2025 (6) TMI 1242 - HC - GST

Challenge to SCN and consequent order - vires of N/N. 56/2023- Central Tax dated 28th December 2023 and N/N. 9/2023- Central Tax dated 31st March 2023 as also N/N. 56/2023- State Tax dated 11th July 2024 - HELD THAT - A perusal of the impugned order reveals that the same has been passed by the adjudicating authority in a detailed manner and after consideration of all the facts and circumstances available before the authority. Hence the same merits no interference of this Court. In the opinion of this Court challenge to the impugned order if any shall be raised by the Petitioner before the appellate authority - Accordingly the Petitioner is granted time till 15th July 2025 to file an appeal before the appellate authority under Section 107 of the Central Goods and Service Tax Act 2017. 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), Notification No. 9/2023 (Central Tax), and Notification No. 56/2023 (State Tax) issued under Section 168A of the Central Goods and Services Tax Act, 2017 ("GST Act").
• Whether the procedure mandated under Section 168A of the GST Act, including the prior recommendation of the GST Council, was complied with in issuing the impugned notifications, particularly the extension of time limits for adjudication of show cause notices and passing of orders under Section 73 of the GST Act.
• The legality of extending limitation periods for adjudication of show cause notices for the Financial Year 2019-20 through the impugned notifications.
• The impact of the impugned notifications on the adjudication proceedings initiated against the Petitioner, specifically concerning the show cause notice dated 27th May 2024 and the consequent order dated 7th August 2024.
• The procedural fairness in the adjudication process, including the opportunity for personal hearings and filing replies by the Petitioner before passing ex-parte orders.
• The appropriate forum and procedure for challenging the impugned adjudication order and the scope of judicial interference at the writ petition stage.

2. ISSUE-WISE DETAILED ANALYSIS

A. Validity of the Impugned Notifications

Relevant legal framework and precedents: Section 168A of the GST Act empowers the Central Government to extend the time limits for adjudication of show cause notices and passing of orders under Sections 73 and 74 of the GST Act, but such extension requires the prior recommendation of the GST Council. The impugned notifications purportedly extend these time limits.

Several High Courts have taken differing 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 made observations on the invalidity of Notification No. 56/2023 (Central Tax) without deciding the issue on merits.

The Supreme Court has admitted a Special Leave Petition (SLP No. 4240/2025) concerning the validity of these notifications and has issued notices. The Supreme Court's order dated 21st February 2025 specifically framed the issue whether the time limit for adjudication of show cause notices and passing of orders under Section 73 of the GST Act could be extended by issuing the impugned notifications under Section 168A.

Court's interpretation and reasoning: The Court noted the conflicting High Court decisions and the pendency of the issue before the Supreme Court. It refrained from expressing a conclusive opinion on the validity of the impugned notifications, emphasizing judicial discipline and awaiting the Supreme Court's authoritative pronouncement.

Application of law to facts: The Court observed that since the validity of the notifications is under adjudication at the highest level, the petitions challenging the notifications were disposed of or stayed accordingly. The Court retained jurisdiction over challenges to parallel State notifications, which are not before the Supreme Court.

Treatment of competing arguments: The petitioners challenged the notifications on procedural grounds, alleging non-compliance with Section 168A and improper issuance after expiry of limitation periods. The Government defended the notifications as valid extensions issued following prescribed procedures. The Court deferred resolution of these arguments to the Supreme Court.

Conclusion: The Court left the question of validity open and directed that any final determination would be subject to the Supreme Court's decision in SLP No. 4240/2025 and its own pending matters on State notifications.

B. Legality and Fairness of the Adjudication Proceedings Against the Petitioner

Relevant legal framework and precedents: Under the GST Act, show cause notices require adjudication within prescribed time limits unless extended by valid notifications. The Petitioner was issued a show cause notice dated 27th May 2024 alleging excess availing of Input Tax Credit (ITC) in GSTR-3B compared to GSTR-2A for FY 2019-20. The Petitioner filed a reply seeking adjournment and more time, but later failed to file further replies after a reminder dated 5th July 2024. The adjudicating authority passed an ex-parte order dated 7th August 2024 confirming a demand of Rs. 10,13,577/-.

