Ex-Parte Order Due to Accountant's Failure to Intimate SCN Quashed; Matter Remanded.

Ex-Parte Order Due to Accountant’s Failure to Intimate SCN Quashed; Matter Remanded.

Issue

Whether an ex-parte adjudication order should be set aside and remanded for a fresh hearing when the taxpayer failed to reply to the Show Cause Notice (SCN) because their accountant failed to bring the notice to their attention.

Facts

Period: 2019-20.
The Default: The petitioner was issued an SCN which afforded an opportunity to file a reply. However, no reply was filed.
Reason for Default: The petitioner explained that their accountant failed to intimate them about the SCN and the subsequent order. Consequently, the proceedings escaped their attention, leading to an ex-parte demand.
The Challenge: The petitioner filed a writ petition seeking the quashing of the order on the grounds of denial of natural justice (lack of proper opportunity).

Decision

The High Court (likely Delhi HC based on context) ruled in favour of the assessee and set aside the impugned order.
Natural Justice Prevails: The Court noted that since no reply was filed, the petitioner effectively did not get a “proper opportunity to be heard” on the merits of the case.
Remand: To ensure justice is done, the matter was remanded back to the Adjudicating Authority.
Directions: The petitioner was granted liberty to file a reply, and the Authority was directed to pass a fresh order after affording a personal hearing.

Key Takeaways

Human Error is a Valid Ground: Courts often condone procedural lapses attributed to the negligence of employees or consultants (like accountants) to ensure that a substantial tax demand is adjudicated on merits rather than by default.
Right to be Heard: The judgment reinforces that an effective hearing requires the taxpayer to participate. If participation was missed due to genuine reasons, the clock can be reset.

Challenge to Notifications Extending Limitation for FY 2019-20 Subject to Supreme Court Verdict.

Issue

Whether Notification No. 9/2023-Central Tax and Notification No. 56/2023-Central Tax (and corresponding State notifications), which extended the time limit for passing adjudication orders for FY 2019-20, are legally valid.

Facts

The Challenge: The petitioner challenged the validity of the Central and State notifications that extended the limitation period for issuing orders under Section 73 for the period 2019-20.
Notifications:
- Notification No. 9/2023-CT (dated 31-03-2023).
- Notification No. 56/2023-CT (dated 28-12-2023).

Decision

The High Court disposed of this specific challenge without a final ruling on the merits.
Pending Litigation: The Court observed that the validity of the Central Notifications is pending consideration before the Supreme Court, and the State Notification is pending before the High Court.
Conditional Outcome: Therefore, the Court directed that the petitioner’s challenge to these notifications (and consequently the validity of the remanded adjudication order on the point of limitation) will be subject to the outcome of the decisions in those pending higher court cases.

Key Takeaways

Limitation Defense is Alive: Taxpayers are successfully keeping the “limitation” defense alive in writ petitions. If the Supreme Court later strikes down the extension notifications, all orders passed during the extended period (including this remanded one) could potentially be invalid.
Sub-Judice Status: The extension of timelines for FY 2018-19 and 2019-20 under Section 168A is currently a contested legal issue, with the final word awaited from the Apex Court.

HIGH COURT OF DELHI

Swarn Cosmetic (India)

Union of India^*

PRATHIBA M. SINGH and SHAIL JAIN, JJ.

W.P. (C) No. 16545 OF 2025
CM APPL. No. 67842 and 67843 OF 2025

OCTOBER 31, 2025

Dinesh Singhal, Sahil A. Garg Narwana, Ms. Amnaya Jagannath Mishra, Kapil Gola and Ms. Honey Gola, Advs. for the Petitioner. Akash Verma, Sr. Standing Counsel, Ms Aanchal Uppal and Sumit K. Batra, Advs. for the Respondent.

JUDGMENT

Prathiba M. Singh, J. – This hearing has been done through hybrid mode.

2. The present petition has been filed by the Petitioner- M/s Swarn Cosmetic (India) under Articles 226 of the Constitution of India, inter alia, seeking the quashing of the impugned show cause notice dated 31st May 2024 (hereinafter, ‘the impugned SCN’) and the subsequent order dated 27^th August, 2024 (hereinafter, ‘the impugned order)pertaining to the Financial Year 2019-2020.

3. Additionally, the present petition also challenges the vires of the following notifications:

•

Notification No.09/2023-Central Tax dated 31^st March, 2023;

•

Notification No.09/2023-State Tax dated 22^nd June, 2023;

•

Notification No. 56/2023- Central Tax dated 28th December, 2023; and

•

Notification No. 56/2023- State Tax dated 11th July, 2024 (hereinafter, ‘the impugned notifications’).

4. The challenge in the present petition is similar to a batch of petitions wherein inter alia, the impugned notifications were challenged. DJST Traders (P.) Ltd. v. Union of India (Delhi)/W.P.(C) No. 16499/2023, was the lead matter in the said batch of petitions. On 22^nd 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. 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 57-2022 & 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 20192020 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. “

5. The abovementioned writ petition and various other writ petitions have been disposed of by this Court on subsequent dates, either remanding the matters or relegating the parties to avail of their appellate remedies, depending upon the factual situation in the respective cases. All such orders are subject to further orders of the Supreme Court in respect of the validity of the impugned notifications in HCC-SEW-Meil-AAG JV v. Assistant Commissioner of State Tax (SC)/S.L.P No 4240/2025.

6. However, in cases where the challenge is to the parallel State Notifications, the same have been retained for consideration by this Court. The lead matter in the said batch is Engineers India Ltd. v. Union of India [W.P. (C) No. 9214 of 2024].

7. On facts, the impugned order raises the following demands qua the Petitioner:

8. The impugned SCN was issued to the Petitioner on 31st May, 2024, with an opportunity to file a reply thereto. However, it is the admitted position that no reply to the impugned SCN was filed on behalf of the Petitioner.

9. The only reason given by the Petitioner for not filing any reply to the SCN is that the Petitioner had appointed an accountant who was handling the Petitioner’s accounts, however, he had failed to bring to notice of the Petitioner, the details of the impugned SCN and the impugned order. Consequently the SCN escaped the attention of the Petitioner and he did not take action within the prescribed period.

10. The Court has heard the parties. In fact, this Court in Sugandha Enterprises v. Commissioner of DGST (Delhi)/W.P.(C) 4779/2025, under similar circumstances where no reply was filed to the SCN had remanded the matter in the following terms:

“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 23rd 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 personal hearing. The personal hearing notice shall be communicated to the Petitioner on the following mobile no. and e-mail address:.”

11. Under such circumstances, considering the fact that the Petitioner did not get a proper opportunity to be heard and no reply to the impugned SCN has been filed by the Petitioner, the matter deserves to be remanded back to the concerned Adjudicating Authority.

12. Accordingly, the impugned order is set aside. The Petitioner is granted time till 30^th November, 2025, to file the reply to the impugned 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. :9643000033

•

E-mail Address :narwanaoffice01 @gmail.com

13. The reply filed by the Petitioner to the impugned 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. The said matter is remanded for fresh adjudication, subject to payment of cost of Rs.20,000/- to be paid to the CGST Department.

14. 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 in HCC-SEW-Meil-AAG JV (supra)and this Court in Engineers India Ltd. (supra).

15. The petitions are disposed of in these terms. All pending applications, if any, are also disposed of.