2025 (6) TMI 1561 - HC - GST

Challenge to SCN and also the consequent order - challenge to N/N. 9/2023- Central Tax dated 31st March 2023 - proper opporunity of hearing not provided to petitioner - violation of principles of natural justice - HELD THAT - Considering the fact that the Petitioner did not get a proper opportunity to be heard the matter deserves to be remanded back to the concerned Adjudicating Authority. The Petitioner is granted time till 15th July 2025 to file the additional reply to SCN. Upon filing of the reply the Adjudicating Authority shall issue a notice for personal hearing to the Petitioner - the impugned order is set aside - petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the Show Cause Notice (SCN) dated 27th September 2023 and the consequent order dated 14th November 2023 issued by the Sales Tax Officer are valid and sustainable.

- Whether Notification No. 9/2023-Central Tax dated 31st March 2023 (the impugned notification) is valid and vires under the Central Goods and Services Tax Act, 2017 (GST Act).

- Whether the procedure prescribed under Section 168A of the GST Act, requiring prior recommendation of the GST Council before issuance of notifications extending deadlines for adjudication, was duly followed.

- Whether the Petitioner was afforded a fair opportunity to be heard, including personal hearing and filing of replies, before passing the impugned order.

- The broader question of the validity of notifications issued under Section 168A of the GST Act, especially Notification Nos. 9 and 56 of 2023, as challenged in multiple High Courts and pending before the Supreme Court.

2. ISSUE-WISE DETAILED ANALYSIS

Validity of the Impugned Notification No. 9/2023-Central Tax

- Legal Framework and Precedents: Section 168A of the GST Act empowers the government to extend the time limit for adjudication of show cause notices and passing of orders under Section 73 of the GST Act, subject to prior recommendation by the GST Council. The procedural compliance with this requirement is critical for the validity of any such notification.

- Court's Interpretation and Reasoning: The Court noted that the validity of Notification No. 9/2023 was under consideration in multiple petitions and had been upheld by some High Courts (Allahabad High Court) while others had quashed similar notifications (Guwahati High Court). The Telangana High Court's observations on Notification No. 56/2023 are under Supreme Court consideration in S.L.P No. 4240/2025.

- Key Evidence and Findings: The Court observed that Notification No. 9/2023 was issued following the prior recommendation of the GST Council, as mandated under Section 168A, unlike Notification No. 56/2023 where the recommendation was post issuance.

- Application of Law to Facts: Given the conflicting judicial opinions and ongoing Supreme Court proceedings, the Court refrained from expressing a conclusive view on the validity of the impugned notification, leaving the issue open pending the Supreme Court's final adjudication.

- Treatment of Competing Arguments: The Court acknowledged the submissions of various parties challenging the notifications on procedural grounds but deferred the final determination to the Supreme Court, emphasizing judicial discipline and consistency.

- Conclusion: The validity of Notification No. 9/2023 remains subject to the Supreme Court's decision in S.L.P No. 4240/2025. The Court declined to rule on the vires of the notification at this stage.

Validity of the Show Cause Notice and Impugned Order

- Legal Framework and Precedents: Under Article 226 of the Constitution, writ jurisdiction is available to challenge administrative orders including SCNs and adjudication orders. The principles of natural justice require that the affected party be given adequate opportunity to reply and be heard before adverse orders are passed.

- Court's Interpretation and Reasoning: The Court observed that the Petitioner had filed a reply to the SCN but failed to attend the personal hearing afforded by the Adjudicating Authority. The impugned order was passed ex parte, without the Petitioner's personal hearing, which the Court found to be a denial of the opportunity to be heard.

- Key Evidence and Findings: The Petitioner's submission that it was unable to avail personal hearings due to various reasons was accepted. The Court emphasized the importance of personal hearing in tax adjudication proceedings.

- Application of Law to Facts: The Court held that the impugned order was liable to be set aside on grounds of procedural unfairness and remanded the matter back to the Adjudicating Authority for fresh adjudication after affording the Petitioner a personal hearing and opportunity to file additional replies.

- Treatment of Competing Arguments: While the Respondent opposed the remand, the Court prioritized the principles of natural justice over procedural finality, especially given the significant demands and penalties imposed ex parte.

- Conclusion: The impugned order was set aside, and the Petitioner was granted time until 15th July 2025 to file additional replies. The Adjudicating Authority was directed to provide personal hearing and pass a fresh order.

Impact of Pending Supreme Court Proceedings on Adjudication and Notifications

- Legal Framework and Precedents: The Supreme Court's intervention in S.L.P No. 4240/2025 concerning the validity of notifications under Section 168A is pivotal. High Courts have generally refrained from deciding on the issue to maintain judicial discipline.

- Court's Interpretation and Reasoning: The Court noted that other High Courts, including Punjab and Haryana, have stayed proceedings or disposed of cases subject to the Supreme Court's final decision. It followed this approach, leaving the question of validity open and subject to the Supreme Court's ruling.

- Key Evidence and Findings: The Court relied on orders passed by various High Courts and the Supreme Court's notice and interim orders in the SLP to justify its stance.

- Application of Law to Facts: The Court disposed of the petition without deciding on the validity of the impugned notification, leaving that issue open but ensured that procedural fairness in adjudication is maintained in the meantime.

- Treatment of Competing Arguments: The Court balanced the need for procedural justice for the Petitioner with the pending higher judicial scrutiny on the validity of the notifications.

- Conclusion: The Court explicitly stated that any order passed by the Adjudicating Authority would be subject to the outcome of the Supreme Court's decision in the pending SLP.

3. SIGNIFICANT HOLDINGS

- "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."

- "Considering the fact that the Petitioner did not get a proper opportunity to be heard, the matter deserves to be remanded back to the concerned Adjudicating Authority."

- "The Petitioner is granted time till 15th July 2025, to file the additional reply to the SCN. Upon filing of the reply, the Adjudicating Authority shall issue a notice for personal hearing to the Petitioner."

- "The additional 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 a 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 provided to the Petitioner to enable filing of the reply as also access to the notices and related documents."

- The Court established the principle that procedural fairness, including the right to personal hearing and opportunity to file replies, is indispensable in tax adjudication proceedings, notwithstanding pending challenges to the statutory validity of the notifications under which such proceedings are initiated.