I. GST demand order set aside and remanded because it was passed during the pendency of a writ petition challenging the underlying SCN and related notifications, effectively denying an opportunity to reply.
II. Challenge to GST limitation extension notifications is stayed pending Supreme Court’s decision.
I. GST Demand Order Set Aside for Being Passed During Pendency of Writ Petition Challenging SCN.
Issue:
Whether a GST demand order passed by the Adjudicating Authority during the pendency of a writ petition challenging the underlying Show Cause Notice (SCN) and related notifications should be set aside, especially when the assessee did not file a reply to the SCN, claiming its challenge was already before the High Court.
Facts:
- For the period 2019-20, a show cause notice (SCN) dated May 29, 2024, was issued to the assessee.
- The assessee did not file a reply to this SCN.
- The assessee submitted that the present writ petition was filed in August 2024, challenging the said SCN along with related notifications.
- Crucially, an order with respect to the SCN was passed by the Adjudicating Authority during the pendency of this very writ petition.
Decision I:
The court held in favor of the assessee. It found that since the assessee was unable to file a reply at the relevant point of time (presumably due to the writ petition challenging the SCN), one opportunity could be given to the assessee to file a reply and contest the matter on merits. Accordingly, the impugned order was set aside, and the assessee was granted time to file a reply to the SCN, with the matter being remanded for fresh adjudication.
Key Takeaways I:
- Principle of Sub Judice: When a matter, or a fundamental aspect of it (like the show cause notice itself), is already under challenge before a higher court (a writ petition), the lower authority should ideally not proceed to pass a final order, or at least must exercise extreme caution, to avoid rendering the higher court’s proceedings otiose (pointless).
- Denial of Opportunity to Respond: The assessee’s decision not to reply to the SCN was implicitly linked to their pending writ petition challenging the very basis of the SCN. Passing an order during this period effectively denied them a practical opportunity to put forth their defense before the adjudicating authority.
- Violation of Natural Justice: The judgment reaffirms the importance of providing a fair opportunity to be heard. The passing of an order while the foundational SCN is under challenge in a higher forum, and without receiving a reply (due to the pendency of the challenge), constitutes a violation of natural justice.
- Remand for Fresh Adjudication: The remedy of setting aside the order and remanding the matter ensures that the assessee gets a proper chance to respond to the SCN and contest the demand on its merits before the adjudicating authority.
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 (extending limitation periods for passing orders under Section 73 or 74 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 two Central Tax Notifications:
- Notification No. 9/2023-Central Tax, dated March 31, 2023.
- Notification No. 56/2023-Central Tax, dated December 28, 2023.
- 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 matter concerning the validity of these notifications was pending consideration before the Supreme Court in HCC-SEW-MEIL-AAG JV v. Asstt. Commissioner of State Tax [S.L.P No. 4240 of 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 Discipline and Comity: High Courts consistently defer to the Supreme Court on questions of law that are already under its consideration. This ensures uniformity in legal interpretation and efficient use of judicial resources.
- Significance of Limitation Extensions: Notifications extending limitation periods, particularly under Section 168A, are crucial for taxpayers as they impact the finality of assessments. Their legal validity is a substantial question of law.
- “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.
HIGH COURT OF DELHI
Cristoo Arora
v.
Union of India
PRATHIBA M. SINGH and Rajneesh Kumar Gupta, JJ.
W.P.(C) No. 11267 of 2024
MAY 7, 2025
Nikhil Goyal and Bankim Garg, Advs. for the Petitioner. Ms. Vaishali Gupta, Adv. for the Respondent.
ORDER
Prathiba M. Singh, J. – This hearing has been done through hybrid mode.
2. The present petition has been filed by the Petitioner -Mr. Cristoo Arora under Article 226 of the Constitution of India challenging the show cause notice dated 29th May, 2024 (hereinafter, ‘the SCN’) issued by the Department of Trade & Taxes, Government of N.C.T. of Delhi, pertaining to the Financial Year 2019-20.