Court's interpretation and reasoning: The Court examined the impugned order and found it to be detailed and based on available facts and circumstances. The Court noted that the Petitioner had an opportunity to file replies and seek hearings but did not avail these opportunities fully. The Court emphasized that the adjudication order merits no interference at the writ petition stage.

Application of law to facts: The Court held that challenges to the adjudication order should be pursued before the designated appellate authority under Section 107 of the GST Act. The Court granted the Petitioner liberty to file an appeal within a stipulated time and directed that the appeal shall be heard on merits without dismissal on limitation grounds, provided it is filed with the mandatory pre-deposit.

Treatment of competing arguments: The Petitioner argued that due to procedural difficulties and non-availability of personal hearings, the adjudication proceeded ex-parte causing prejudice. The Government contended that due process was followed and the Petitioner had adequate opportunity. The Court balanced these views by permitting appellate remedy and ensuring personal hearings at the appellate stage.

Conclusion: The Court declined to interfere with the impugned order in the writ petition and directed the Petitioner to approach the appellate authority with liberty to be heard on merits. The Court clarified that its observations shall not influence the appellate authority's decision.

C. Procedural and Jurisdictional Aspects Regarding Appeals and Interim Relief

Relevant legal framework: Section 107 of the GST Act provides the right to appeal against orders passed by adjudicating authorities. The Court emphasized adherence to statutory appellate remedies rather than circumventing them through writ petitions.

Court's interpretation and reasoning: The Court recognized the pendency of the broader legal issue before the Supreme Court but stressed that procedural rights of the Petitioner to challenge orders must be exercised before the appellate authority. It granted an extended time frame for filing appeals and mandated issuance of personal hearing notices.

Application of law to facts: The Court directed that appeals filed within the extended timeline, with pre-deposit, shall be entertained on merits and not rejected on limitation grounds. The Court also ensured communication details were recorded to facilitate personal hearings.

Treatment of competing arguments: The Petitioner sought relief on account of procedural lapses and inability to participate effectively in the adjudication. The Court balanced this by allowing appellate proceedings and mandating personal hearings, thus safeguarding procedural fairness.

Conclusion: The Court's order ensures that the Petitioner's substantive and procedural rights are preserved pending final adjudication of the validity of notifications and orders.

3. SIGNIFICANT HOLDINGS

"The impugned order reveals that the same has been passed by the adjudicating authority in a detailed manner and after consideration of all the facts and circumstances available before the authority. Hence, the same merits no interference of this Court."

"Challenge to the impugned order, if any, shall be raised by the Petitioner before the appellate authority."

"If the appeal is filed by the Petitioner before 15th July, 2025, along with the mandatory pre-deposit, the same shall be adjudicated upon merits and shall not be dismissed on the ground of limitation."

"The observations made by this Court in the present petition shall have no bearing upon the decision of the appellate authority. The submissions made by the Petitioner in the personal hearing shall be duly considered by the appellate authority and the appeal shall be decided in accordance with law."

"The issue in respect of the validity of the impugned notification is left open. Any order passed by the appellate authority shall be subject to the outcome of the decision of the Supreme Court in S.L.P No 4240/2025 ... and of this Court in W.P.(C) 9214/2024 ..."

Core principles established include:

• Judicial restraint in interfering with detailed adjudication orders at the writ petition stage when statutory appellate remedies are available.
• Recognition of the primacy of the GST Council's recommendation as a procedural requirement under Section 168A for extending limitation periods.
• Preservation of procedural fairness by ensuring opportunity for personal hearings and appeals on merits.
• Deference to the Supreme Court's pending adjudication on conflicting High Court views regarding the validity of notifications extending limitation periods.

Final determinations:

• The impugned adjudication order dated 7th August 2024 stands affirmed by the Court at the writ petition stage.
• The Petitioner is granted liberty to file an appeal before the appellate authority within an extended timeline with pre-deposit, and such appeal shall be heard on merits.
• The validity of the impugned notifications remains an open question pending Supreme Court's decision and is not decided by this Court.