2025 (5) TMI 1264 - HC - GST

Extension of time limit of issuance of SCN u/s 73 / 74 - Validity of Notification No. 56/2023-Central Tax - procedural requirements under Section 168A for prior to the issuance of notifications - No opportunity to file a reply to the SCN - Challenging the SCN and impugned order - original petitioner passed away by the time the order passed and legal heir representing the case - HELD THAT - On facts this Court is of the opinion that a personal hearing ought to be granted to the Petitioner. The impugned order is set aside and the matter is remanded for reconsideration to the Adjudicating Authority. 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 the notices and related documents. 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 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 . Petition is disposed of.

Summary

The core legal questions considered in this judgment include: (1) the vires and validity of 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); (2) whether the proper procedural requirements, including prior recommendation of the GST Council, were complied with before issuing the impugned notification; (3) the legality of extending the time limit for adjudication of show cause notices and passing orders under Section 73 of the GST Act and corresponding State GST Acts for the financial year 2019-2020 through such notifications; (4) the procedural fairness in adjudication, specifically the failure to grant personal hearing to the petitioner before passing the impugned order; and (5) the appropriate relief and directions in light of the pendency of the validity challenge before the Supreme Court.

The first issue concerning the validity of Notification No. 56/2023-Central Tax revolves around whether the notification was issued in conformity with Section 168A of the CGST Act, which mandates prior recommendation of the GST Council before extending deadlines for adjudication. The Court noted that the notification incorrectly stated that it was issued based on the GST Council's recommendation, which was actually given after the notification's issuance, thereby potentially rendering it ultra vires. This procedural irregularity formed the basis of the challenge.

In analyzing this issue, the Court referred to parallel proceedings and judgments from various High Courts. The Allahabad High Court upheld the validity of Notification No. 9/2023, while the Patna High Court upheld Notification No. 56/2023. Contrastingly, the Guwahati High Court quashed Notification No. 56/2023. The Telangana High Court made observations casting doubt on the validity of Notification No. 56/2023, and this issue is currently under consideration by the Supreme Court in Special Leave Petition (SLP) No. 4240/2025. The Supreme Court's order dated 21st February, 2025, acknowledged the cleavage of opinion among High Courts and issued notice in the matter, indicating the significance and complexity of the legal questions involved.

The Supreme Court's involvement underscores the unsettled nature of the law on whether the time limits for adjudication under Section 73 of the GST Act and the corresponding State GST Acts can be extended via notifications issued under Section 168A. The Court's reasoning highlighted that the extension of limitation periods without adherence to statutory procedure, including the GST Council's prior recommendation, could be invalid. Thus, the Court emphasized strict compliance with the procedural safeguards enshrined in the CGST Act.

Regarding the procedural fairness issue, the petitioner had been issued a show cause notice on 15th December, 2023, and an adjudication order was passed on 30th April, 2024. The petitioner submitted a detailed reply but was not granted a personal hearing. Compounding this, the original petitioner had passed away by the time the order was passed, and the legal heir was representing the case. The Court found this denial of personal hearing to be a significant procedural lapse. It held that a personal hearing is a fundamental aspect of natural justice and is essential before passing an order that imposes liability or penalty. Consequently, the Court set aside the impugned order and remanded the matter to the adjudicating authority for reconsideration, directing that a personal hearing be granted to the petitioner's legal heir.

The Court also addressed the broader context of the petitions pending before it, noting that the validity of the impugned notifications is a substantial question currently under the Supreme Court's consideration. It acknowledged that various High Courts have taken divergent views, and therefore, it refrained from expressing any definitive opinion on the validity of the notifications. Instead, it disposed of the petitions subject to the outcome of the Supreme Court proceedings, thereby maintaining judicial discipline and avoiding conflicting judgments.

In terms of relief, the Court proposed categorizing the pending cases and allowing the petitioners to place their stand before the adjudicating authorities, including permitting appellate remedies, without prejudging the validity of the notifications. This approach balances the need to protect the petitioners' rights to be heard and to prevent undue prejudice due to procedural lapses, while preserving the larger question of the notifications' validity for the Supreme Court's determination.

The Court also ordered that access to the GST Portal be ensured for the petitioner to facilitate receipt of notices and related documents, thereby enabling effective participation in the proceedings. It left all rights and remedies open to the parties, emphasizing that any orders passed by the adjudicating authority would be subject to the Supreme Court's final decision in SLP No. 4240/2025.

In summary, the Court's analysis and conclusions can be encapsulated as follows:

1. The validity of Notification No. 56/2023-Central Tax, issued under Section 168A of the CGST Act, is a substantial legal issue involving compliance with statutory procedural requirements, particularly the necessity of prior GST Council recommendation. Divergent High Court rulings and ongoing Supreme Court proceedings reflect the complexity and unsettled nature of this question.

2. Procedural fairness mandates that a personal hearing must be granted before passing adjudication orders under the GST Act. The failure to provide such a hearing, especially when the petitioner had filed detailed replies, vitiates the impugned order.

3. The Court refrains from expressing any opinion on the validity of the notifications, deferring to the Supreme Court's final adjudication, and accordingly disposes of the petitions with directions for reconsideration and opportunity to be heard.

4. The Court's directions to ensure access to the GST Portal and to allow petitioners to pursue appellate remedies safeguard procedural rights and promote fair adjudication.

5. The judgment underscores the principle that statutory powers, especially those affecting limitation periods and procedural timelines, must be exercised strictly in accordance with legislative mandates to prevent arbitrariness.

Verbatim from the judgment encapsulates the Court's approach: "The impugned order is set aside and the matter is remanded for reconsideration to the Adjudicating Authority." Further, "All rights and remedies of the parties are left open," and "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."