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2025 (5) TMI 1269 - HC - GSTChallenge 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 adjudication of show cause notices and passing of order - denial of ITC - HELD THAT - The validity of the impugned notifications was under consideration before this Court in a batch of petitions with the lead petition being DJST Traders Pvt. Ltd. vs. Union of India and Ors. 2025 (5) TMI 43 - DELHI HIGH COURT In the said batch of petitions on 22nd April 2025 the parties were heard at length qua the validity of the impugned notifications and accordingly held that Broadly there are six categories of cases which are pending before this Court. While the issue concerning the validity of the impugned notifications is presently under consideration before the Supreme Court this Court is of the prima facie view that depending upon the categories of petitions orders can be passed affording an opportunity to the Petitioners to place their stand before the adjudicating authority. In some cases proceedings including appellate remedies may be permitted to be pursued by the Petitioners without delving into the question of the validity of the said notifications at this stage. Thereafter on 23rd April 2025 this Court having noted that the validity of the impugned notifications is under consideration before the Supreme Court had disposed of several matters in the said batch of petitions after addressing other factual issues raised in the respective petitions. Additionally while disposing of the said petitions this Court clearly observed that the validity of the impugned notifications therein shall be subject to the outcome of the proceedings before the Supreme Court in M/S. HCC-SEW-MEIL-AAG JV VERSUS ASSISTANT COMMISSIONER OF STATE TAX ORS. 2025 (4) TMI 60 - SC ORDER . The Department submits that he has sought instructions and according to the same the matter shall be re-considered by the adjudicating authority - the impugned order dated 30th August 2024 is set aside and the said issue as captured by this Court in order dated 23rd April 2025 shall be considered by the adjudicating authority. Petition disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court include:
2. ISSUE-WISE DETAILED ANALYSIS Validity of the Impugned Notifications under Section 168A of the GST Act Relevant legal framework and precedents: Section 168A of the GST Act empowers the Central Government to extend the time limit for issuance of show cause notices and adjudication orders, but only upon prior recommendation of the GST Council. The notifications in question purportedly extend such time limits for the financial year 2019-20. Several High Courts have delivered conflicting judgments on the validity of these notifications. The Allahabad High Court upheld Notification No. 9/2023, the Patna High Court upheld Notification No. 56/2023, whereas the Guwahati High Court quashed Notification No. 56/2023. The Telangana High Court expressed reservations about Notification No. 56/2023 but did not conclusively rule on its validity. These conflicting views have resulted in a Special Leave Petition (SLP) pending before the Supreme Court (S.L.P No 4240/2025). Court's interpretation and reasoning: The Court acknowledged the cleavage of judicial opinion and the pendency of the Supreme Court's decision on the issue. It noted that Notification No. 9/2023 was issued following the GST Council's prior recommendation, whereas Notification No. 56/2023 was issued without such prior approval and ratified only subsequently, thereby breaching the statutory mandate. Application of law to facts and treatment of competing arguments: The Court refrained from expressing a definitive opinion on the validity of the notifications, deferring to the Supreme Court's forthcoming ruling. It recognized the importance of judicial discipline and the need to avoid conflicting decisions on the same legal question. Conclusion: The issue of validity of the impugned notifications remains open and is subject to the Supreme Court's adjudication. Interim orders passed by various High Courts, including the Punjab and Haryana High Court, have been maintained pending the Supreme Court's decision. Extension of Time Limits for Adjudication under Section 73 of the GST Act Relevant legal framework: Section 73 of the GST Act deals with determination of tax not paid or short paid or erroneously refunded. The time limit for initiating proceedings under Section 73 is statutorily prescribed and can only be extended under Section 168A, subject to the GST Council's recommendation. Court's reasoning: The Supreme Court's notice in the SLP highlights the key issue: whether the time limit for adjudication of show cause notices under Section 73 could be validly extended by the impugned notifications. The Court recognized this as a substantial legal question with significant implications for the Petitioners. Conclusion: The matter is sub judice before the Supreme Court, and the Court declined to interfere with the extension of time limits at this stage. Denial of Input Tax Credit (ITC) under the IGST Act Relevant legal framework: The IGST Act, 2017 allows for Input Tax Credit on imports and inward supplies, including those from Special Economic Zone (SEZ) units. Form GSTR-2A is a key document reflecting ITC claimed by taxpayers. Key evidence and findings: The Petitioner claimed ITC under the IGST Act for the financial year 2019-20 on imports and inward supplies from SEZ units. The adjudicating authority denied this ITC, citing the absence of a utility or option in Form GSTR-2A at the relevant time for recording such ITC. Court's interpretation and reasoning: The Court found that the denial overlooked the procedural limitations faced by the Petitioner due to the absence of a proper mechanism (utility/option) in Form GSTR-2A to record the ITC. This issue was held to require a detailed hearing on merits. Application of law to facts: The Court directed that the adjudicating authority reconsider the issue afresh, providing the Petitioner an opportunity for personal hearing and to place their case on merits. Treatment of competing arguments: The Department argued for upholding the denial of ITC, while the Petitioner contended that the denial was unjustified due to procedural constraints. The Court sided with the Petitioner's right to be heard and to have the matter reconsidered. Conclusion: The impugned order denying ITC was set aside, and the matter was remanded for fresh adjudication after personal hearing. Denial of Personal Hearing and Ex-parte Orders Key findings: The Court noted that in many cases, adjudication orders were passed ex-parte due to the Petitioners' inability to file replies or avail personal hearings. This led to imposition of large demands and penalties without adequate opportunity to defend. Court's reasoning: Recognizing the fundamental principle of natural justice, the Court emphasized the necessity of affording personal hearings before passing adverse orders. Directions: The Court ordered that the adjudicating authority issue notices for personal hearings and consider the Petitioner's replies and submissions before passing fresh orders. Impact of Conflicting Judicial Opinions and Pending Supreme Court Proceedings Court's approach: The Court acknowledged the conflicting High Court decisions on the validity of the impugned notifications and the pending Supreme Court SLP. It emphasized judicial discipline by refraining from expressing an opinion on the validity of the notifications and deferring to the Supreme Court's decision. Application to present petitions: The Court disposed of the petitions subject to the outcome of the Supreme Court's ruling, leaving all rights and remedies open to the parties. 3. SIGNIFICANT HOLDINGS "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 S.L.P No 4240/2025 titled M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors." "The impugned order dated 30th August, 2024 is set aside and the said issue, as captured by this Court in order dated 23rd April, 2025, shall be considered by the adjudicating authority." "The adjudicating authority shall issue a notice for personal hearing to the Petitioner... The reply filed by the Petitioner to the SCN along with the submissions made in the personal hearing proceedings shall be duly considered by the Adjudicating Authority and fresh order with respect to the SCN shall be passed accordingly." Core principles established include:
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