GST Demand order set aside due to lack of personal hearing, remanding for fresh adjudication.

I. GST Demand order set aside due to lack of personal hearing, remanding for fresh adjudication.

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

I. GST Demand Order Set Aside Due to Lack of Personal Hearing.

Issue:

Whether a GST adjudication order passed under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) should be set aside if the assessee was not afforded a proper opportunity of personal hearing, even if a reply to the show cause notice was filed.

Facts:

• A Show Cause Notice (SCN) dated May 9, 2024, was issued to the petitioner-assessee under Section 73 of the CGST Act.
• The petitioner filed a reply to the said SCN on June 4, 2024.
• Subsequently, an adjudication order dated August 25, 2024, was passed under Section 73 by the respondent-department against the petitioner.
• The assessee filed a writ petition challenging this order on the ground of lack of proper opportunity of hearing.
• It was observed by the court that personal hearing was not availed by the petitioner before the impugned order had been passed.

Decision I:

The court held in favor of the assessee. It ruled that since personal hearing was not availed by the petitioner before the impugned order was passed, the impugned order was to be set aside, and a personal hearing was to be given to the petitioner by the respondent.

Key Takeaways I:

• Right to Personal Hearing: The principles of natural justice mandate that an assessee must be given a proper opportunity of being heard before an adverse order is passed. This generally includes the right to a personal hearing, especially when a show cause notice is issued and a reply is filed.
• Non-Availment of Hearing vs. Denial of Hearing: While the assessee might not have “availed” the hearing, the court’s decision implies that either no specific opportunity for personal hearing was adequately provided, or the circumstances were such that the assessee was prevented from availing it, leading to a denial of a proper opportunity.
• Remand for Due Process: The standard remedy for a violation of natural justice is to set aside the order and remand the matter back to the adjudicating authority to re-adjudicate after providing the necessary opportunity for a personal hearing. This ensures compliance with due process.
• Section 73: This section deals with demand of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized, where there is no fraud, willful misstatement, or suppression of facts. Even in such cases, proper procedure, including hearing, must be followed.

II. Challenge to GST Limitation Extension Notification Stayed Pending Supreme Court Decision.

Issue:

Whether a High Court should proceed with a challenge to the validity of Notification No. 56/2023-Central Tax, dated December 28, 2023 (extending the time limit for passing orders under Section 73(10) of the CGST Act), when the same legal question is already pending before the Supreme Court.

Facts II:

• The assessee challenged the validity of Notification No. 56/2023-Central Tax, dated December 28, 2023.
• This notification extended the period for passing orders under Section 73(10) (which relates to the time limit for issuing assessment orders in non-fraud cases) for certain financial years.
• It was brought to the court’s attention that the validity of this impugned notification was already under challenge before the Supreme Court in the case of DJST Traders Private Limited v. Union of India & Ors. (presumably, this is the same or a connected SLP as others referenced in earlier cases, given the similar subject matter).

Decision II:

The court referred to the fact that the validity of the impugned notification was already under challenge before the Supreme Court. Therefore, the writ petition was disposed of with a direction that the petitioner’s challenge to the notifications in the instant proceedings should be subject to the outcome of the Supreme Court’s decision. The ruling was in favor of the revenue, implying the High Court would not rule on the validity of the notification itself but keep the challenge alive pending the apex court’s decision.

Key Takeaways II:

• Judicial Discipline/Comity: High Courts invariably defer to the Supreme Court on questions of law that are already under consideration by the apex court. This is a matter of judicial propriety and ensures consistency and clarity in the law.
• Significance of Limitation Extension: The extension of time limits for passing assessment orders is a crucial procedural aspect in tax law, directly impacting the finality of assessments. Challenges to such extensions often involve fundamental legal questions.
• “Subject to Outcome”: This means the High Court did not dismiss the assessee’s challenge to the notification’s validity. Instead, it effectively stayed the decision on that point, making it contingent on the Supreme Court’s ruling. This is a procedural relief for the assessee, as their challenge remains open.
• Impact of Supreme Court Decision: The Supreme Court’s verdict on the validity of such notifications will have a binding effect on all High Courts and tax authorities, determining whether assessments passed within the extended period are valid.
• “In favour of revenue” (in the provided text): This classification likely reflects that the High Court did not set aside the demand order on the ground of limitation but rather deferred the issue, which is a temporary win for the revenue on that specific point. However, the first part of the judgment (regarding lack of personal hearing) was in favor of the assessee.