GST demand order set aside due to improper SCN upload and denied personal hearing

I. GST demand order set aside due to improper SCN upload and denied personal hearing, even if portal issue was later rectified.

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

I. GST Demand Order Set Aside Due to SCN Upload in Wrong Portal Tab and Denied Personal Hearing.

Issue:

Whether a demand order passed under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), is valid if the Show Cause Notice (SCN) was uploaded on an “Additional Notices Tab” on the GST portal, leading to the assessee’s contention of non-receipt/non-knowledge, and the order was passed without affording the assessee a personal hearing, even if the department claims the portal was rectified later.

Facts:

• For the period 2019-20, an SCN was issued to the assessee under Section 73.
• The SCN was uploaded on the “Additional Notices Tab” of the GST portal.
• The assessee contended that due to this method of uploading, the SCN was not brought to their knowledge, and consequently, the impugned order was passed without providing the assessee a personal hearing.
• The Department argued that the portal issue (where notices might not have been readily visible under the main tab) was rectified after January 16, 2024, and notices were visible.
• The SCN was issued post-January 17, 2024.

Decision I:

The court held in favor of the assessee. Even though the SCN was issued post-January 17, 2024 (when the portal rectification was claimed), the court considered the assessee’s plea that it did not get an opportunity to file a reply to the SCN. Therefore, the impugned order was set aside. The Adjudicating Authority was directed to pass a fresh order after affording an opportunity of personal hearing to the assessee. The matter was remanded.

Key Takeaways I:

• Effective Communication of Notice: The fundamental requirement for effective service of a Show Cause Notice (SCN) is that it must genuinely come to the knowledge of the assessee. Uploading a notice on a less obvious or “additional” tab on a portal, especially if it leads to a genuine claim of non-knowledge, fails this test.
• Violation of Natural Justice: Passing a demand order without the assessee having knowledge of the SCN, and consequently without an opportunity to file a reply or be heard in person, is a clear and direct violation of the principles of natural justice (audi alteram partem).
• Consequence of Violation: Orders passed in violation of fundamental principles of natural justice are deemed procedurally flawed and are typically set aside by courts.
• Remand Implied: While the decision explicitly states the order is “set aside,” the usual implication of such rulings is that the matter is remanded back to the adjudicating authority to pass a fresh order after providing proper notice and opportunity to the assessee.

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

Issue:

Whether a High Court should proceed with a challenge to the validity of Notification Nos. 56/2023-Central Tax and 9/2023-Central Tax, dated March 31, 2023 (and corresponding state notifications), concerning the extension of limitation periods for passing orders under Section 73 of the CGST Act, when the same legal question is already pending before the Supreme Court.

Facts II:

• For the period 2019-20, the assessee challenged the validity of:
  • Notification No. 56/2023-Central Tax.
  • 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 for passing orders under Section 73.
• It was brought to the court’s attention that the challenge to these notifications was under 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 also be subject to the outcome of the decision in the said Supreme Court SLP, as the matter was pending before the apex court. The ruling was “partly in favour of assessee/Matter stayed.”

Key Takeaways II:

• Judicial Comity: High Courts consistently defer to the Supreme Court on questions of law that are already being litigated before the apex court. This ensures uniformity in legal interpretation and avoids conflicting judgments.
• 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 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.