Challenge to GST Limitation Extension Notifications Stayed Pending Supreme Court Decision.

I. Demand order passed without opportunity to reply to SCN or hearing violates natural justice and requires readjudication.

II. Challenge to GST limitation extension notifications is stayed pending Supreme Court’s decision.

I. Demand Order Passed Without Opportunity to Reply or be Heard Violates Natural Justice.

Issue:

Whether a demand order issued under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), is invalid if the assessee was not afforded an opportunity to file a reply to the Show Cause Notice (SCN) and was not granted an opportunity of hearing before the order was passed.

Facts:

• For the period 2019-20, a Show Cause Notice (SCN) was issued to the petitioner, raising a demand.
• It was the assessee’s specific contention that they were not afforded with an opportunity to file a reply to the SCN.
• Furthermore, the impugned demand order was passed without affording the assessee an opportunity to be heard.

Decision I:

The court held in favor of the assessee. It ruled that an opportunity ought to be afforded to the assessee to contest the matter on merits. Consequently, the matter was to be readjudicated. The impugned demand order was set aside, and the case was remanded back to the assessing authority.

Key Takeaways I:

• Fundamental Principle of Natural Justice (Audi Alteram Partem): The right to be heard is a cornerstone of fair administrative and quasi-judicial proceedings. This includes:
  • Right to Reply: The right to submit a response to allegations made in a show cause notice.
  • Right to Personal Hearing: The right to be personally heard, especially when complex issues or factual disputes are involved, or when requested.
• Consequences of Violation: An order passed in violation of these fundamental principles of natural justice is considered procedurally flawed and is liable to be set aside by higher courts or appellate authorities.
• Remedy of Remand: The typical remedy in such cases is to set aside the flawed order and remand the matter back to the original authority with a direction to re-adjudicate after providing a proper opportunity to the assessee. This ensures that the matter is decided on its merits after due process.
• Distinction from Previous Case: Unlike the previous case where the court found the reply was considered due to a detailed order, here the explicit finding is that no opportunity was given to file a reply or to be heard, making it a clear violation.

II. Challenge to GST Limitation Extension Notifications Stayed Pending Supreme Court Decision.

Issue:

Whether a High Court should proceed with a challenge to the validity of Notification No. 9/2023-Central Tax, dated March 31, 2023, and Notification No. 56/2023-Central Tax, dated December 28, 2023 (along with corresponding state notifications), concerning the extension of limitation periods under the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), when the same legal question is pending consideration before the Supreme Court.

Facts II:

• For the period 2019-20, the assessee challenged the validity of two Central Tax Notifications:
  • Notification No. 9/2023-Central Tax, dated March 31, 2023.
  • Notification No. 56/2023-Central Tax, dated December 28, 2023.
• The assessee also challenged the corresponding state notifications (Notification No. 09/2023-State Tax dated June 22, 2023, and Notification No. 56/2023-State Tax dated July 11, 2024).
• These notifications, issued under Section 168A of the CGST Act, 2017 (Power to issue removal of difficulty orders), extended various limitation periods.
• It was brought to the court’s attention that the larger issue of the validity of such notifications extending limitation periods was pending consideration before the Supreme Court in S.L.P. No. 4240/2025, dated February 21, 2025.

Decision II:

The court ruled that the challenge made by the assessee to the notifications in the present proceedings would be subject to the outcome of the decision of the Supreme Court, as the matter was pending consideration before the apex court. The matter was effectively stayed on this point.

Key Takeaways II:

• Judicial Discipline and Comity: High Courts typically defer to the Supreme Court on questions of law already under its consideration. This practice ensures consistency in legal interpretation across the country and avoids contradictory judgments.
• Importance of Section 168A Notifications: Notifications issued under Section 168A (similar to Section 168A in Income Tax for certain aspects) are significant as they impact procedural timelines and potentially affect the fundamental rights of taxpayers (e.g., right to finality of assessment).
• Stay of Proceedings: The court’s decision to “stay” the challenge to the notifications means that the High Court will not decide on its validity until the Supreme Court pronounces its judgment on the matter. This benefits the assessee by keeping their challenge alive.
• “Partly in favour of assessee/Matter stayed”: This classification means the assessee did not get a definitive ruling on the validity of the notification in their favor from the High Court, but the challenge was also not dismissed. The outcome for the assessee on this specific point will depend entirely on the Supreme Court’s verdict.