2025 (5) TMI 1347 - HC - GST

Challenge to SCN and consequent demand order - challenge to N/N. 56/2023-Central Tax dated 28th December 2023 - extension of time limits for adjudication - HELD THAT - 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 on Additional Notices Tab had remanded the matter. 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 emailed to the Petitioner and upon the hearing notice being received the Petitioner would appear before the Department and make its submissions. The show cause notices shall be adjudicated in accordance with law. There is no doubt that after 16th January 2024 changes have been made to the portal and the Additional Notices Tab has been made visible. However in the present case the writ petition was filed in 2024 raising issues as to the validity of the impugned Notifications. Under such circumstances considering the fact that the Petitioner did not get a proper opportunity to be heard and no reply to the SCN has been filed by the Petitioner the matter deserves to be remanded back to the concerned Adjudicating Authority. The Petitioner is granted time till 10th July 2025 to file the reply to SCN. Upon filing of the reply the Adjudicating Authority shall issue to the Petitioner a notice for personal hearing. The impugned order is set aside - petition disposed off.

Summary

The core legal questions considered by the Court include:

1. Whether the Show Cause Notice (SCN) dated 28th May 2024 and the consequent demand order dated 17th August 2024 issued by the Sales Tax Officer are valid and sustainable.

2. The vires (constitutional validity) of Notification No. 56/2023-Central Tax dated 28th December 2023, particularly regarding the procedural compliance under Section 168A of the Central Goods and Services Tax Act, 2017 (GST Act).

3. Whether the extension of time limits for adjudication under the GST Act, as effected by the impugned notifications, was lawfully issued.

4. The procedural fairness in issuance and communication of the SCN, specifically whether uploading the SCN on the 'Additional Notices Tab' of the GST Portal without proper notification to the petitioner violated principles of natural justice.

5. The impact of pending Supreme Court proceedings on the validity of the impugned notifications and consequential orders.

Issue-wise Detailed Analysis:

Validity of the Impugned Notifications (Notification No. 56/2023-Central Tax and related notifications):

The legal framework centers on Section 168A of the Central Goods and Services Tax Act, 2017, 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 reviewed a batch of petitions challenging the impugned notification on the ground that the proper procedure under Section 168A was not followed. The notification purportedly extended deadlines without prior GST Council recommendation, instead ratifying it post-issuance, which was argued as contrary to statutory mandate.

Precedents from various High Courts were considered: the Allahabad and Patna High Courts upheld the validity of the notifications, while the Guwahati High Court quashed Notification No. 56/2023 (Central Tax). The Telangana High Court expressed reservations about the validity but did not conclusively decide, with the matter presently pending before the Supreme Court in SLP No. 4240/2025.

The Supreme Court's order acknowledged the cleavage of opinion among High Courts and issued notice for the matter, indicating the legal uncertainty surrounding the notifications' validity.

The Court refrained from expressing an opinion on the vires of the notifications, respecting judicial discipline and the pendency of the Supreme Court proceedings. It directed that interim orders and final adjudications be governed by the Supreme Court's decision.

Procedural Fairness in Issuance and Communication of Show Cause Notices:

The petitioner contended that the SCN was uploaded on the GST Portal under the 'Additional Notices Tab', which was not readily visible, resulting in lack of knowledge and opportunity to respond. The respondent countered that after 16th January 2024, the portal was rectified to make such notices visible.

The Court relied on its prior decisions where similar circumstances led to remanding matters to ensure fair opportunity to be heard. The principle established was that notices must be communicated in a manner that ensures the recipient's knowledge and ability to respond, including personal hearings, and orders should not be passed ex-parte.

In the present case, the Court found that the petitioner had not filed any reply to the SCN and had no proper opportunity to be heard, warranting remand of the matter to the adjudicating authority.

The Court ordered that the petitioner be granted time to file replies, and that hearing notices be communicated not only via the portal but also through email and mobile communication to ensure receipt and opportunity for personal hearing.

Impact of Pending Supreme Court Proceedings:

The Court acknowledged that the validity of the impugned notifications is sub judice before the Supreme Court. It accordingly left the question of validity open and clarified that any fresh orders passed by the adjudicating authority shall be subject to the Supreme Court's final decision.

The Court also noted that various High Courts, including Punjab and Haryana High Court, had disposed of connected cases by deferring to the Supreme Court's impending ruling, emphasizing judicial discipline and consistency.

Application of Law to Facts and Treatment of Competing Arguments:

The Court balanced the statutory mandate under the GST Act with the principles of natural justice. While the procedural validity of the notifications was under challenge and pending higher adjudication, the Court prioritized ensuring that the petitioner was not prejudiced by procedural lapses in notice communication.

It rejected the respondent's contention that mere uploading on the portal sufficed, given the prior lack of visibility and the petitioner's inability to file replies or attend hearings.

The Court's approach was pragmatic, allowing the petitioner to file replies and be heard afresh, without prejudging the validity of the notifications, thus preserving the petitioner's rights while awaiting the Supreme Court's authoritative ruling.

Conclusions:

The Court set aside the impugned demand orders and remanded the matter to the adjudicating authority for fresh consideration after affording the petitioner an opportunity to file replies and be heard through personal hearings.

The Court mandated improved communication of notices via email and mobile, in addition to portal uploads, to ensure effective notice and opportunity to be heard.

The validity of the impugned notifications was left open, to be decided by the Supreme Court, and all rights and remedies of the parties were preserved.

Significant Holdings:

The Court held: "The intention is to ensure that the Petitioner is given an opportunity to file its reply and is heard on merits and that orders are not passed in default."

It further stated: "The reply filed by the Petitioner to the SCN along with the submissions made in the personal hearing shall be duly considered by the Adjudicating Authority and a fresh order with respect to the SCN shall be passed accordingly."

Core principles established include the necessity of procedural fairness in tax adjudication processes, particularly the effective communication of show cause notices to enable the party's right to be heard.

The Court emphasized adherence to statutory procedures under the GST Act, while also upholding the fundamental right to fair hearing, especially in cases where portal-based communications were insufficiently accessible.

Final determinations included setting aside the impugned demand orders, granting the petitioner time to respond, remanding the matter for fresh adjudication, and reserving the question of notification validity for the Supreme Court's decision.