Denial of Personal Hearing Vitiates GST Order, Even if No Reply is Filed.

Issue

Is a GST demand order passed under Section 73 legally valid if the adjudicating authority concludes the proceedings without granting a personal hearing, especially in a situation where the taxpayer has not filed a written reply to the Show Cause Notice (SCN)?

Facts

The Department of Trade & Taxes issued a Show Cause Notice (SCN) to the petitioner for the period April 2019 to March 2020.
The petitioner did not file a written reply or objection to the SCN.
The adjudicating authority proceeded to pass a final order under Section 73, confirming the demand proposed in the SCN.
The order explicitly recorded that the taxpayer had neither filed objections nor appeared for a hearing.
The petitioner challenged this order directly in the High Court through a writ petition, arguing it was passed in violation of the principles of natural justice because no personal hearing was granted.

Decision

The High Court set aside the impugned demand order.
It held that even though the petitioner had failed to file a reply, the authority was still obligated to grant an opportunity for a personal hearing before passing an adverse order.
Citing Section 75(4) of the CGST Act, the court affirmed that a hearing is a mandatory requirement.
The matter was remitted back to the adjudicating authority for a fresh decision. The court directed the authority to grant the petitioner time to file a reply, provide a personal hearing, and then pass a new, reasoned order.

Key Takeaways

Hearing is a Mandatory Right, Not a Choice: Section 75(4) of the CGST Act makes it compulsory for an officer to grant a personal hearing if an adverse decision is contemplated. This is a non-negotiable procedural safeguard.
Failure to Reply Does Not Waive Hearing Right: A taxpayer’s failure to submit a written reply does not automatically extinguish their separate right to be heard orally. The two opportunities are distinct.
Violation of Natural Justice: Passing an order without a hearing, especially when it results in a financial liability for the taxpayer, is a clear violation of the principles of natural justice (audi alteram partem – hear the other side).
Ground for Writ Petition: A breach of the mandatory requirement of a personal hearing is a strong ground for a High Court to intervene in its writ jurisdiction, quash the order, and remand the case for proper adjudication.

HIGH COURT OF DELHI

Sugandha Enterprises

Commissioner of DGST

PRATHIBA M. SINGH and Rajneesh Kumar Gupta, JJ.

W.P.(C) No.4779 of 2025
CM APPL. No.22008 of 2025

APRIL 23, 2025

Ujjwal Jain, Adv. for the Petitioner. Mudit Gupta, Vivek Sharma, Ms. Prernaa Singh, Advs. and Vaishali Gupta, Panel Counsel (Civil) 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- Devender Kumar Singh challenging the show cause notice dated 23rd May, 2024 (hereinafter, ‘the SCN’) issued by the Department of Trade & Taxes upon the Petitioner concern pertaining to the tax period April, 2019 to March, 2020. The petition also challenges the consequent order dated 30th July, 2024 (hereinafter, ‘the impugned order’) passed under Section 73 of the Central Goods and Services Tax Act, 2017 (hereinafter, ‘CGST Act, 2017’)

3. Additionally, the present petition also challenges the Notification No. 9/2023- Central Tax dated 31st March, 2023 and 56/2023- Central Tax dated 28th December, 2023 as also Notification No. 09/2023-State Tax dated 22nd June, 2023 and Notification No. 56/2023- State Tax dated 11th July, 2024 (hereinafter, ‘the impugned notifications’).

4. The present petition is a part of a batch of petitions wherein inter alia, the impugned notifications have been challenged. The W.P.(C) No. 16499/2023 titled DJST Traders (P.) Ltd. v. Union of India 191 (Delhi)is the lead matter in the said batch of petitions. On the last date of hearing i.e., 22rd April, 2025, the parties were heard at length qua the validity of the impugned notifications 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. 09and56of2023 (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 HCC-SEW-Meil-AAG JV v. Assistant Commissioner of State Tax 1080 (SC)/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. As observed by this Court in the order dated 22nd April, 2025 as well, since the challenge to the above mentioned notifications is presently under consideration before the Supreme Court in HCC-SEW-Meil-AAG JV v. Assistant Commissioner of State Tax 1080 (SC)/S.L.P No 4240/2025 the challenge made by the Petitioner to the impugned notification in the present proceedings shall also be subject to the outcome of the decision of the Supreme Court.

6. On facts, however, the submission of the Petitioner in the present petition is that the Petitioner was not afforded with an opportunity to file a reply to the SCN dated 23^rd May, 2024 and the impugned order was passed without affording the Petitioner with an opportunity to be heard. Hence, the impugned order is a non-speaking order and is liable to be set aside on the said ground.

7. Heard. The Court has considered the submissions made. The Court has perused the records. 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:

And whereas, the taxpayer had neither deposited the proposed demand nor filed their objections/ reply in DRC-06 within the stipulated period of time, therefore, following the Principle of Natural Justice, the taxpayer was granted opportunities of personal hearing for submission of their reply/objections against the proposed demand before passing any adverse order.

And whereas, neither the taxpayer filed objections/reply in DRC 06 nor appeared for personal hearing despite giving sufficient opportunities, therefore, the undersigned is left with no other option but to upheld the demand raised in SCN/DRC 01. DRC 07 is issued accordingly.

8. This Court is of the opinion that since the Petitioner has not been afforded an opportunity to be heard and the said SCN and the consequent impugned order have been passed without hearing the Petitioner, an opportunity ought to be afforded to the Petitioner to contest the matter on merits.

9. Accordingly, the impugned order is set aside. The Petitioner is granted 30 days’ time to file the reply to SCN. Upon filing of the reply, the Adjudicating Authority shall issue to the Petitioner, a notice for personal hearing. The personal hearing notice shall be communicated to the Petitioner on the following mobile no. and e-mail address:

Mobile No.: 9717595497

E-mail Address : ujjwaljainadvocate@gmail.com

10. 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.

11. The present writ petition is disposed of in above terms. All the pending applications, if any, are also disposed of.

12. Mr. Mudit Gupta, ld. Counsel for Respondent No. 1’s appearance shall be taken as reflected for order dated 16^th April, 2025 as well.

13. However, it is made clear that the issue in respect of the validity of the impugned notifications is left open. Any order passed by the Adjudicating Authority shall be subject to the outcome of the decision of the Supreme Court.

14. The petition is disposed of in these terms. All pending applications, if any, are also disposed of.