2025 (6) TMI 109 - HC - GST

Challenge to SCN and consequent order - challenge to vires of N/N. 56/2023- Central Tax dated 28th December 2023 - case of the Petitioner is that the SCN is belated and is liable to be quashed in view of the fact that the impugned notification is ultra vires - Petitioner did not get a proper opportunity to be heard - Violation of principles of natural justice - HELD THAT - On 23rd April 2025 this Court having noted that the validity of the impugned notification is under consideration before the Supreme Court had disposed of several matters in the said batch of petitions after addressing other factual issues raised in the respective petitions. Additionally while disposing of the said petitions this Court clearly observed that the validity of the impugned notification therein shall be subject to the outcome of the proceedings 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 . Conclusion - 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 impugned order is set aside - Petition allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) Whether the Show Cause Notice (SCN) dated 29th May, 2024 is barred by limitation or is otherwise liable to be quashed;

(b) Whether the impugned Notification No. 56/2023-Central Tax dated 28th December, 2023 (hereinafter 'impugned notification') is ultra vires and invalid for non-compliance with statutory procedural requirements under Section 168A of the Central Goods and Services Tax Act, 2017 (hereinafter 'GST Act');

(c) The validity and legal effect of the impugned notification in light of conflicting judicial pronouncements across various High Courts and pending adjudication by the Supreme Court;

(d) Whether the Petitioner was afforded a fair opportunity of hearing and whether the adjudication order passed ex-parte without the Petitioner filing a reply to the SCN is sustainable;

(e) The scope of relief that can be granted to the Petitioner pending final adjudication on the validity of the impugned notification by the Supreme Court;

(f) The procedural and substantive rights of the parties in the context of ongoing proceedings and appeals under the GST framework.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (b): Validity of the Show Cause Notice and the Impugned Notification

The Petitioner challenged the SCN on the ground that it was belated and issued pursuant to an ultra vires notification. The impugned notification purportedly extended timelines for adjudication under the GST Act without adhering to the mandatory procedural requirement of prior recommendation by the GST Council as prescribed under Section 168A of the GST Act.

The Court referred extensively to the ongoing batch of petitions before it and other High Courts where the validity of Notification No. 56/2023 was under scrutiny. The Court noted that while some High Courts (Allahabad and Patna) upheld the notification, others (Guwahati and Telangana) quashed or expressed doubts on its validity. The Telangana High Court's judgment, which questioned the validity of the notification, was under consideration by the Supreme Court in S.L.P No. 4240/2025.

The Supreme Court had issued notices and acknowledged the cleavage of opinion among High Courts, specifically on whether the time limit for adjudication under Section 73 of the GST Act could be extended by notifications issued under Section 168A. The Supreme Court's order indicated that the question was substantial and warranted final adjudication.

The Court also noted the Punjab and Haryana High Court's decision to refrain from expressing an opinion on the vires of Section 168A and related notifications, deferring to the Supreme Court's forthcoming judgment and maintaining interim orders accordingly.

Application of Law to Facts: Given the pendency of the Supreme Court's decision and the conflicting High Court rulings, the Court recognized that the question of the validity of the impugned notification was not ripe for final determination at this stage. The Court accordingly left the issue open and subject to the Supreme Court's outcome.

Issue (c): Fair Opportunity and Adjudication Without Petitioner's Reply

The Court examined the impugned order passed by the Sales Tax Officer, which was based on the Petitioner's failure to file any reply to the SCN and failure to seek adjournments or provide clarifications. The order was passed ex-parte relying on available records and best judgment.

The Court emphasized the fundamental principle of natural justice that a party must be given a fair opportunity to be heard before adverse orders are passed. The absence of any reply or personal hearing for the Petitioner was found to be a procedural infirmity.

Application of Law to Facts: In light of the Petitioner's non-participation and the absence of opportunity to present its case, the Court held that the matter deserved to be remanded to the Adjudicating Authority for fresh consideration after affording the Petitioner a chance to file a reply and participate in personal hearings.

Issue (d): Relief Pending Final Adjudication on Validity of Notification

The Court acknowledged submissions by various counsel that even if the impugned notification were upheld, relief could be granted on grounds of procedural fairness and to allow the Petitioner to place its case before the adjudicating authority.

Recognizing the complexity and ongoing litigation, the Court proposed a categorical approach categorizing pending petitions and affording appropriate procedural reliefs, including the opportunity to file replies and pursue appellate remedies, without prejudging the validity of the notification.

The Court thus balanced the need to preserve the parties' rights with the overarching requirement of judicial discipline pending the Supreme Court's final decision.

Issue (e): Procedural Directions and Preservation of Rights

The Court directed that the impugned order be set aside and remanded the matter to the Adjudicating Authority. The Petitioner was granted time until 10th July 2025 to file a reply to the SCN. Upon receipt, the Adjudicating Authority was mandated to issue a notice for personal hearing and duly consider the Petitioner's submissions before passing a fresh order.

The Court explicitly preserved the question of the validity of the impugned notification, clarifying that any order passed by the Adjudicating Authority would be subject to the Supreme Court's decision in S.L.P No. 4240/2025.

Access to the GST Portal was to be provided to the Petitioner to enable uploading replies and accessing notices and documents, ensuring procedural fairness.

All rights and remedies of the parties were kept open, reflecting the Court's intent to avoid foreclosing any legal avenue pending final adjudication.

3. SIGNIFICANT HOLDINGS

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

"However, it is made clear that the issue in respect of the validity of the impugned notification 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."

Core principles established include:

(i) The necessity of compliance with statutory procedural requirements under Section 168A of the GST Act for issuance of notifications extending limitation periods;

(ii) The importance of affording a fair opportunity of hearing before passing adjudication orders, including the right to file replies and participate in personal hearings;

(iii) Judicial restraint in deciding contentious issues pending before the Supreme Court, with interim reliefs tailored to preserve parties' rights without prejudging substantive questions;

(iv) The binding effect of the Supreme Court's forthcoming decision on all pending matters involving the validity of the impugned notification and related provisions.

Final determinations:

The Court set aside the impugned order passed without hearing, remanded the matter for fresh adjudication after allowing the Petitioner to file replies and be heard, and left the question of the validity of the impugned notification open pending the Supreme Court's ruling. All procedural rights and remedies were preserved, and access to relevant portals was ensured to facilitate participation in proceedings.