2025 (5) TMI 1115 - HC - GST

Challenge to adjudication order and SCN - Vires of N/N. 56/2023 (Central Tax) dated 28th December 2023 and Notification 09/2023 (Central Tax) dated 31st March 2023 - 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. Upon such perusal it is noticed that the impugned order dated 25th August 2024 is a detailed order that has been passed considering various aspects and some of the demands have in fact been dropped upon considering the reply filed. In view thereof the Court is of the opinion that the impugned order does not warrant interference under writ jurisdiction and the same would be a fit case for appeal. Accordingly the Petitioner is permitted to file an appeal along with the requisite pre-deposit by 10th July 2025. If the appeal is filed within the stipulated time the same shall not be dismissed on limitation and shall be heard on merits. Petition disposed off.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) The validity and legality of Notification No. 56/2023-Central Tax dated 28th December, 2023 and Notification No. 09/2023-Central Tax dated 31st March, 2023 issued under Section 168A of the Central Goods and Services Tax Act, 2017 (CGST Act), particularly whether these notifications were issued following the mandatory procedure including prior recommendation of the GST Council.

(b) Whether the extension of the time limit for adjudication of show cause notices and passing of orders under Section 73 of the CGST Act for the financial year 2019-2020 could be validly effected through the impugned notifications.

(c) The procedural fairness in the adjudication process under the impugned order dated 25th August, 2024, specifically whether the petitioner was afforded a proper opportunity to file replies and avail personal hearings before the order was passed.

(d) The applicability and effect of interim orders passed by various High Courts and the Supreme Court on the validity of the impugned notifications and related proceedings.

(e) The scope of relief available to the petitioner in light of the pendency of the validity challenge to the notifications before the Supreme Court.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Validity of Notifications No. 56/2023 and No. 09/2023 under Section 168A of the CGST Act

The legal framework governing the issuance of the impugned notifications is Section 168A of the CGST Act, which mandates that any extension of the time limit for adjudication of show cause notices and passing of orders requires the prior recommendation of the GST Council. The petitioner challenged the notifications on the ground that the proper procedure was not followed, specifically that Notification No. 56/2023 was issued without prior GST Council recommendation and that the ratification was given only after issuance, rendering it invalid.

The Court noted that this issue has been extensively litigated across various High Courts with 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 raised serious concerns about the validity of Notification No. 56/2023, and this judgment is presently under consideration by the Supreme Court in S.L.P No. 4240/2025.

The Supreme Court has issued notice and interim orders, recognizing the cleavage of opinion among High Courts and the significance of the issue. The Supreme Court's order explicitly framed the question as whether the time limit for adjudication under Section 73 of the CGST Act could be extended by issuing notifications under Section 168A.

The Court in the present matter observed that since the issue is sub judice before the Supreme Court, it would refrain from expressing any opinion on the validity of the impugned notifications and would await the Supreme Court's final adjudication.

(b) Extension of Time for Adjudication under Section 73 of the CGST Act

The impugned notifications purported to extend the limitation period for adjudication of show cause notices under Section 73 of the CGST Act for the financial year 2019-2020. The petitioner challenged this extension as invalid due to procedural irregularities in issuing the notifications.

The Court recognized that the extension of limitation is a significant power that must be exercised strictly in accordance with statutory mandates, including the requirement of GST Council's prior recommendation under Section 168A. The conflicting judicial pronouncements on this point were highlighted, with the Supreme Court now poised to resolve the controversy.

Pending the Supreme Court's decision, the Court declined to interfere with the extension but emphasized that the final outcome would be subject to the Supreme Court's ruling.

(c) Procedural Fairness and Adjudication Order dated 25th August, 2024

The petitioner contended that despite filing a reply to the show cause notice on 17th June, 2024, the departmental authority did not duly consider the reply and failed to provide an adequate personal hearing, resulting in an ex-parte adjudication order imposing substantial demands and penalties.

Upon examination of the record, the Court observed that the impugned order was detailed and reflected consideration of various aspects, including dropping some demands after considering the petitioner's reply. The Court found no prima facie ground to interfere with the order under writ jurisdiction.

The Court noted that the appropriate remedy for the petitioner was to challenge the order through an appeal rather than through writ jurisdiction. Accordingly, the petitioner was permitted to file an appeal with the requisite pre-deposit by a specified date, with assurance that the appeal would be heard on merits and not dismissed on limitation grounds if filed timely.

(d) Interim Orders and Effect of Pending Supreme Court Proceedings

The Court took note of interim orders passed by other High Courts, including the Punjab and Haryana High Court, which refrained from expressing opinions on the vires of Section 168A and the impugned notifications, deferring to the Supreme Court's pending adjudication.

The Court aligned with this approach, holding that the validity of the impugned notifications would be subject to the outcome of the Supreme Court's decision in S.L.P No. 4240/2025. It emphasized the importance of judicial discipline and the binding effect of the Supreme Court's forthcoming ruling on all connected cases.

(e) Relief and Access to Remedies

The Court acknowledged the petitioner's difficulties in filing replies and availing personal hearings, which had led to ex-parte orders and substantial demands. While refraining from deciding on the validity of the notifications, the Court indicated that depending on the category of cases, relief could be granted to allow petitioners to place their stand before the adjudicating authority and pursue appellate remedies.

In the present petition, the Court allowed the petitioner to file an appeal and directed that access to the GST Portal be ensured to facilitate access to notices and related documents. The Court left all rights and remedies open, subject to the Supreme Court's final decision on the validity of the impugned notifications.

3. SIGNIFICANT HOLDINGS

The Court made the following crucial determinations and legal pronouncements:

"The validity of the impugned notifications is left open and the order of the Appellate 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 25th August, 2024 is a detailed order that has been passed considering various aspects, and some of the demands have, in fact, been dropped upon considering the reply filed. In view thereof, the Court is of the opinion that the impugned order does not warrant interference under writ jurisdiction and the same would be a fit case for appeal."

"The petitioner is permitted to file an appeal along with the requisite pre-deposit by 10th July, 2025. If the appeal is filed within the stipulated time, the same shall not be dismissed on limitation and shall be heard on merits."

"Access to the GST Portal, if not already available, shall be ensured to be provided to the Petitioner to enable access to the notices and related documents."

"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."

These holdings establish the principle that challenges to the validity of notifications issued under Section 168A must await the Supreme Court's determination, and that procedural fairness in adjudication requires consideration of replies and opportunity for hearing, with appellate remedies available for grievances.

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