2025 (5) TMI 1514 - HC - GST

Challenge to SCN and consequent demand order - challenge to N/N. 56/2023-Central Tax dated 28th December 2023 - extension of time limits for adjudication - HELD THAT - This Court in Neelgiri Machinery through its Proprietor Mr. Anil Kumar V. Commissioner Delhi Goods And Service Tax And Others 2025 (3) TMI 1308 - DELHI HIGH COURT under similar circumstances where the SCN was uploaded on Additional Notices Tab had remanded the matter. It is relevant to note that post 16th January 2024 the GST Department has effected changes in the portal to ensure that the Show Cause Notices become visible to parties - The SCN in the present case is dated 11th December 2023 in terms of Neelgiri the Petitioner has not had sufficient opportunity to file a reply or an opportunity to be heard. Accordingly the matter deserves to be remanded back to the concerned Adjudicating Authority. The impugned order is set aside - petition disposed off by way of remand.

Summary

The core legal questions considered in this judgment 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 (GST Act) is valid and in conformity with the statutory mandate, particularly regarding the requirement of prior recommendation by the GST Council.

2. Whether the extension of time limits for adjudication under Section 73 of the GST Act and the corresponding State GST Acts for the financial year 2019-2020, effected through the impugned notifications, is legally permissible.

3. Whether the impugned Show Cause Notice (SCN) dated 11th December, 2023 was properly served on the Petitioner, and whether the Petitioner was afforded a fair opportunity to file a reply and be heard before passing the impugned adjudication order.

4. The effect of conflicting judicial opinions from various High Courts on the validity of the impugned notifications and the pending resolution of these issues by the Supreme Court.

5. The procedural fairness in the adjudication process, specifically the adequacy of notice and personal hearing rights afforded to the Petitioner.

Issue-wise Detailed Analysis:

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

The legal framework revolves around Section 168A of the Central GST Act, which mandates that any extension of time limits for adjudication of show cause notices and passing orders must be preceded by a recommendation from the GST Council. The Petitioner challenged the vires of Notification No. 56/2023 on the ground that it was issued without the prior recommendation of the GST Council, and the ratification was given only after issuance, thus contravening the statutory requirement.

The Court noted that this issue is not isolated but part of a broader batch of petitions pending before multiple High Courts and the Supreme Court. Various High Courts have taken divergent views: the Allahabad and Patna High Courts upheld the validity of the notifications, whereas the Guwahati High Court quashed Notification No. 56/2023. The Telangana High Court made observations on invalidity but did not decide the issue finally; this judgment is under Supreme Court consideration in SLP No. 4240/2025.

The Supreme Court, in its order dated 21st February, 2025, recognized the cleavage of opinion and issued notices in the matter, indicating that the ultimate determination on the validity of the notifications, including whether the time limits for adjudication could be extended under Section 168A, is pending.

The Court in the present matter refrained from expressing any opinion on the vires of the notifications, respecting judicial discipline and the pending Supreme Court proceedings. It acknowledged that the validity of the impugned notifications is a substantial legal question yet to be conclusively decided.

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

The impugned notifications purportedly extended the time limits for adjudication of show cause notices for the financial year 2019-2020. The legal question is whether such extensions are permissible under the GST Act and whether the procedural requirements, including GST Council recommendation, were complied with.

The Supreme Court's notice in the SLP indicates that this issue is central to the dispute. The Court noted that the extension notifications are challenged for non-compliance with the statutory procedure and questioned whether such extensions could be granted retrospectively or without proper recommendation.

The Court observed that since the matter is sub judice before the Supreme Court, the interim orders passed by other High Courts, including Punjab and Haryana High Court, would govern the present cases, and judicial restraint is warranted.

Service of Show Cause Notice and Opportunity of Personal Hearing

On facts, the Petitioner contended that the SCN dated 11th December, 2023 was uploaded only under the 'Additional Notices Tab' on the GST Portal, which did not come to the Petitioner's notice. Consequently, the Petitioner was deprived of a fair opportunity to file a reply or appear for a personal hearing, leading to ex-parte adjudication and imposition of demands and penalties.

The Court relied on its earlier decisions, notably in 'Neelgiri Machinery' and 'Sathish Chand Mittal', where similar circumstances were considered. In those cases, the Court held that notices uploaded under the 'Additional Notices' tab without adequate visibility or communication do not amount to proper service, thus violating principles of natural justice.

The Court emphasized the need to ensure that the Petitioner receives actual notice, including by e-mail, and is provided a meaningful opportunity to be heard before passing any order. The Court noted that post 16th January, 2024, the GST Department had made changes to the portal to improve visibility of notices, but in the present case, the SCN predates these changes.

Accordingly, the Court set aside the impugned demand orders and remanded the matter to the adjudicating authority with directions to afford the Petitioner an opportunity to file replies within a specified time and to conduct personal hearings with proper communication.

Effect of Conflicting Judicial Opinions and Pending Supreme Court Proceedings

The Court acknowledged the existence of conflicting High Court judgments on the validity of the impugned notifications and the extension of time limits under Section 168A. It noted that the Supreme Court is seized of the matter and that the final determination on these issues would be binding.

In light of this, the Court refrained from deciding the validity of the notifications and left the issue open, subject to the Supreme Court's decision. It also noted that all rights and remedies of the parties remain open and that any order passed by the adjudicating authority shall be subject to the outcome of the Supreme Court proceedings.

Procedural Fairness and Remedial Measures

The Court underscored the importance of procedural fairness in tax adjudication, particularly the requirement of proper service of notices and the right to be heard. It directed that hearing notices should not only be uploaded on the portal but also sent via e-mail to ensure actual receipt by the Petitioner.

The Court directed the GST Department to provide the Petitioner with access to the GST portal and all relevant documents to enable effective participation in the proceedings. It also set a timeline for filing replies and mandated personal hearings before any further adjudication.

Conclusions

The Court concluded that while the validity of the impugned notifications under Section 168A remains undecided and is pending before the Supreme Court, the Petitioner's right to a fair hearing was not respected in the present case. Therefore, the impugned orders were set aside, and the matter was remanded for fresh adjudication after providing the Petitioner an opportunity to file replies and be heard.

The Court's directions aim to balance the procedural rights of the Petitioner with the ongoing legal questions about the validity of the notifications, ensuring that no prejudice is caused by procedural lapses pending final judicial determination.

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."

"Since there is no clarity on behalf of the Department, this Court follows the order dated 9th September, 2024 in Satish Chand Mittal (Trade Name National Rubber Products) vs. Sales Tax Officer SGST, Ward 25-Zone 1 ... where the Court under similar circumstances has remanded back the matter to ensure the Noticee/Petitioners get a fair opportunity to be heard."

"The hearing notices shall now not be merely uploaded on the portal but shall also be e-mailed to the Petitioner and upon the hearing notice being received, the Petitioner would appear before the Department and make its submissions."

"All rights and remedies of the parties are left open."

Core principles established include:

- The necessity of prior GST Council recommendation for extension of adjudication timelines under Section 168A of the GST Act.

- The importance of procedural fairness, including proper service of show cause notices and the right to personal hearing, as fundamental to tax adjudication.

- Judicial restraint in deciding issues pending before the Supreme Court, with interim reliefs tailored to protect parties' rights without prejudging substantive legal questions.

- The requirement that electronic notices on government portals must be effectively communicated to taxpayers to ensure actual knowledge and opportunity to respond.