2025 (5) TMI 1261 - HC - GST

Challenge to SCN and consequent 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 issuance and adjudication of show cause notices and passing of order - HELD THAT - A perusal of the impugned order reveals that the date fixed for personal hearing of the Petitioner is 28th August 2024 which is the same as the date on which the impugned order has been passed. A reading of the impugned order makes it clear that the same has been passed in a mechanical manner without duly considering the reply of the Petitioner or affording the Petitioner with an opportunity to be heard -This Court is of the opinion that since the Petitioner has not been afforded an opportunity to be heard and the said SCN and the consequent impugned order have been passed without hearing the Petitioner an opportunity ought to be afforded to the Petitioner to contest the matter on merits. The impugned order is set aside - petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

• The validity and vires 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 (CGST Act), particularly whether these notifications validly extended the time limit for adjudication of show cause notices and passing of orders under Section 73 of the GST Act for the financial year 2019-20.
• Whether the impugned show cause notice dated 28th May 2024 and the consequent order dated 28th August 2024 passed by the Sales Tax Officer were legally sustainable, especially in light of alleged non-affordance of personal hearing to the petitioner.
• The procedural fairness and adherence to principles of natural justice in the issuance of the impugned order, including whether the petitioner was given adequate opportunity to be heard and whether the order was a speaking order.
• The legal consequences of retrospective cancellation of the petitioner's GSTIN registration from 29th November 2018 on the validity of the impugned order.
• The impact of pending Supreme Court proceedings on the adjudication of the present petition and the extent to which this Court could grant interim relief or pass orders without pre-empting the Supreme Court's decision.

2. ISSUE-WISE DETAILED ANALYSIS

Validity of Notifications No. 9/2023 and No. 56/2023 under Section 168A of the CGST Act

Legal Framework and Precedents: Section 168A of the CGST Act empowers the government to extend the time limit for adjudication of show cause notices and passing of orders under Section 73 by issuing notifications, subject to prior recommendation of the GST Council. The notifications in question purportedly extended the limitation period for the financial year 2019-20.

Court's Interpretation and Reasoning: The Court noted that the validity of these notifications was under active consideration before multiple High Courts and the Supreme Court, with conflicting judicial opinions. The Allahabad and Patna High Courts upheld the notifications, whereas the Guwahati High Court quashed Notification No. 56/2023 (Central Tax). The Telangana High Court made observations on invalidity, which are presently under Supreme Court review in SLP No. 4240/2025.

Key Evidence and Findings: The Court observed that Notification No. 9 was issued following the GST Council's recommendation, whereas Notification No. 56 was challenged for being issued without prior recommendation and for purportedly granting extension beyond the prescribed limitation period. The Supreme Court had issued notices and interim orders in the related SLP, recognizing the cleavage of opinion among High Courts.

Application of Law to Facts: Given the ongoing Supreme Court proceedings, this Court refrained from expressing any opinion on the validity of the impugned notifications. It acknowledged that the final determination on this issue would be binding on the parties.

Treatment of Competing Arguments: The Court balanced the conflicting High Court judgments and noted the judicial discipline in awaiting the Supreme Court's authoritative ruling. It disposed of connected petitions accordingly and directed adherence to the Supreme Court's decision.

Conclusions: The Court left the question of the notifications' validity open and subject to the Supreme Court's final adjudication.

Legality and Procedural Fairness of the Impugned Show Cause Notice and Order

Legal Framework and Precedents: Principles of natural justice require that a party be given a reasonable opportunity of being heard before adverse orders are passed. Section 75(4) of the CGST Act mandates issuance of notice for personal hearing before passing an order. The order must be a speaking order, reflecting consideration of the party's submissions.

Court's Interpretation and Reasoning: The Court examined the impugned order dated 28th August 2024, which stated that despite repeated opportunities and notices under Section 75(4), the petitioner had not appeared for personal hearing and had only filed an unsatisfactory online reply. However, the Court found that the date fixed for personal hearing was the same as the date the order was passed, indicating no actual hearing occurred.

Key Evidence and Findings: The petitioner had filed a reply to the show cause notice on 21st June 2024 with supporting documents. There was no evidence of any personal hearing notice being issued to the petitioner. The order was passed mechanically without considering the petitioner's reply or affording a hearing opportunity.

