Opportunity of Hearing Granted for Section 73 Demand; Challenge to Notification on Limitation Period Awaits SC Verdict

By | May 24, 2025
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Opportunity of Hearing Granted for Section 73 Demand; Challenge to Notification on Limitation Period Awaits SC Verdict

This response combines two distinct but related rulings concerning GST demand and limitation periods.

I. Opportunity of Hearing Granted for Section 73 Demand

  • Issue: Whether an order passed under Section 73 of the CGST Act (determination of tax not involving fraud) should be set aside if the assessee claims their reply was not furnished due to an accountant’s failure and no opportunity for personal hearing was afforded, even after a rectification application was rejected.
  • Facts:
    • For the period 2019-20, an impugned order-in-original was passed against the assessee pursuant to a show cause notice (SCN).
    • The assessee contended that they had handed over the reply to their accountant, but the accountant failed to file it.
    • The assessee also claimed they were not given an opportunity to participate in a personal hearing.
    • After learning about the order, the assessee filed an application for rectification (dated August 13, 2024), which was also rejected.
  • Decision: The court held that the assessee had not been afforded a proper opportunity to be heard. Therefore, an opportunity ought to be afforded to the assessee to contest the matter on merits. The assessee was granted 30 days to file a reply to the SCN, and a fresh order was to be passed. The matter was remanded.
  • Key Takeaways:
    • Natural Justice is Paramount: Even in cases not involving fraud, the fundamental principle of natural justice, i.e., providing a reasonable opportunity to be heard, must be strictly adhered to by tax authorities.
    • Remand for Proper Hearing: If an assessee can demonstrate that they were denied a fair opportunity to present their case, courts will typically remand the matter back to the authority to provide such an opportunity.
    • Accountant’s Lapses: While an assessee is generally responsible for their agent’s actions, the court here focused on the ultimate lack of a hearing.
    • Rectification Rejected: The rejection of the rectification application further emphasized the assessee’s inability to present their case, strengthening the argument for a fresh hearing.

II. Challenge to Limitation Period Notifications Awaits Supreme Court Decision

  • Issue: Whether the validity of Notification Nos. 9/2023-Central Tax and 56/2023-Central Tax (which extend limitation periods) can be adjudicated by a High Court when a similar matter is pending before the Supreme Court.
  • Facts:
    • The assessee challenged the validity of Notification Nos. 9/2023-Central Tax (dated March 31, 2023) and 56/2023-Central Tax (dated December 28, 2023), along with corresponding State Tax notifications. These notifications generally extend the time limits for various actions under the GST Act, often related to assessment and demand under Section 73.
    • It was noted that a similar matter 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 21-2-2025].
  • Decision: The challenge made by the assessee to the notifications in the present proceedings would be subject to the outcome of the decision of the Supreme Court. The matter was effectively stayed or made contingent on the Supreme Court’s ruling.
  • Key Takeaways:
    • Judicial Restraint: High Courts typically exercise judicial restraint and defer to the Supreme Court when a similar, crucial legal question (especially concerning the validity of notifications or constitutional challenges) is already under consideration by the apex court.
    • Impact of Supreme Court Decision: The Supreme Court’s decision on the validity of such notifications will have a binding precedent and will clarify the legal position on the extended limitation periods across the country.
    • Staying Proceedings: Staying proceedings or making them subject to the Supreme Court’s outcome prevents contradictory judgments and ensures legal certainty.
    • Section 168A and Extension of Time Limits: Section 168A of the CGST Act grants the government power to extend time limits in cases of force majeure or difficulties. The validity of extensions made via notifications (like the ones cited) is a frequently litigated issue, often touching upon the limits of delegated legislation and whether statutory deadlines can be extended indefinitely.
HIGH COURT OF DELHI
Pashmeen Overseas
v.
Commissioner of Delhi GST
PRATHIBA M. SINGH and Rajneesh Kumar Gupta, JJ.
W.P.(C) No. 5085 OF 2025
CM APPL. No. 23310 OF 2025
APRIL  23, 2025
Vineet Bhatia, Chanderkant Singh, Ms. Aamnaya Jagannath Mishra, Bipin Punia, Keshav Garg, Parvesh Bansal and Rahul Bansal, Advs. for the Petitioner. Sumit K Batra, 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- M/s Pashmeen Overseas challenging the Order-in-Original dated 3rd August, 2024 bearing Reference No. ZD0708240105598 passed by the Sales Tax Officer (hereinafter, ‘the impugned order’) pertaining to the tax period April, 2019 to March, 2020.
3. Additionally, the present petition also challenges the Notification No. 9/2023- Central Tax dated 31st March, 2023 and Notification No. 56/2023-Central Tax dated 28th December, 2023 as also Notification No.9/2023 -State Tax dated 22nd June, 2023 and Notification No.56/2023- State tax dated 11th July, 2024 (hereinafter, ‘the impugned notification’).
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 [2025] (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 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-AAGJV v. Asstt. Commissioner of State Tax [S.L.P No. 4240 of 2025, dated 21-2-2025], 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 reply to the SCN dated 15th May, 2024 was not filed by the Petitioner since the same was handed over to the accountant but the accountant failed to furnish the reply. It is also submitted that the opportunity to participate in personal hearing was also not afforded to the Petitioner. Hence, the impugned order has been passed without giving the Petitioner any opportunity to be heard.
7. Accordingly, it is submitted on behalf of the Petitioner that the impugned order passed in pursuance to SCN deserves to be set aside on these grounds.
8. Further, it is also submitted by the Petitioner that after obtaining the knowledge about the passing of the impugned order, an application for rectification of order dated 13th August, 2024 was filed by the Petitioner which was also rejected by the Sales Tax Officer vide order dated 17th December, 2024.
9. Heard. The Court has considered the submissions made and has also perused the record. 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:
“Specific reasons entered The taxpayer has been issued notice u/s. 73 on 15.5.2024 to be replied by 15.6.2024, which was not replied. Accordingly as per the provisions of Section 75(4) an opportunity of personal hearing along with reminder to file the reply was afforded to the taxpayer for 22/07/2024. Neither taxpayer nor his AR attended the personal hearing and also not filed any reply to the SCN issued.
Accordingly the case has been taken up ex-parte and the demand intimated to the taxpayer is hereby confirmed. “
10. This Court is of the opinion that since the Petitioner has not been afforded an opportunity to be heard and the impugned order has been passed without hearing the Petitioner, an opportunity ought to be afforded to the Petitioner to contest the matter on merits.
11. 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.: 9811081159
E-mail Address : bhatiav68@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 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 present writ petition is disposed of in above terms. All the pending applications, if any, are also disposed of.