2025 (5) TMI 1213 - HC - GST

Extension of time limit of issuance of Show Cause Notice SCN) u/s 73 / 74 - Validity and vires of Notification No. 9/2023-Central Tax and Notification No. 9/2023-State Tax - procedural requirements under Section 168A for prior to the issuance of notifications - Challenging the SCN and impugned order - HELD THAT - On a perusal of the reply to the Show Cause Notice dated 24th November 2023 it would show that various grounds have been raised by the Petitioner which have not been considered in the impugned order at all. Accordingly the matter is remanded for fresh adjudication by the Adjudicating Authority. It is however made clear that the issue in respect of 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 M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax Ors. and of this Court in Engineers India Limited v. Union of India Ors 2025 (4) TMI 60 - SC ORDER qua the State notification. Accordingly the impugned order is set aside. The reply filed by the Petitioner dated 24th November 2023 along with the submissions made by the Petitioner in the personal hearing shall be considered before passing the fresh order. All the rights and remedies of the parties are left open. 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. Petition is disposed of in these terms.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) Whether the impugned notifications issued under the Central Goods and Services Tax Act, 2017 (CGST Act) and Delhi Goods and Services Tax Act, 2017 (DGST Act) are ultra vires the statutory provisions, specifically Section 168A of the CGST Act;

(b) Whether the procedure prescribed under Section 168A, including prior recommendation of the GST Council, was duly followed before issuance of the impugned notifications extending the time limits for adjudication of show cause notices and passing of orders under Section 73 of the GST Acts;

(c) The validity and legality of the impugned notifications in light of conflicting judicial precedents from various High Courts and pending Supreme Court proceedings;

(d) Whether the adjudicating authority erred in confirming tax demands and penalties without properly considering the detailed replies and objections filed by the petitioner in response to the show cause notices;

(e) The appropriate relief and procedural directions to be granted pending the Supreme Court's final adjudication on the validity of the notifications.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (b): Validity of Impugned Notifications under Section 168A of CGST Act

The legal framework centers on Section 168A of the CGST Act, which mandates that any extension of time limits for adjudication of show cause notices and passing of orders requires the prior recommendation of the GST Council. The impugned notifications challenged include Notification No. 9/2023-Central Tax and Notification No. 9/2023-State Tax.

The Court noted that the validity of these notifications was already under consideration in a batch of petitions, including a lead petition before this Court and several others before different High Courts. The Allahabad and Patna High Courts upheld the validity of certain notifications, whereas the Guwahati High Court quashed one such notification. The Telangana High Court made observations on invalidity but did not conclusively rule on the vires, and this judgment is currently under Supreme Court review.

The Supreme Court has issued notices and is considering the matter in S.L.P No. 4240/2025, focusing on whether the time limits for adjudication under Section 73 of the GST Act could be extended by notifications issued under Section 168A. The Supreme Court acknowledged a divergence of opinion among High Courts.

The Punjab and Haryana High Court, while refraining from opining on the vires of Section 168A and the notifications, directed that the connected cases be governed by the Supreme Court's eventual decision, underscoring the judicial discipline to await the apex court's ruling.

The Court's interpretation aligns with this approach, recognizing the pending Supreme Court adjudication as determinative. It refrains from issuing any definitive ruling on the validity of the impugned notifications, instead acknowledging the ongoing judicial process and the conflicting precedents.

Issue (c): Conflicting Judicial Precedents and Pending Supreme Court Proceedings

The Court extensively reviewed the judicial landscape, noting the split in High Court decisions regarding the validity of the notifications. The Allahabad and Patna High Courts upheld the notifications, while the Guwahati High Court quashed one. The Telangana High Court made critical observations on invalidity, which the Supreme Court is now examining.

The Supreme Court's issuance of notice and interim orders indicates the significance and complexity of the legal questions raised. The Court emphasized judicial discipline by deferring to the Supreme Court's final determination and directing that interim orders continue to operate pending that decision.

Issue (d): Consideration of Petitioner's Reply to Show Cause Notice

The petitioner submitted a detailed reply to the Show Cause Notice dated 24th November, 2023, which was not adequately considered by the adjudicating authority. The impugned order confirmed the tax demand and interest, rejecting the petitioner's reply as incomplete, inadequately supported, and unsatisfactory without addressing the specific grounds raised.

The Court scrutinized the impugned order and found that the petitioner's grounds and submissions were not considered, amounting to a procedural lapse. The Court held that such omission violates principles of natural justice and fair adjudication.

Applying the law to the facts, the Court set aside the impugned order and remanded the matter for fresh adjudication. It directed the adjudicating authority to issue a notice for personal hearing, consider the petitioner's detailed reply along with oral submissions, and pass a fresh order accordingly.

This approach preserves the petitioner's right to be heard and ensures that the adjudication is based on a comprehensive and fair evaluation of all materials.

Issue (e): Relief and Procedural Directions Pending Supreme Court Outcome

Given the pendency of the Supreme Court proceedings on the validity of the impugned notifications, the Court adopted a cautious stance. It declined to rule on the validity but provided interim relief by mandating fresh adjudication with opportunity for personal hearing.

The Court also ensured that the petitioner's access to the GST portal and related documents be facilitated to enable effective participation in the proceedings. It left all rights and remedies open, allowing the petitioner to pursue appellate remedies without prejudice.

This balanced approach respects the ongoing judicial process while safeguarding the petitioner's procedural rights and preventing ex-parte orders that could cause irreparable harm.

3. SIGNIFICANT HOLDINGS

The Court held that:

"The issue in respect of 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 titled M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors. and of this Court in W.P.(C) 9214/2024 titled Engineers India Limited v. Union of India & Ors qua the State notification."

It established the core principle that procedural fairness must be observed in tax adjudication, mandating that replies and objections filed by taxpayers be duly considered before confirming demands and penalties.

In conclusion, the Court set aside the impugned order confirming tax demands, remanded the matter for fresh adjudication with a direction to provide personal hearing, and preserved the petitioner's rights to access documents and pursue remedies. The Court deferred any decision on the validity of the impugned notifications to the Supreme Court's final ruling, thereby maintaining judicial discipline and consistency.

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