2025 (6) TMI 663 - HC - GST

Challenge to N/N. 56/2023-Central Tax dated 28th December 2023 and N/N. 56/2023-State Tax dated 11th July 2024 - impugned order passed without providing the Petitioner a personal hearing and in the absence of a reply on behalf of the Petitioner - HELD THAT - 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. The show cause notices shall be adjudicated in accordance with law. 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 impugned SCN in the present petition has been issued on 06th December 2023. Therefore considering the fact that the Petitioner was not provided a proper opportunity to file a reply and attend a personal hearing the impugned order is set aside and the matter is relegated to the concerned Adjudicating Authority to be heard on merits. Petition disposed off.

Summary

The core legal questions considered in this matter are:

1. Whether the impugned Notifications No. 56/2023-Central Tax dated 28th December 2023 and No. 56/2023-State Tax dated 11th July 2024, issued under Section 168A of the Central Goods and Services Tax Act, 2017 (GST Act), are valid and in accordance with the statutory mandate, specifically regarding the requirement of prior recommendation by the GST Council and adherence to limitation periods.

2. Whether the impugned Show Cause Notice (SCN) dated 6th December 2023 and the subsequent order dated 9th March 2024 were issued and passed in violation of principles of natural justice, particularly concerning the mode of communication and opportunity for personal hearing to the petitioner.

3. The extent to which the adjudicating authorities must provide opportunity to the petitioner to file replies and avail personal hearings before passing orders on SCNs under the GST regime.

4. The impact of conflicting judicial pronouncements from various High Courts and the pending Supreme Court proceedings on the validity of the impugned notifications and related adjudications.

Issue 1: Validity of the Impugned Notifications under Section 168A of the GST Act

The legal framework revolves around Section 168A of the GST Act, which empowers the Central Government to extend the time limit for adjudication of show cause notices and passing orders under Section 73 of the GST Act, subject to the prior recommendation of the GST Council.

Several High Courts have examined the validity of these notifications. The Allahabad High Court upheld Notification No. 9/2023 (Central Tax), while the Patna High Court upheld Notification No. 56/2023 (Central Tax). Contrarily, the Guwahati High Court quashed Notification No. 56/2023 (Central Tax), and the Telangana High Court observed on its invalidity without deciding the substantive vires. This divergence of judicial opinion led to the Supreme Court taking cognizance of the issue in SLP No. 4240/2025.

The Supreme Court's intervention is focused on whether the time limits for adjudication under the GST Act for the financial year 2019-2020 could be extended by the impugned notifications issued under Section 168A. The Court noted the cleavage of opinion among various High Courts and issued notice, with interim relief pending final adjudication.

The Delhi High Court, while recognizing the ongoing Supreme Court proceedings, refrained from expressing any definitive opinion on the validity of the notifications and directed that the outcome of the Supreme Court proceedings would be binding on all connected matters.

Regarding the State Tax Notification No. 56/2023, the challenge was that it was issued after the expiry of the limitation period prescribed by an earlier State Notification No. 13/2022. This issue remains under consideration by the Delhi High Court in a separate batch of petitions.

Issue 2: Validity of the Show Cause Notice and Impugned Order in Light of Procedural Fairness

The petitioner contended that the SCN dated 6th December 2023 was uploaded under the 'Additional Notices Tab' on the GST portal, which was not readily visible or brought to their attention, resulting in non-receipt of the notice. Consequently, the petitioner was deprived of the opportunity to file a reply or appear for a personal hearing before the impugned order dated 9th March 2024 was passed.

The Court examined precedents where similar circumstances arose. Notably, in W.P.(C) 13727/2024 ('Neelgiri Machinery'), this Court had remanded the matter to ensure that the petitioner was given a fair opportunity to respond to the SCN and be heard. The Court emphasized that orders should not be passed ex-parte without affording an opportunity of personal hearing and filing of replies.

The Court observed that post 16th January 2024, the Department had improved the GST portal to make SCNs more accessible to parties. However, since the impugned SCN in this case was issued prior to these changes, the petitioner was not afforded a proper opportunity to respond.

Accordingly, the Court set aside the impugned order and remanded the matter to the adjudicating authority with directions to provide the petitioner an opportunity to file a reply by 15th July 2025 and to conduct a personal hearing. The Court also mandated that hearing notices shall not merely be uploaded on the portal but also emailed to the petitioner to ensure effective communication.

Issue 3: Procedural Safeguards and Opportunity to be Heard in GST Adjudications

The Court underscored the fundamental principle of natural justice that no order should be passed without giving the affected party a reasonable opportunity to be heard. This principle was reiterated in the context of GST adjudications, where the petitioner had been unable to avail personal hearings and file replies, leading to ex-parte orders and imposition of demands and penalties.

The Court referred to earlier decisions emphasizing that notices and orders must be communicated effectively, and personal hearings must be granted before passing orders. The Court directed that the adjudicating authority must consider the petitioner's reply and submissions made during the personal hearing before passing a fresh order on the SCN.

Issue 4: Impact of Conflicting Judicial Opinions and Pending Supreme Court Proceedings

The Court acknowledged the conflicting judgments from various High Courts regarding the validity of the impugned notifications and noted that the Supreme Court was seized of the matter. The Punjab and Haryana High Court had disposed of connected cases, deferring to the Supreme Court's decision and refraining from expressing any opinion on the vires of Section 168A and the notifications issued thereunder.

In line with judicial discipline, the Delhi High Court also refrained from deciding the validity of the impugned notifications and held that the adjudicating authority's orders would be subject to the outcome of the Supreme Court proceedings and related matters before this Court.

Conclusions and Directions

The Court allowed the amendment application to include challenges to the impugned notifications in the writ petition but kept all objections open pending final adjudication.

The Court set aside the impugned demand orders dated 23rd April 2024 and 5th December 2023 on the ground of denial of opportunity to the petitioner and procedural irregularities.

The petitioner was permitted to file replies to the SCNs within a stipulated period and to appear for personal hearings, with directions to the adjudicating authority to pass fresh orders after considering the petitioner's submissions.

The Court emphasized that access to the GST portal and communication of notices must be ensured to the petitioner.

All rights and remedies of the parties were left open, and the validity of the impugned notifications was expressly left open for determination by the Supreme Court and this Court in ongoing proceedings.

Significant Holdings:

"The Court is of the prima facie view that, depending upon the categories of petitions, orders can be passed affording an opportunity to the Petitioners to place their stand before the adjudicating authority. In some cases, proceedings including appellate remedies may be permitted to be pursued by the Petitioners, without delving into the question of the validity of the said notifications at this stage."

"Since the matter is pending before the Hon'ble Supreme Court, the interim order passed in the present cases, would continue to operate and would be governed by the final adjudication by the Supreme Court on the issues in the aforesaid SLP."

"The impugned order dated 09th March, 2024 was passed without providing the Petitioner a personal hearing and in the absence of a reply on behalf of the Petitioner. The impugned demand orders dated 23rd April, 2024 and 5th December, 2023 are accordingly set aside."

"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."

"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 filing of reply and access to the notices and related documents."