GST demand order set aside due to non-service of SCN on a taxpayer with cancelled registration, denying reply and hearing.

I. GST demand order set aside due to non-service of SCN on a taxpayer with cancelled registration, denying reply and hearing.

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

I. GST Demand Order Set Aside Due to Non-Service of SCN on Taxpayer with Cancelled Registration.

Issue:

Whether a GST demand order passed under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), is valid if the Show Cause Notice (SCN) was not served effectively due to the cancellation of the petitioner’s GST registration, thereby preventing them from accessing the portal and responding to the SCN or participating in proceedings.

Facts:

• For the period 2019-20, an SCN was issued to the petitioner, and subsequently, an order was passed.
• The petitioner contended that the SCN was not served upon them because their GST registration had already been cancelled.
• As a result of the cancelled registration, the petitioner claimed they had no access to their GST portal and, consequently, no knowledge of the issuance of the SCN or subsequent proceedings.
• This lack of knowledge prevented the petitioner from filing any reply to the SCN.

Decision I:

The court held in favor of the assessee. It ruled that the impugned order was passed without giving the petitioner an opportunity to file a reply and be heard. Therefore, the impugned order was set aside. The petitioner was granted time to file a reply to the SCN, and the Adjudicating Authority was directed to pass a fresh order after considering the reply.

Key Takeaways I:

• Effective Service of Notice is Paramount: This judgment strongly emphasizes the requirement for effective service of the SCN. Simply uploading a notice on a portal is insufficient if the recipient genuinely cannot access that portal due to a prior action by the department (like registration cancellation).
• Impact of Registration Cancellation on Communication: Once a GST registration is cancelled, the taxpayer’s ability to access the portal and receive electronic communications is severely hampered. The department cannot assume effective service through the portal in such scenarios.
• Violation of Natural Justice (Audi Alteram Partem): Passing an order without the assessee’s knowledge of the SCN and without affording them an opportunity to reply or be heard is a clear violation of a fundamental principle of natural justice.
• Remedy of Remand: The standard judicial remedy for such procedural violations is to set aside the flawed order and remand the matter back to the original authority for fresh adjudication after ensuring proper notice and opportunity for the assessee to present their case.

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

Issue:

Whether a High Court should proceed with a challenge to the validity of Notification No. 56/2023-Central Tax, dated December 28, 2023 (extending the time limit for passing orders under Section 73(9) of the CGST Act), when the same legal question is already pending before the Supreme Court.

Facts II:

• For the period 2019-20, the assessee challenged the validity of Notification No. 56/2023-Central Tax, dated December 28, 2023.
• This notification, issued by the Central Board of Indirect Taxes and Customs (CBIC), extended the time limit for passing orders under Section 73(9) (which specifies the time limit for issuing assessment orders in non-fraud cases).
• It was brought to the court’s attention that the matter concerning the validity of this notification was pending consideration before the Supreme Court in S.L.P. No. 4240/2025, dated February 21, 2025.

Decision II:

The court held that the challenge made by the assessee to the notification in the present proceedings would be subject to the outcome of the decision of the Supreme Court, as the matter was pending before the apex court. This implies a stay on this particular aspect of the writ petition.

Key Takeaways II:

• Judicial Comity and Restraint: High Courts typically defer to the Supreme Court on questions of law that are already under its consideration. This ensures consistency in legal interpretation and efficient use of judicial resources.
• Significance of Limitation Extensions: The extension of time limits for passing assessment orders is a crucial procedural aspect in tax law, directly impacting the finality of assessments. Challenges to such extensions often involve fundamental legal questions.
• “Subject to Outcome”: This means the High Court did not dismiss the assessee’s challenge to the notification outright but rather kept it alive, making its resolution contingent upon the Supreme Court’s ruling. This is a procedural relief for the assessee.
• Impact of Supreme Court Decision: The Supreme Court’s verdict on the validity of such notifications will have a binding effect on all courts and tax authorities, determining the validity of assessment orders passed within these extended periods.
• “Partly in favour of assessee/Matter stayed”: While the outcome of the stay is a procedural win for the assessee (as their challenge is not dismissed), it’s important to note that it’s not a definitive ruling on the merits of the notification’s validity.