Demand Order Without Proper Opportunity to Be Heard is Invalid, Matter Remanded

By | June 3, 2025
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I. Demand Order Without Proper Opportunity to Be Heard is Invalid, Matter Remanded

Issue:

Whether a show cause notice (SCN) and a consequent demand order, challenged on the grounds of not being properly signed by the concerned authority and the assessee not being granted an opportunity to file a reply, are valid.

Facts:

The assessee challenged a show cause notice (SCN) issued by the Sales Tax Officer and the subsequent order. The assessee’s primary submissions were twofold: first, that both the SCN and the impugned order were not signed by the concerned authority, rendering them invalid; and second, that no opportunity to file a reply was granted to the assessee.

Decision:

The court, primarily considering the fact that the assessee was not granted a proper opportunity to be heard, decided to remand the matter back to the concerned Adjudicating Authority. The Adjudicating Authority was directed to grant a personal hearing to the assessee before passing a fresh order.

Key Takeaways:

  • Principle of Natural Justice (Opportunity to be Heard): The most critical takeaway is the reaffirmation of the fundamental principle of audi alteram partem (hear the other side). Failure to provide a proper opportunity for the assessee to present their case, including filing a reply and being heard, is a significant procedural lapse that invalidates the demand order.
  • Importance of Due Process: Regardless of the merits of the demand itself, the tax authorities must adhere strictly to due process, including providing a fair hearing.
  • Remand as Remedy: When a violation of natural justice is established, the typical judicial remedy is to set aside the flawed order and remand the case for fresh adjudication, ensuring that the procedural defects are cured.
  • Signing of Orders (Procedural Compliance): While the decision focused on the opportunity of hearing, the assessee’s contention regarding unsigned notices/orders highlights the importance of procedural compliance, including proper authentication of official documents. This point, though not the primary basis for the remand, is a valid ground for challenge in tax proceedings.

II. Validity of GST Demand Limitation Period Extensions Subject to Supreme Court Review

Issue:

Whether the validity of CBIC Notification No. 56/2023-CT and its corresponding state Notification No. 56/2023-ST (which extend limitation periods for demand orders under Section 168A of the CGST Act) is legally sound.

Facts:

The assessee challenged the validity of CBIC Notification No. 56/2023-Central Tax and the corresponding state Notification No. 56/2023-State Tax. These notifications are generally issued under Section 168A of the Central Goods and Services Tax Act, 2017 (and its state counterparts), granting the power to extend various time limits, often for the purpose of issuing demand orders.

Decision:

The court noted that a similar matter concerning the validity of these notifications was already 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 21-02-2025). Consequently, the challenge made by the assessee to these notifications in the present proceedings would be subject to the outcome of the Supreme Court’s decision.

Key Takeaways:

  • Doctrine of Sub Judice: This decision exemplifies the judicial principle of awaiting a higher court’s ruling when a common and critical question of law is pending before it. This promotes consistency and avoids conflicting interpretations.
  • Scope of Section 168A: The legal challenge revolves around the interpretation and application of Section 168A of the CGST Act, which allows for the extension of time limits in specified circumstances (e.g., force majeure). The Supreme Court’s decision will provide definitive guidance on the permissible extent and conditions for such extensions.
  • Impact on Time-Barred Demands: The validity of these notifications directly affects numerous demand orders issued by tax authorities that rely on these extensions to overcome the standard limitation periods. If the notifications are held invalid, these demands might be time-barred.
  • Matter Stayed: The case being “stayed” implies that further proceedings related to the demand (specifically the aspect dependent on the validity of these notifications) are put on hold, awaiting the Supreme Court’s binding pronouncement. This offers interim relief to the assessee.
HIGH COURT OF DELHI
Krishna Enterprises
v.
Government of NCT of Delhi
PRATHIBA M. SINGH and Rajneesh Kumar Gupta, JJ.
W.P. (C) No. 479 of 2025
CM APPL. No. 2232 of 2025
MAY  7, 2025
M.A. Ansari, Ms. Tabassum Firdause and Arvind Soni, Advs. for the Petitioner. K.G. Gopalakrishnan, Sumit K. Batra, Parth Sharma, Subham Kumar, Dipak Raj, Anurag Singhal, Advs., Anurag Ojha, SSC and Mrs. Anju Tyagi, SPC 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 – M/S Krishna Enterprises Through its Proprietor Deepak Bansal under Article 226 of the Constitution of India inter alia challenging the Show Cause Notice dated 19th December, 2023 (hereinafter, the ‘Show Cause Notice ‘) issued by the Sales Tax Officer Class II/ AVATO, Delhi (hereinafter, the ‘Sales Tax Officer’) as also the consequent order dated 24th April, 2024 issued by the Sales Tax Officer.
3. Further, vide the present petition, the Petitioner also challenges the vires of Notification No. 56/2023- Central Tax dated 28th December, 2023 as also the Notification No. 56/2023-State Tax dated 11th July, 2024 (hereinafter, the ‘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 W.P.(C) 16499/2023 titled ‘DJST Traders (P.) Ltd. v. Union of India  (Delhi)‘. In the said batch of petitions, on 22nd 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 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.”
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. 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, dated 23-4-2025].
7. In the present case however, on facts, the submission of the Petitioner is that the Show Cause Notice as also the impugned order are not signed by the concerned authority and hence, the same are not valid. Further, an opportunity to file a reply has not been granted to the Petitioner.
8. It is further submitted on behalf of the Petitioner that if an opportunity is given, the Petitioner will file the reply. Accordingly, the matter may be adjudicated afresh.
9. Considering the fact that the Petitioner was not granted a proper opportunity to be heard, in the opinion of the Court, the matter deserves to be remanded back to the concerned Adjudicating Authority.
10. A personal hearing shall be granted to the Petitioner and the notice for the same shall be sent on the following email address:
• ansariadvocate15@gmail.com
11. However, it is again made clear that the issue in respect of validity of the impugned notifications is left open and the order of the Adjudicating Authority shall be subject to the outcome of the decision of the Supreme Court and this Court.
12. Petition is disposed ofin these terms. All pending applications are also disposed of.
13. All the rights and remedies of the parties are left open. Access to the GST Portal, if not already available, shall be ensured to be provided to the Petitioner to file a reply as also enable access to the notices and related documents.