I. GST demand order set aside and remanded for fresh adjudication due to non-consideration of reply and denied personal hearing.
II. Challenge to GST limitation extension notification is stayed pending Supreme Court’s decision.
I. GST Demand Order Set Aside and Remanded Due to Non-Consideration of Reply and Denied Personal Hearing.
Issue:
Whether a GST demand order passed under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), should be set aside and the matter remanded if the assessee’s detailed reply to the show cause notice (SCN) was not considered and a proper opportunity of personal hearing was not provided.
Facts:
- For the period 2017-18, the assessee challenged an SCN and the consequent demand order.
- The assessee submitted that a detailed reply to the SCN was filed.
- However, the assessee contended that an opportunity of personal hearing was not provided, and the impugned order was passed without considering the reply filed.
- A perusal of the impugned order by the court showed that the reply of the assessee was, in fact, not considered.
Decision I:
The court held in favor of the assessee. Since the assessee was not afforded an opportunity of hearing, and the SCN and consequent order were passed without hearing the assessee, an opportunity of hearing was to be afforded to the assessee to contest the matter on merits. Accordingly, the impugned order was set aside, and the matter was remanded for readjudication.
Key Takeaways I:
- Duty to Consider Reply and Afford Hearing: The judgment strongly emphasizes two fundamental principles of natural justice:
- The adjudicating authority must genuinely consider the reply filed by the assessee. Merely filing a reply is insufficient; it must be reflected in the final order.
- A proper opportunity of personal hearing must be provided, especially when an adverse order is contemplated.
- Violation of Natural Justice is Fatal: The court’s finding that the reply was “not considered” and no hearing was afforded constitutes a clear violation of the audi alteram partem rule, rendering the impugned order procedurally invalid.
- Remedy of Remand for Merits: The standard judicial remedy for such a violation is to set aside the order and remand the matter back to the adjudicating authority. This ensures that the assessee gets a fair chance to present their case on merits, and the authority passes a fresh, reasoned order after proper consideration.
- Sections 73, 74, 75 CGST Act: These sections deal with demand and recovery. Section 75 particularly lays down general procedures for determination of tax and highlights the importance of providing an opportunity of hearing under sub-section (4).
- Article 226 of Constitution of India: The writ jurisdiction under Article 226 is invoked when fundamental rights (like the right to natural justice) are violated, and an alternate remedy might be inadequate or unavailable.
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. 9/2023-Central Tax, dated March 31, 2023 (issued by the Central Board of Indirect Taxes and Customs (CBIC) for extending limitation periods), when the same legal question is already pending consideration before the Supreme Court.
Facts II:
- For the period 2017-18, the assessee challenged the validity of Notification No. 9/2023-Central Tax, dated March 31, 2023.
- This notification, issued under Section 168A of the CGST Act, 2017, extended various limitation periods.
- 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 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 Comity and Restraint: 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.
CM APPL. No. 69711 of 2024
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 No4240/2025 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 7-3-2025.”
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. ”