2025 (7) TMI 132 - HC - GST

Challenge to SCN and consequent order - challenge to vires of N/N. 9/2023- Central Tax dated 31st March 2023 56/2023- Central Tax dated 28th December 2023 as also the N/N. 56/2023-State Tax dated 11th July 2024 - impugned order has been passed in haste without duly considering the reply as well as the documents filed by the Petitioner and has mechanically confirmed the demand of the remaining amount - Violation of principles of natural justice - HELD THAT - This Court has considered the submissions made and has perused the impugned order. In the opinion of this Court the impugned order has been passed after duly considering the reply of the Petitioner. Upon considering the impugned order this Court is of the opinion that the same does not merit any interference of this Court and a challenge if any shall be taken up by the Petitioner before the appellate authority in appeal - 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:

- Whether the impugned Notifications Nos. 9/2023-Central Tax, 56/2023-Central Tax, and 56/2023-State Tax issued under Section 168A of the Central Goods and Services Tax Act, 2017 (GST Act) are valid and legally sustainable.

- Whether the procedure prescribed under Section 168A, including the requirement of prior recommendation of the GST Council for extension of deadlines for adjudication of show cause notices and passing orders under Section 73 of the GST Act, was properly followed.

- The impact of conflicting High Court decisions on the validity of the impugned notifications and the effect of pending Supreme Court proceedings on the adjudication of related writ petitions.

- Whether the impugned adjudication order dated 30th August, 2024, passed by the Sales Tax Officer, which confirmed a tax demand on the Petitioner despite the Petitioner's submission of a reply and supporting documents, was passed without due consideration and is liable to be set aside.

- The appropriate remedy and procedural relief available to the Petitioner in light of the ongoing challenges to the notifications and the impugned order, including the scope for filing appeals and the effect of limitation periods.

2. ISSUE-WISE DETAILED ANALYSIS

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

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 Section 73, subject to prior recommendation of the GST Council. The impugned notifications purportedly extend such deadlines for the tax period April 2019 to March 2020.

Several High Courts have delivered conflicting judgments on the validity of these notifications. The Allahabad High Court upheld Notification No. 9/2023, while the Patna High Court upheld Notification No. 56/2023 (Central Tax). Conversely, 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 conclusively.

The Supreme Court has admitted a Special Leave Petition (SLP No. 4240/2025) concerning these notifications and issued notice, recognizing the cleavage of opinion among High Courts. The Supreme Court's order dated 21st February, 2025, explicitly framed the issue as whether the time limit for adjudication under Section 73 of the GST Act and SGST Act could be extended by the impugned notifications issued under Section 168A.

Court's Interpretation and Reasoning: The Delhi High Court acknowledged the conflicting High Court rulings and the pending Supreme Court proceedings. It refrained from expressing any opinion on the validity of the impugned notifications in light of the ongoing Supreme Court adjudication. The Court noted that the Punjab and Haryana High Court had also deferred to the Supreme Court's decision and ordered that interim relief granted in connected cases would continue until the Supreme Court's final verdict.

Application of Law to Facts: The Court held that the legality of the impugned notifications remains an open question and that the outcome of the Supreme Court's decision will be binding on all pending matters. Accordingly, the Court disposed of the batch of petitions challenging the notifications, subject to the final decision in the Supreme Court.

Treatment of Competing Arguments: The Court carefully balanced the submissions of the Petitioner challenging the notifications on procedural grounds against the existing judicial precedents and the fact that the Supreme Court was seized of the matter. It declined to interfere with the notifications at this stage to maintain judicial discipline and consistency.

Conclusion: The Court left the question of the validity of the impugned notifications open, pending the Supreme Court's ruling, and disposed of the petitions challenging the notifications accordingly.

Issue 2: Validity and Reasonableness of the Impugned Adjudication Order

Relevant Legal Framework: Under the GST Act, after issuance of a show cause notice, the taxpayer is entitled to file a reply and be heard before any order is passed. The adjudicating authority must consider the submissions and evidence before confirming any demand.

Key Evidence and Findings: The Petitioner filed a reply dated 15th June, 2024, along with supporting documents in response to the SCN dated 16th May, 2024. The Petitioner also avers that a personal hearing was granted and attended. Despite this, the impugned order dated 30th August, 2024, confirmed the tax demand, stating that the reply was not satisfactory as supporting documents such as e-way bills, invoices, bank statements, and purchase registers were not submitted.

Court's Interpretation and Reasoning: The Court examined the impugned order and noted that the adjudicating authority had specifically recorded reasons for rejecting the Petitioner's reply, emphasizing the absence of supporting documents. The Court found that the order was not passed mechanically or without consideration but was based on the assessment of the evidence submitted.

Application of Law to Facts: Given the adjudicating authority's detailed observations and the Petitioner's opportunity to be heard, the Court concluded that the impugned order did not warrant interference at the writ petition stage.

Treatment of Competing Arguments: The Petitioner argued that the order was passed in haste and without due consideration. The Court rejected this contention, holding that the adjudicating authority's reasons were explicit and that the Petitioner had the remedy of appeal.

Conclusion: The Court declined to interfere with the impugned order and directed the Petitioner to file an appeal before the appellate authority under Section 107 of the GST Act.

Issue 3: Procedural Relief and Filing of Appeal

Relevant Legal Framework: Section 107 of the GST Act provides the right to appeal against orders passed under the Act. The limitation period and pre-deposit requirements apply to such appeals.

Court's Interpretation and Reasoning: Recognizing the ongoing challenges to the notifications and the impugned order, the Court granted the Petitioner time until 15th July, 2025, to file an appeal with the requisite pre-deposit. The Court further directed that the appeal shall be adjudicated on merits and shall not be dismissed on the ground of limitation.

Application of Law to Facts: This procedural direction was issued to ensure that the Petitioner's rights are protected while the larger legal issues concerning the notifications are being adjudicated by the Supreme Court.

Treatment of Competing Arguments: The Court balanced the need to protect the Petitioner's procedural rights against the necessity to maintain the integrity of the appellate process, especially in light of the pending Supreme Court decision.

Conclusion: The Petitioner was granted an extended window to file an appeal, and the appellate authority was directed to decide the appeal on merits without rejecting it on limitation grounds.

3. SIGNIFICANT HOLDINGS

- "The validity of the impugned notifications 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 titled M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors. and this Court in W.P.(C) 9214/2024 titled Engineers India Limited v. Union of India & Ors."

- "The impugned order has been passed after duly considering the reply of the Petitioner. Relevant portion of the impugned order is extracted herein below: 'THE REPLY FURNISHED BY THE TAXPAYER IS NOT SATISFACTORY BECAUSE HE DID NOT SUBMIT ANY SUPPORTING DOCUMENTS LIKE E-WAY BILL, INVOICES, BANK STATEMENTS, PURCHASE REGISTER ETC. HENCE DEMAND IS CREATED.'"

- "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 Court emphasized judicial discipline by refraining from expressing an opinion on the validity of the impugned notifications, deferring to the Supreme Court's pending adjudication.

- The Court recognized the Petitioner's right to be heard and the necessity of supporting documentary evidence in GST adjudications, thereby upholding procedural fairness and evidentiary standards.