3. The petition also challenges the vires of Notification No. 56/2023-Central Tax dated 28th December, 2023 and Notification No. 09/2023-Central Tax dated 31st March, 2023 (hereinafter ‘impugned notifications’).
4. The validity of the impugned notifications was under consideration before this Court in a batch of petitions with the lead petition being DJST Traders (P.) Ltd. v. Union of IndiaW.P.(C) 16499/2023 titled. In the said batch of petitions, on 22nd April, 2025, the parties were heard at length qua the validity of the impugned notification and accordingly, the following order was passed:
“4. Submissions have been heard in part. The broad challenge to both sets of Notifications is on the ground that the proper procedure was not followed prior to the issuance of the same. In terms of Section 168A, prior recommendation of the GST Council is essential for extending deadlines. In respect of Notification no.9, the recommendation was made prior to the issuance of the same. However, insofar as Notification No. 56/2023 (Central Tax) the challenge is that the extension was granted contrary to the mandate under Section 168A of the Central Goods and Services Tax Act, 2017 and ratification was given subsequent to the issuance of the notification. The notification incorrectly states that it was on the recommendation of the GST Council. Insofar as the Notification No. 56 of 2023 (State Tax) is concerned, the challenge is to the effect that the same was issued on 11th July, 2024 after the expiry of the limitation in terms of the Notification No.13 of 2022 (State Tax).
5. In fact, Notification Nos. 09 and 56 of 2023 (Central Tax) were challenged before various other High Courts. The Allahabad Court has upheld the validity of Notification no.9. The Patna High Court has upheld the validity of Notification no.56. Whereas, the Guwahati High Court has quashed Notification No. 56 of 2023 (Central Tax).
6. The Telangana High Court while not delving into the vires of the assailed notifications, made certain observations in respect of invalidity of Notification No.56 of 2023 (Central Tax). This judgment of the Telangana High Court is now presently under consideration by 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. The Supreme Court vide order dated 21st February, 2025, passed the following order in the said case:
| “1. | The subject matter of challenge before the High Court was to the legality, validity and propriety of the Notification No.13/2022 dated 5-7-2022 & Notification Nos.9 and 56 of 2023 dated 31-3-2023 & 8-12-2023 respectively. |
| 2. | However, in the present petition, we are concerned with Notification Nos.9 & 56/2023 dated 31-3-2023 respectively. |
| 3. | These Notifications have been issued in the purported exercise of power under Section 168 (A) of the Central Goods and Services Tax Act. 2017 (for short, the “GST Act”). |
| 4. | We have heard Dr. S. Muralidhar, the learned Senior counsel appearing for the petitioner. |
| 5. | The issue that falls for the consideration of this Court is whether the time limit for adjudication of show cause notice and passing order under Section 73 of the GST Act and SGST Act (Telangana GST Act) for financial year 2019-2020 could have been extended by issuing the Notifications in question under Section 168-A of the GST Act. |
| 6. | There are many other issues also arising for consideration in this matter. |
| 7. | Dr. Muralidhar pointed out that there is a cleavage of opinion amongst different High Courts of the country. 8. Issue notice on the SLP as also on the prayer for interim relief, returnable on 7-32025.” |
7. In the meantime, the challenges were also pending before the Bombay High Court and the Punjab and Haryana High Court. In the Punjab and Haryana High Court vide order dated 12th March, 2025, all the writ petitions have been disposed of in terms of the interim orders passed therein. The operative portion of the said order reads as under:
“65. Almost all the issues, which have been raised before us in these present connected cases and have been noticed hereinabove, are the subject matter of the Hon’ble Supreme Court in the aforesaid SLP.
66. Keeping in view the judicial discipline, we refrain from giving our opinion with respect to the vires of Section 168-A of the Act as well as the notifications issued in purported exercise of power under Section 168-A of the Act which have been challenged, and we direct that all these present connected cases shall be governed by the judgment passed by the Hon’ble Supreme Court and the decision thereto shall be binding on these cases too.
67. Since the matter is pending before the Hon’ble Supreme Court, the interim order passed in the present cases, would continue to operate and would be governed by the final adjudication by the Supreme Court on the issues in the aforesaid SLP-4240-2025.
