Department's assertion of due process with the Petitioner's grievance of ex-parte adjudication and lack of opportunity to place their case fully.

Conclusion: The orders were set aside and the matter remanded for fresh adjudication with an opportunity to the Petitioner to file additional replies and be heard personally.

3. Procedural Fairness and Opportunity to be Heard

Legal Framework: Principles of natural justice require that a party be given a fair opportunity to present its case before adverse orders are passed.

Court's Reasoning: The Court observed that the Petitioner was unable to avail personal hearings in most cases, and orders were passed ex-parte, leading to large demands and penalties. It emphasized the need for personal hearings and comprehensive adjudication.

Application to Facts: The Court allowed the Petitioner to file additional replies by 10th July, 2025 and directed the Adjudicating Authority to grant a personal hearing and pass a consolidated adjudication order.

Conclusion: The Court underscored the importance of procedural fairness and remanded the matter for fresh consideration.

4. Passing of Separate Orders by the Same Authority

The Petitioner raised concerns about the propriety of two separate orders being passed by the same adjudicating authority in respect of related Show Cause Notices.

The Court acknowledged this issue and directed that the Adjudicating Authority should pass a single comprehensive order after hearing the Petitioner, thereby avoiding fragmentation of proceedings and ensuring holistic adjudication.

5. Relief Pending Supreme Court Decision

Given the pendency of the validity challenge of the notifications before the Supreme Court, the Court refrained from deciding on the core legal issue but granted interim relief by remanding the matter for fresh adjudication and ensuring access to the GST portal for the Petitioner.

The Court explicitly left the question of the notifications' validity open and stated that the adjudication order would be subject to the Supreme Court's final decision.

Significant Holdings:

"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."

"The impugned orders are liable to be set aside. The matter is remanded back in respect of both impugned Show Cause Notices to enable the Petitioner to be heard on merits and then for the Adjudicating Authority to pass a detailed adjudication order."

"The Adjudicating Authority shall take a view on all the issues comprehensively and pass a single adjudication order after hearing the Petitioner regarding both the Show Cause Notices."

"All 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 enable access to notices and related documents."

Core principles established include the mandatory adherence to procedural fairness including personal hearings, the necessity of statutory compliance in issuing notifications under Section 168A of the GST Act, and the recognition that adjudication orders must be passed after full consideration of replies and relevant statutory provisions effective at the relevant time.

Final determinations on each issue are provisional and subject to the Supreme Court's ruling on the validity of the impugned notifications, with interim relief granted by remanding the matter for fresh adjudication and ensuring procedural safeguards.