GST demand order set aside due to miscommunication and lack of portal access

I. GST demand order set aside due to miscommunication and lack of portal access for assessee with retrospectively cancelled GST registration, remanding for fresh adjudication after providing portal access.

II. Challenge to GST limitation extension notifications is stayed pending Supreme Court’s decision.

I. GST Demand Order Set Aside Due to Miscommunication and Lack of Portal Access for Assessee with Cancelled GST Registration.

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 Show Cause Notice (SCN) was issued after the assessee’s GST registration was cancelled retrospectively, leading to the assessee having no portal access and thus no knowledge of the SCN, even if a reply was later filed but not considered by the department.

Facts:

• For the period 2017-18, an impugned order in original was passed against the assessee subsequent to the issuance of a show cause notice (SCN).
• The assessee submitted that the demand was raised upon them via the SCN after their GST registration had been cancelled with retrospective effect.
• Due to the cancelled registration, the assessee contended they did not have access to the GST portal and, therefore, had no knowledge of the SCN and subsequent proceedings.
• Upon gaining knowledge (presumably through some other means), a reply was filed by the assessee.
• However, the impugned demand order recorded that no reply had been filed. This indicated a miscommunication or lack of proper record-keeping by the department.

Decision I:

The court held in favor of the assessee. It found that there had clearly been a “miscommunication” in the matter, as the assessee did not have access to the portal at the time the SCN was issued. Accordingly, the assessee was to be granted access to the portal for two months, and the impugned order was set aside. The assessee was directed to file a reply to the SCN, and after granting an opportunity of hearing, a fresh order was to be passed. The matter was remanded.

Key Takeaways I:

• Effective Service of Notice is Paramount: This judgment strongly emphasizes that effective service of an SCN is crucial. Merely uploading a notice on a portal is not effective service if the recipient genuinely cannot access that portal due to actions by the department (like retrospective registration cancellation).
• Impact of Retrospective Cancellation on Communication: When GST registration is cancelled retrospectively, it significantly impacts the taxpayer’s ability to access the portal. The department cannot assume effective service through electronic means in such a scenario.
• Miscommunication and Lack of Proper Records: The court’s finding of “miscommunication” and the observation that the demand order incorrectly recorded “no reply” despite one being filed highlights a failure in proper record-keeping or processing by the department.
• Violation of Natural Justice: Passing an order without ensuring the assessee has knowledge of the SCN and an opportunity to file a reply or be heard is a clear violation of natural justice.
• Remedy: Portal Access and Remand: The court provided a comprehensive remedy by:
  1. Setting aside the flawed order.
  2. Granting the assessee access to the portal for a specific period (two months) to facilitate compliance.
  3. Directing the assessee to file a reply.
  4. Mandating a fresh order after providing a proper hearing. This ensures all procedural safeguards are met.

II. Challenge to GST Limitation Extension Notifications Stayed Pending Supreme Court’s 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 (and its corresponding state notification), concerning the extension of limitation periods for passing orders under the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), when a similar matter is pending consideration before the Supreme Court.

Facts II:

• The assessee challenged the validity of:
  • Notification No. 9/2023-Central Tax, dated March 31, 2023.
  • Notification No. 9/2023 –State Tax, dated June 22, 2023.
• These notifications, issued by the Central Board of Indirect Taxes and Customs (CBIC) and corresponding state authorities under Section 168A of the CGST Act, 2017 (Power to issue removal of difficulty orders), extended various limitation periods.
• It was brought to the court’s attention 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 February 21, 2025].

Decision II:

The court held that 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, as the similar 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.