68. In view of the aforesaid, all these connected cases are disposed of accordingly along with pending applications, if any.”
8. The Court has heard Id. Counsels for the parties for a substantial period today. A perusal of the above would show that various High Courts have taken a view and the matter is squarely now pending before the Supreme Court.
9. Apart from the challenge to the notifications itself, various counsels submit that even if the same are upheld, they would still pray for relief for the parties as the Petitioners have been unable to file replies due to several reasons and were unable to avail of personal hearings in most cases. In effect therefore in most cases the adjudication orders are passed ex-parte. Huge demands have been raised and even penalties have been imposed.
10. Broadly, there are six categories of cases which are pending before this Court. While the issue concerning the validity of the impugned notifications is presently under consideration before the Supreme Court, this Court is of the prima facie view that, depending upon the categories of petitions, orders can be passed affording an opportunity to the Petitioners to place their stand before the adjudicating authority. In some cases, proceedings including appellate remedies may be permitted to be pursued by the Petitioners, without delving into the question of the validity of the said notifications at this stage.
11. The said categories and proposed reliefs have been broadly put to the parties today. They may seek instructions and revert by tomorrow i.e., 23rd April, 2025. “
5. Thereafter, on 23rd April, 2025, this Court, having noted that the validity of the impugned notifications is under consideration before the Supreme Court, had disposed of several matters in the said batch of petitions after addressing other factual issues raised in the respective petitions. Additionally, while disposing of the said petitions, this Court clearly observed that the validity of the impugned notifications therein shall be subject to the outcome of the proceedings before the Supreme Court in HCC-SEW-MEIL-AAG JV v. Asstt. Commissioner of State Tax [S.L.P No. 4240 of 2025, dated 21-2-2025]
6. In the present case, the submission of the Petitioner is that no reply to the SCN dated 29th May, 2024 was filed by it. The challenge to the SCN along with the impugned notifications was filed before this Court in August, 2024 and no order with respect to the SCN had been passed by the adjudicating authority until the filing of the present petition.
7. However, it is further submitted that during the pendency of the present petition, an order dated 20th August, 2024 has been passed, confirming the demand of Rs. 95,95,823/-, as raised in the SCN dated 29th May, 2024.
8. Accordingly, an application being C.M. Appl. 71361 of 2024 was filed by the Petitioner seeking amendment of the petition to the extent that the challenge to the order dated 20th August, 2024 be also allowed to be made in the petition. Subsequently, the said application for amendment was allowed. Hence, the order dated 20th August, 2024 (hereinafter, ‘the impugned order’) also stands challenged in the present petition.
9. The Court has heard the submissions made. In this petition, as mentioned above, no reply to the SCN has been filed by the Petitioner. Relevant portion of the impugned order reads as under:
“Observations and conclusion of the assessing authority:
Agreed with SCN amount
Specific reasons entered
Neither any reply nor his AR. appeared for personal hearing which indicates that the taxpayer has nothing to say in the matter and left no option but to create the demand. “
10. This Court is of the opinion that since the Petitioner has been unable to file a reply as at the relevant point in time, the Petitioner had challenged the SCN itself along with the Notifications, one opportunity can be given to the Petitioner to file a reply and to contest the matter on merits.
11. Accordingly, the impugned order is set aside. The Petitioner is granted time till 10th July 2025, to file the reply to SCN. Upon filing of the reply, the Adjudicating Authority shall issue a notice for personal hearing to the Petitioner. The personal hearing notice shall be communicated to the Petitioner on the following mobile no. and e-mail address:
Mobile No.:9999897128
Email Address: gargbankim@gmail.com
12. The 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 fresh order with respect to the SCN shall be passed accordingly.
13. However, it is made clear that the issue in respect of 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 HCC-SEW-MEIL-AAG JV (supra)
14. All rights and remedies of the parties are left open. Access to the GST Portal shall be provided to the Petitioner to enable uploading of the reply as also access to the notices and related documents.
15. The present writ petition is disposed of in above terms. All the pending applications, if any, are also disposed of.