Application of Law to Facts: The Court held that the impugned order was non-speaking and passed without affording the petitioner a chance to be heard, violating principles of natural justice and statutory provisions.

Treatment of Competing Arguments: While the respondents contended that adequate opportunities were provided, the Court found the factual record did not support this. The petitioner's inability to secure a personal hearing was a key factor in setting aside the order.

Conclusions: The impugned order was set aside, and the adjudicating authority was directed to issue a fresh notice for personal hearing and to consider the petitioner's reply and submissions afresh before passing any order.

Effect of Retrospective Cancellation of GSTIN Registration

Legal Framework and Precedents: Cancellation of GST registration affects the taxpayer's legal standing and compliance obligations. However, procedural fairness and opportunity to contest remain essential before imposing demands or penalties.

Court's Interpretation and Reasoning: The petitioner's GSTIN registration was retrospectively cancelled from 29th November 2018 by an order dated 14th March 2023. The Court observed that the impugned order failed to address this fact adequately and was non-speaking on this ground.

Key Evidence and Findings: The retrospective cancellation was undisputed and relevant to the proceedings, yet the adjudicating authority did not consider its implications in the order.

Application of Law to Facts: The Court held that the impugned order's failure to consider the retrospective cancellation rendered it liable to be set aside for being non-speaking and procedurally defective.

Treatment of Competing Arguments: The respondents did not effectively counter the petitioner's submission on retrospective cancellation, and the Court emphasized the need for the authority to consider this fact in fresh proceedings.

Conclusions: The adjudicating authority was directed to consider the retrospective cancellation in the fresh adjudication process.

Interim Relief and Access to Procedural Rights Pending Supreme Court Decision

Legal Framework and Precedents: Pending final adjudication by the Supreme Court on the validity of the impugned notifications, subordinate courts and authorities must act cautiously, ensuring parties' rights are protected without pre-empting the higher court's ruling.

Court's Interpretation and Reasoning: The Court recognized the ongoing Supreme Court proceedings and the necessity to keep the issue of notifications' validity open. It emphasized that any fresh order passed by the adjudicating authority would be subject to the Supreme Court's outcome.

Key Evidence and Findings: The Court noted that several High Courts had disposed of related petitions with interim orders pending Supreme Court decisions, maintaining judicial discipline and consistency.

Application of Law to Facts: The Court granted the petitioner access to the GST portal to upload documents and receive notices, thereby ensuring procedural fairness during the pendency of the Supreme Court matter.

Treatment of Competing Arguments: The Court balanced the need to protect the petitioner's rights with respect for the Supreme Court's jurisdiction and the ongoing litigation.

Conclusions: The Court disposed of the petition with directions for fresh adjudication and procedural opportunities, without expressing any opinion on the notifications' validity, which remains subject to the Supreme Court's decision.

3. SIGNIFICANT HOLDINGS

"Despite opportunities for personal hearing including notice under section 75 (4) of the CGST/DGST Act and Rules, the taxpayer has not appeared till date. The taxpayer has only submitted online reply and the reply filed by the taxpayer is neither proper nor satisfactory. No satisfactory reply/explanation has been received from the taxpayer despite adequate and repeated opportunities being given. Hence demand created accordingly."

The Court held that this statement in the impugned order was factually incorrect and the order was passed mechanically without affording a personal hearing, thereby violating principles of natural justice.

"Since the Petitioner has not been afforded an opportunity to be heard and the said SCN and the consequent impugned order have been passed without hearing the Petitioner, an opportunity ought to be afforded to the Petitioner to contest the matter on merits."

This core principle underscores the mandatory nature of hearing before adverse orders and the necessity for speaking orders.

"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."

The Court preserved the principle of judicial discipline and respect for hierarchical adjudication by deferring the substantive issue of notifications' validity to the Supreme Court.

Final determinations:

• The impugned order dated 28th August 2024 is set aside for being non-speaking and for denial of personal hearing.
• The adjudicating authority is directed to issue a fresh notice for personal hearing by 10th July 2025 and consider the petitioner's reply and submissions before passing any fresh order.
• The validity of Notifications No. 9/2023 and No. 56/2023 remains undecided and subject to the Supreme Court's final ruling.
• The petitioner shall be granted access to the GST portal for procedural compliance.
• All rights and remedies of the parties are preserved.