2025 (6) TMI 2024 - HC - GST

Calling for the records pertaining to the Petitioner s case - applicability of Circular No. 219/13/2024-GST dated 26.06.2024 - violation of Section 168 of the CGST/KGST Act - Impugned Notifications numbered as 56/2023-CT dated 28.12.2023 and 25/2023 FD 20 CSL 2023 dated 29.12.2023 (Annexure- B B1) ultra vires Section 168A read with section 73 of CGST/KGST Act 2017 or not - applicability of time limitation - HELD THAT - Having regard to the subsequent events that has transpired during the pendency of the present petition in respondent No.5 dropping the proceedings against the very same petition in relation to the tax period 2020-21 it is deemed just and appropriate to set aside the impugned order at Annexure-A and the matter remitted back to respondent No.5 for reconsideration afresh in accordance with law bearing in mind the order in Form GST DRC-05 dated 28.02.2025 within a stipulated time frame and in accordance with law. The matter is remitted back to respondent No.5 for reconsideration afresh and bearing in mind the order dated 20.08.2025 in accordance with law - petition allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) Whether the impugned adjudication order dated 30.08.2024 issued under Section 73(9) of the KGST Act is valid and legal, or liable to be quashed under Article 226 of the Constitution of India;

(b) Whether the impugned order contravenes the binding Circular No. 219/13/2024-GST dated 26.06.2024 and violates the provisions of Section 168 of the CGST/KGST Act;

(c) Whether the notifications numbered 56/2023-CT dated 28.12.2023 and 25/2023 FD 20 CSL 2023 dated 29.12.2023 are ultra vires Section 168A read with Section 73 of the CGST/KGST Act, 2017;

(d) Whether the impugned adjudication order is barred by limitation as prescribed under Section 73(10) of the CGST and KGST Acts;

(e) Whether the show cause notice dated 30.05.2024 is without jurisdiction and barred by limitation under Section 73(10) read with Section 73(2) of the CGST and KGST Acts;

(f) Whether a stay or interim relief restraining recovery of the demand confirmed by the impugned order is warranted;

Additionally, the Court considered the effect of a subsequent order dated 28.02.2025 dropping proceedings for the subsequent tax period 2020-21 against the petitioner, and whether this impacts the validity or reconsideration of the impugned order for the tax period 2019-20.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Validity and legality of the impugned adjudication order dated 30.08.2024

The adjudication order was passed under Section 73(9) of the KGST Act following issuance of a show cause notice under Section 73(2). The petitioner challenged this order by invoking Article 226, seeking quashing on grounds of illegality and invalidity.

The Court examined the procedural compliance and substantive grounds of the order. It noted that the order pertained to the tax period 2019-20 and was challenged during pendency of the petition.

Relevant legal framework includes the CGST/KGST Act provisions governing assessment, adjudication, and limitation periods (Sections 73(2), 73(9), 73(10), and 168). The petitioner alleged violation of these provisions and procedural irregularities.

The Court observed that the impugned order was challenged on multiple grounds but did not express any conclusive opinion on the merits. Instead, it considered subsequent developments and procedural propriety.

Issue (b): Contravention of Circular No. 219/13/2024-GST and violation of Section 168

The petitioner contended that the impugned order was issued contrary to the binding Circular dated 26.06.2024 and violated Section 168 of the CGST/KGST Act, which governs revision powers.

The Court acknowledged the contention but refrained from detailed adjudication on this point, reserving all contentions for future consideration. It emphasized that the matter required fresh examination in light of subsequent orders and facts.

Issue (c): Ultra vires nature of Notifications 56/2023-CT and 25/2023 FD 20 CSL 2023

The petitioner challenged these notifications as being ultra vires Section 168A read with Section 73 of the CGST/KGST Act. These notifications presumably relate to procedural or substantive amendments affecting the adjudication process.

The Court did not delve into detailed analysis of the vires of these notifications at this stage, leaving the question open for consideration upon reconsideration of the matter by the authorities.

Issue (d) and (e): Limitation bar under Section 73(10) and jurisdictional validity of show cause notice

The petitioner argued that both the impugned order and the show cause notice dated 30.05.2024 were barred by the limitation period prescribed under Section 73(10) of the CGST and KGST Acts, and thus without jurisdiction.

The Court noted these contentions but did not conclusively decide on limitation issues. Instead, it considered the procedural propriety and the effect of subsequent developments in the case.

Issue (f): Interim relief and stay of recovery

The petitioner sought interim relief restraining recovery of demand confirmed by the impugned order during pendency of the petition. The Court did not grant any interim stay but proceeded to consider the overall circumstances for an appropriate remedy.

Effect of subsequent order dated 28.02.2025 dropping proceedings for tax period 2020-21

During the pendency of the petition, respondent No.4 passed an order dropping proceedings against the petitioner for the subsequent tax period 2020-21. The operative part stated that the show cause notice dated 11.11.2024 for 2020-21 was dropped, without prejudice to any future proceedings.

The Court took note of this subsequent order and the submission by the State that respondent No.5 would reconsider the impugned order for 2019-20 in light of this development.

In view of this, the Court found it just and appropriate to set aside the impugned order dated 30.08.2024 and remit the matter to respondent No.5 for fresh consideration in accordance with law, bearing in mind the subsequent order dated 28.02.2025.

The Court directed the petitioner to appear before respondent No.5 on a specified date and mandated that a fresh decision be passed within four weeks thereafter. Liberty was granted to the petitioner to submit additional pleadings or documents.

All rival contentions on all aspects were kept open with no opinion expressed by the Court.

3. SIGNIFICANT HOLDINGS

The Court's key legal reasoning and rulings include the following:

"In view of the aforesaid facts and circumstances, having regard to the subsequent events that has transpired during the pendency of the present petition in respondent No.5 dropping the proceedings against the very same petition in relation to the tax period 2020-21, I deem it just and appropriate to set aside the impugned order at Annexure-A and remit the matter back to respondent No.5 for reconsideration afresh in accordance with law, bearing in mind the order in Form GST DRC-05 dated 28.02.2025, within a stipulated time frame and in accordance with law."

Core principles established by the Court include:

- The necessity of fresh consideration of adjudication orders in light of subsequent developments affecting related tax periods.

- Preservation of the parties' rights to submit additional evidence and pleadings before reconsideration.

- The Court refrains from expressing any opinion on the merits or rival contentions when procedural or factual developments warrant remand for fresh adjudication.

- The importance of adherence to limitation provisions and procedural fairness under the CGST/KGST Acts, though the Court did not conclusively decide these issues at this stage.

Final determinations:

- The impugned adjudication order dated 30.08.2024 is set aside.

- The matter is remitted to the concerned authority for fresh consideration within a stipulated time frame.

- The petitioner must appear before the authority on the specified date and may submit additional pleadings.

- All substantive and procedural contentions remain open for determination upon reconsideration.