2025 (5) TMI 1114 - HC - GST

Challenge to impugned SCN and demand notice - Vires of N/N. 9/2023-Central Tax dated 31st March 2023 issued by the Central Board of Indirect Taxes and Customs - 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 Court has perused the records. In fact 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 vide Additional Notices Tab had remanded the matter holding that The impugned demand orders dated 23rd April 2024 and 5th December 2023 are accordingly set aside. In response to show cause notices dated 04th December 2023 and 23th September 2023 the Petitioner shall file its replies within thirty days. 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. It is relevant to note that post 16th January 2024 the Department has effected changes in the portal to ensure that the SCNs become visible to parties. However the SCN in the present case is of 25th September 2023. Therefore following the above decision the impugned order is set aside. Let the entire matter be considered afresh after giving a personal hearing notice to the Petitioner. Petition disposed off.

Summary

The core legal questions considered by the Court include: (i) the validity and vires of Notification No. 9/2023-Central Tax and Notification No. 56/2023-Central Tax issued under Section 168A of the Central Goods and Services Tax Act, 2017 (GST Act); (ii) whether the procedure prescribed under Section 168A, including prior recommendation of the GST Council, was duly followed before issuance of these notifications; (iii) 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 by such notifications; (iv) the effect of conflicting High Court judgments on the validity of these notifications and the role of the Supreme Court in resolving these conflicts; (v) procedural fairness in the issuance and adjudication of show cause notices, specifically whether the petitioner was given adequate notice and opportunity to file replies and be heard before passing demand and penalty orders; and (vi) the appropriate relief and procedural directions in light of the pending Supreme Court adjudication on the validity of the notifications.

Regarding the validity of the impugned notifications, the Court examined the statutory framework under Section 168A of the GST Act, which mandates that any extension of time limits for adjudication of show cause notices and passing orders requires prior recommendation by the GST Council. The Court noted that Notification No. 9/2023-Central Tax was issued following such recommendation, whereas Notification No. 56/2023-Central Tax was issued without prior recommendation, with ratification occurring only after issuance, thus allegedly contravening the statutory mandate. The Court reviewed divergent judicial pronouncements from various High Courts: the Allahabad and Patna High Courts upheld the validity of Notifications 9 and 56 respectively, whereas the Guwahati High Court quashed Notification No. 56. The Telangana High Court also expressed reservations regarding Notification No. 56. These conflicting views underscored the legal uncertainty surrounding the notifications.

The Court further highlighted that the Supreme Court had admitted Special Leave Petitions (SLPs) challenging these notifications and issued notice, recognizing the cleavage of opinion among High Courts. The Supreme Court's order explicitly framed the question of whether the time limit for adjudication and passing of orders under Section 73 of the GST Act and corresponding State GST Acts could be extended by notifications issued under Section 168A. Pending the Supreme Court's final decision, various High Courts, including the Punjab and Haryana High Court, refrained from expressing their views on the vires of Section 168A and the impugned notifications, instead directing that interim orders continue and that the matter be governed by the Supreme Court's forthcoming judgment.

On the procedural fairness issue, the Court analyzed the facts that the impugned show cause notice (SCN) dated 25th September 2023 was uploaded only under the 'Additional Notices Tab' on the GST portal, which was not readily visible or accessible to the petitioner. Consequently, the petitioner claimed ignorance of the SCN and was unable to file replies or avail personal hearings. The impugned demand order dated 26th December 2023 was passed ex parte without hearing the petitioner. The Court examined prior decisions where similar circumstances arose, notably W.P.(C) 13727/2024, where the Court had remanded matters for fresh adjudication after affording parties a fair opportunity to be heard. The Court emphasized the principle that orders should not be passed in default without giving proper notice and hearing, especially where the departmental portal's design or placement of notices impedes effective communication.

Responding to the respondent's submission that reminder notices were issued on 9th November and 5th December 2023, the Court found that mere reminders did not cure the fundamental defect of non-communication of the original SCN. The Court held that the petitioner must be given a fresh opportunity to file replies and be heard before the adjudicating authority. It directed that henceforth, hearing notices should not only be uploaded on the portal but also sent by email to the petitioner to ensure receipt and awareness. The Court ordered that the impugned demand orders be set aside and the entire matter be reconsidered afresh, with the petitioner permitted to file replies within a stipulated period and the adjudicating authority to pass a reasoned order on merits.

Regarding the impact of the pending Supreme Court proceedings on the validity of the impugned notifications, the Court explicitly left the issue open, clarifying that the adjudication authority's order would be subject to the Supreme Court's final decision in SLP No. 4240/2025. The Court also directed that the petitioner be provided access to the GST portal to enable filing of replies and access to notices and related documents, thus facilitating procedural fairness going forward.

The Court's treatment of competing arguments was balanced. While acknowledging the respondent's reliance on reminder notices and portal uploads, it underscored the necessity of actual knowledge and opportunity to be heard as fundamental principles of natural justice. It also recognized the broader legal controversy over the validity of the notifications but refrained from expressing any opinion on that issue, deferring to the Supreme Court's ultimate authority. The Court's approach sought to protect the petitioner's procedural rights without prejudicing the substantive legal questions pending at the highest judicial level.

Significant holdings include the following:

"The principal issue involved in the present case is squarely covered by the decisions of this Court... where the Court under similar circumstances has remanded back the matter to ensure the Noticee/Petitioners get a fair opportunity to be heard."

"The impugned order is set aside. The respondent is granted another opportunity to reply to the impugned SCN within a period of two weeks from date. The Adjudicating Authority shall consider the same and pass such order, as it deems fit, after affording the petitioner an 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."

"The issue in respect of the validity of the impugned notification is left open and the order of the Adjudicating Authority shall be subject to the outcome of the decision of the Supreme Court in S.L.P No 4240/2025."

Core principles established include the mandatory requirement of procedural fairness in tax adjudication proceedings, especially the necessity of effective communication of show cause notices and hearing opportunities. The Court reaffirmed that ex parte orders without proper notice violate principles of natural justice. It also underscored the importance of adherence to statutory procedures under the GST Act for issuance of notifications extending time limits, while recognizing the primacy of the Supreme Court in resolving conflicting High Court opinions on such statutory interpretations.

In conclusion, the Court set aside the impugned demand orders passed without hearing, directed fresh adjudication after affording the petitioner an opportunity to file replies and be heard, mandated improved notice communication procedures, and left the question of the validity of the impugned notifications open pending the Supreme Court's decision. All rights and remedies of the parties were kept open, ensuring that the petitioner's procedural and substantive rights are protected without prejudging the complex legal issues under judicial consideration at the highest level.