2025 (6) TMI 992 - HC - GST

Challenge to SCN and consequent order - vires of N/N. 56/2023-Central Tax dated 28th December 2023 and N/N. 56/2023-State Tax dated 11th July 2024 - Petitioner had no access to the GST Portal due to cancellation of the GST registration - no reply to the SCN could be filed - Violation of principles of natural justice - HELD THAT - In view of the fact that the Petitioner was not able to access the GST Portal due to the cancellation of GST Registration the Petitioner deserves to be provided with a proper opportunity to file a reply and attend a personal hearing. Accordingly the impugned order is set aside and the matter is relegated to the Adjudicating Authority to be heard on merits. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

• The validity and vires of Notification No. 56/2023-Central Tax dated 28th December, 2023 and Notification No. 56/2023-State Tax dated 11th July, 2024 issued under the Central Goods and Services Tax Act, 2017 (hereinafter "GST Act").
• Whether the impugned notifications were issued following the mandatory procedure under Section 168A of the GST Act, including prior recommendation of the GST Council.
• The legality of extending the time limit for adjudication of show cause notices and passing orders under Section 73 of the GST Act and the corresponding State GST Act for the financial year 2019-2020 through these notifications.
• Whether the issuance of the notifications after expiry of limitation periods affects their validity.
• The procedural fairness in adjudication proceedings, specifically whether the petitioner was denied an opportunity to file replies or avail personal hearings due to cancellation of GST registration and consequent non-access to the GST portal.
• The appropriate relief to be granted to petitioners where adjudication orders have been passed ex-parte due to inability to participate in proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Validity of Notifications No. 56/2023-Central Tax and No. 56/2023-State Tax under Section 168A of the GST Act

Relevant legal framework and precedents: Section 168A of the GST Act mandates that any extension of the time limit for adjudication of show cause notices must be made on the prior recommendation of the GST Council. The impugned notifications purportedly extend such deadlines.

Several High Courts have taken divergent views on the validity of these notifications. The Allahabad High Court upheld Notification No. 9/2023 (Central Tax), the Patna High Court upheld Notification No. 56/2023 (Central Tax), while the Guwahati High Court quashed Notification No. 56/2023 (Central Tax). The Telangana High Court expressed reservations regarding the validity of Notification No. 56/2023 (Central Tax), and this issue is currently pending before the Supreme Court in SLP No. 4240/2025.

Court's interpretation and reasoning: The Court acknowledged the conflicting judicial opinions and noted that the matter is sub judice before the Supreme Court. It recognized that the notifications were challenged on the ground that the proper procedure under Section 168A was not followed, specifically that the extension was granted without prior GST Council recommendation and ratification was given only after issuance.

Treatment of competing arguments: The Court refrained from expressing an opinion on the validity of the notifications, deferring to the Supreme Court's forthcoming decision. It noted the judicial discipline involved in not pre-empting the apex court's ruling.

Conclusions: The validity of the impugned notifications remains an open question, pending the Supreme Court's adjudication. The Court disposed of connected petitions with the condition that the outcome of the Supreme Court's decision would be binding.

Extension of Time Limits for Adjudication under Section 73 of the GST Act

Relevant legal framework: Section 73 of the GST Act deals with determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized. The limitation period for adjudication under this section is subject to extension by notifications issued under Section 168A.

Key evidence and findings: The impugned notifications extended the limitation period for adjudication for the financial year 2019-2020. The Court noted the ongoing litigation on whether such extensions were validly granted.

Application of law to facts: The Court observed that the extension of limitation period is contingent on the validity of the impugned notifications, which is pending before the Supreme Court. Therefore, the Court refrained from deciding on the extension issue independently.

Conclusions: The question of whether the time limit for adjudication could be extended via these notifications remains undecided pending the apex court's ruling.

Procedural Fairness and Opportunity to be Heard in Adjudication Proceedings

Relevant legal framework: Principles of natural justice require that a party must be given a fair opportunity to respond to show cause notices and to be heard before adverse orders are passed.

Key evidence and findings: The petitioner had applied for cancellation of GST registration, which was effective from 29th June, 2023. Due to cancellation, the petitioner lost access to the GST portal, rendering it unable to file replies or attend personal hearings in response to the show cause notice dated 20th May, 2024. Consequently, the adjudicating authority passed the impugned order ex-parte on 24th August, 2024, demanding Rs. 27,37,619/- including tax, interest, and penalty.

Court's interpretation and reasoning: The Court held that the petitioner was deprived of a proper opportunity to defend itself due to lack of access to the GST portal. This denial of access violated the principles of natural justice.

Application of law to facts: The Court set aside the impugned order and directed the adjudicating authority to provide the petitioner an opportunity to file a reply and attend a personal hearing. It ordered that access to the GST portal be restored if not already provided, and that the petitioner's reply and submissions be duly considered before passing a fresh order.

Treatment of competing arguments: While the respondent authorities justified the demand and penalty, the Court emphasized the procedural lapse in denying access and opportunity to the petitioner, which outweighed other considerations at this stage.

Conclusions: The petitioner must be afforded a fair hearing, and the matter must be reconsidered on merits after allowing the petitioner to participate fully in the proceedings.

Relief and Interim Measures Pending Final Adjudication

Relevant legal framework: The Court has inherent powers under Articles 226 and 227 of the Constitution to grant interim relief and ensure fair procedure.

Court's reasoning: Given the pendency of the Supreme Court's decision on the validity of the notifications and the procedural lapses in the adjudication, the Court categorized the pending cases and proposed appropriate reliefs. It allowed petitioners to pursue appellate remedies and file replies without prejudice to the ultimate validity of the notifications.

Conclusions: Interim reliefs were granted to ensure that petitioners are not prejudiced by procedural defaults or unresolved legal questions. The Court's directions preserve all rights and remedies of the parties.

3. SIGNIFICANT HOLDINGS

"In view of the fact that the Petitioner was not able to access the GST Portal due to the cancellation of GST Registration, the Petitioner deserves to be provided with a proper opportunity to file a reply and attend a personal hearing. Accordingly, the impugned order is set aside and the matter is relegated to the Adjudicating Authority to be heard on merits."

"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."

"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."

"The issue in respect of the validity of the impugned notifications is left open and the order of 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'."

Core principles established include the necessity of adherence to procedural fairness in tax adjudication, the requirement of prior GST Council recommendation for extending limitation periods under Section 168A, and judicial restraint in adjudicating validity of notifications pending apex court decisions.

Final determinations are that the impugned order demanding tax and penalty is set aside for lack of opportunity to the petitioner, the petitioner is entitled to file replies and attend hearings, and the ultimate question of validity of the notifications remains reserved for the Supreme Court's decision.