2025 (5) TMI 1108 - HC - GST

Challenge to adjudication order and SCN - Vires of N/N. 09/2023-State Tax dated 22nd June 2023 issued by the Government of NCT Delhi - extension of time limit for adjudication of show cause notices and passing orders u/s 73 of the GST Act - personal hearing not provided - violation of principles of natural justice - HELD THAT - The present petition is a part of a batch of petitions wherein inter alia the impugned notifications have been challenged. The decision in DJST Traders Private Limited v. Union of India Ors. 2025 (5) TMI 43 - DELHI HIGH COURT is the lead matter in the said batch of petitions. On the last date of hearing i.e. 22rd April 2025 the parties were heard at length qua the validity of the impugned notifications and accordingly the following order was passed 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. As observed by this Court in the order dated 22nd April 2025 since the challenge to the above mentioned notification is presently under consideration before the Supreme Court in M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax Ors. 2025 (4) TMI 60 - SC ORDER the challenge made by the Petitioner to the notification in the present proceedings would have to await the outcome of the decision of the Supreme Court. Accordingly list this matter on 11th September 2025.

The core legal questions considered in the judgment include:

1. Whether the adjudication order dated 30th April 2024 passed under Section 73 of the Delhi/Central Goods and Services Tax Act, 2017 was validly issued.

2. The validity and legality of Notification No. 09/2023-State Tax dated 22nd June 2023 issued by the Government of NCT, Delhi, particularly whether the proper procedure under Section 168A of the Central Goods and Services Tax Act, 2017 was followed prior to issuance.

3. The broader question of whether the time limit for adjudication of show cause notices and passing of orders under Section 73 of the GST Act and the corresponding SGST Act could be extended by notifications issued under Section 168A of the GST Act.

4. The procedural propriety and constitutional validity of the impugned notifications, including whether the prior recommendation of the GST Council, as mandated under Section 168A, was obtained before issuing the notifications.

5. The effect of conflicting High Court decisions on the validity of these notifications and the implications of pending Supreme Court proceedings on the adjudication process.

6. The relief available to petitioners who have been unable to file replies or avail personal hearings, leading to ex-parte adjudication orders with substantial demands and penalties.

Issue-wise Detailed Analysis

Validity of the Adjudication Order under Section 73 of the DGST/CGST Act, 2017

The adjudication order dated 30th April 2024 was challenged on grounds including procedural irregularities and the validity of the underlying notifications extending the limitation period for adjudication. Section 73 of the DGST/CGST Act empowers the tax authorities to adjudicate demands related to tax evasion or short payment. The petitioner contended that the adjudication was premature or invalid due to the questionable validity of the notification extending the limitation period.

The Court noted that the adjudication orders were passed largely ex-parte because petitioners were unable to file replies or avail personal hearings. This raised concerns about the fairness of the proceedings. However, the Court refrained from delving into the validity of the adjudication order without first resolving the validity of the impugned notifications that extended the limitation period.

Validity and Procedural Compliance of Notification No. 09/2023-State Tax and Other Related Notifications

The impugned Notification No. 09/2023-State Tax, along with Notification No. 56/2023 (Central Tax), were challenged primarily on the ground that they were issued without adhering to the mandatory procedure prescribed under Section 168A of the CGST Act, which requires prior recommendation of the GST Council before extending deadlines for adjudication.

The Court observed that for Notification No. 09, the recommendation by the GST Council was obtained prior to issuance, whereas for Notification No. 56, the extension was granted contrary to the mandate, with ratification occurring only after issuance. The notification incorrectly stated it was issued on the GST Council's recommendation, which was factually inaccurate.

Several High Courts had taken divergent views on these notifications. The Allahabad High Court upheld Notification No. 09, the Patna High Court upheld Notification No. 56, while the Guwahati High Court quashed Notification No. 56. The Telangana High Court, without deciding on the vires, made observations on the invalidity of Notification No. 56. This cleavage of opinion underscored the complexity and unsettled nature of the legal questions involved.

The Supreme Court had admitted a Special Leave Petition (SLP) challenging these notifications and issued notices with interim orders, thereby indicating the matter was sub judice and required authoritative resolution.

Extension of Time Limits under Section 168A of the CGST Act

Section 168A of the CGST Act governs the extension of time limits for adjudication and other proceedings. The notifications in question purported to extend the limitation period for adjudication under Section 73 for the financial year 2019-2020. The key legal question was whether such extensions could be validly effected by notifications issued under Section 168A and whether the procedural safeguards, including prior GST Council recommendation, were complied with.

The Court noted that the Supreme Court was seized of this issue, considering the conflicting High Court rulings and the procedural irregularities alleged. The Court refrained from expressing any opinion on the validity of the notifications or the extensions until the Supreme Court's final adjudication.

Effect of Conflicting High Court Decisions and Pending Supreme Court Proceedings

The judgment highlighted the divergent views of various High Courts on the validity of the notifications and the extensions of limitation periods. The Punjab and Haryana High Court, acknowledging the pending Supreme Court proceedings, declined to express any opinion on the vires of Section 168A or the notifications and disposed of connected cases with directions that the interim orders would continue until the Supreme Court's decision.

The Court in the present matter adopted a similar approach, recognizing the need to maintain judicial discipline and await the Supreme Court's authoritative ruling before deciding on the validity of the impugned notifications and related adjudication orders.

Relief to Petitioners Unable to Participate in Adjudication Proceedings

Several petitioners submitted that they were unable to file replies or avail personal hearings, resulting in ex-parte adjudication orders with substantial demands and penalties. The Court acknowledged the hardship and prima facie indicated that, depending on the category of petitions, relief could be granted by permitting petitioners to place their stand before the adjudicating authority or pursue appellate remedies without prejudicing the question of the notifications' validity.

The Court proposed categorizing the petitions and affording appropriate procedural relief, thereby ensuring fairness and due process even as the legal validity of the notifications remained under judicial scrutiny.

Conclusions

The Court held that the challenge to the impugned notifications must await the Supreme Court's decision in SLP No. 4240/2025. In the interim, the Court was inclined to grant procedural relief to petitioners who had been prejudiced by ex-parte orders due to inability to participate in adjudication proceedings. The matter was adjourned for further hearing after the Supreme Court's ruling.

Significant Holdings

"Since the challenge to the above mentioned notification is presently under consideration before 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 challenge made by the Petitioner to the notification in the present proceedings would have to await the outcome of the decision of the Supreme Court."

"Keeping in view the judicial discipline, we refrain from giving our opinion with respect to the vires of Section 168-A of the Act as well as the notifications issued in purported exercise of power under Section 168-A of the Act which have been challenged, and we direct that all these present connected cases shall be governed by the judgment passed by the Hon'ble Supreme Court and the decision thereto shall be binding on these cases too."

"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."

The core principles established include the necessity of adhering to statutory procedural mandates such as prior GST Council recommendation before issuing notifications extending limitation periods, the importance of judicial discipline in refraining from conflicting rulings when higher court decisions are pending, and the safeguarding of procedural fairness for petitioners in tax adjudication proceedings.

Final determinations were deferred pending the Supreme Court's ruling, with interim directions to ensure petitioners' rights to be heard and pursue remedies notwithstanding the pendency of the challenge to the notifications' validity.

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