2025 (5) TMI 229 - HC - GST

SCN uploaded on portal without petitioner's knowledge violates natural justice, adjudication order set aside for fresh consideration

Delhi HC set aside an adjudication order due to violation of natural justice principles. The SCN was uploaded on 'Additional Notices Tab' without ... Violation of principles of natural justice - Service of SCN - SCN was uploaded on ‘Additional Notices Tab’ and did not come to the knowledge of the Petitioner - impugned order passed without providing the Petitioner a personal hearing and in the absence of a reply on behalf of the Petitioner - Challenge to adjudication order - challenge to N/N. 09/2023-Central Tax dated 31st March, 2023 issued by the Central Board of Indirect Taxes and Customs - HELD THAT:- This Court in Neelgiri Machinery through its Proprietor Mr. Anil Kumar V. Commissioner Delhi Goods And Service Tax And Others [2025 (3) TMI 1308 - DELHI HIGH COURT] under similar circumstances where the SCN was uploaded vide ‘Additional Notices Tab’ had remanded the matter. It is relevant to note that post 17th January 2024, the Department has effected changes in the portal to ensure that the SCNs become visible to parties. However, considering the SCN in the present case is of September 2023, following the above decision, this Court inclined to set aside the impugned order and grant the Petitioner a fresh hearing. Let the entire matter be considered afresh and an order be passed on merits after duly considering the reply and the submissions made by the Petitioner in the personal hearing - Petition disposed off. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court in this matter include:Whether the show cause notice (SCN) dated 24th September 2023 and the consequent order dated 18th December 2023 passed under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act) are valid, especially in light of procedural compliance and opportunity of hearing.The validity and legality of Notification No. 9/2023-Central Tax dated 31st March 2023 issued under Section 168A of the CGST Act, particularly regarding the extension of time limits for adjudication of tax demands.Whether the impugned notifications were issued following the proper procedure, including the prior recommendation of the GST Council as mandated under Section 168A of the CGST Act.The impact of conflicting judicial opinions from various High Courts on the validity of the impugned notifications and the effect of pending proceedings before the Supreme Court on these issues.Whether the Petitioner was denied a fair opportunity of hearing due to the SCN being uploaded only under the 'Additional Notices Tab' on the GST portal and not being properly communicated.The appropriate relief and procedural directions to be granted to the Petitioner in light of the above issues and pending Supreme Court adjudication.2. ISSUE-WISE DETAILED ANALYSISValidity of the Impugned Notifications under Section 168A CGST ActRelevant legal framework and precedents: Section 168A of the CGST Act empowers the extension of time limits for adjudication of tax demands, subject to prior recommendation by the GST Council. The impugned Notification No. 9/2023 and Notification No. 56/2023 (Central Tax) were issued purportedly under this provision.Several High Courts have delivered divergent rulings on the validity of these notifications. The Allahabad High Court upheld Notification No. 9, while the Patna High Court upheld Notification No. 56. Conversely, the Guwahati High Court quashed Notification No. 56 (Central Tax). The Telangana High Court raised concerns regarding the validity of Notification No. 56 and its issuance contrary to the mandate of Section 168A, particularly noting that ratification was given post issuance, not prior.The Supreme Court has admitted Special Leave Petitions (SLPs) challenging these notifications and is currently considering the validity of the extensions granted under Section 168A. The Supreme Court's order dated 21st February 2025 noted the cleavage of opinion among High Courts and issued notice for final adjudication.Court's interpretation and reasoning: The Delhi High Court acknowledged the conflicting judicial opinions and the pendency of the Supreme Court proceedings. It refrained from expressing any opinion on the vires of the impugned notifications, deferring to the Supreme Court's ultimate decision. The Court recognized the importance of judicial discipline and the binding effect of the Supreme Court's forthcoming ruling on all connected matters.Application of law to facts and treatment of competing arguments: The Court noted that the Petitioner's challenge to the impugned notification must await the Supreme Court's decision. This approach avoids inconsistent rulings and respects the hierarchical judicial process. The Court also observed that even if the notifications are upheld, procedural fairness in adjudication remains critical.Conclusion: The validity of the impugned notifications is left open, pending the Supreme Court's pronouncement. The Court directed that any orders passed under these notifications shall be subject to the Supreme Court's outcome.Validity of Show Cause Notice and Opportunity of HearingRelevant legal framework and precedents: Principles of natural justice require that a show cause notice be properly communicated to the party concerned and that the party be given an opportunity to file replies and be heard before an order is passed. The CGST Act mandates adjudication procedures under Section 73, including personal hearings.Precedents from this Court in cases such as Neelgiri Machinery, Satish Chand Mittal, and Kamla Vohra have emphasized that SCNs must be adequately brought to the notice of the recipient and that orders should not be passed ex-parte without affording a fair hearing.Court's interpretation and reasoning: The Court found that the SCN dated 24th September 2023 was uploaded only under the 'Additional Notices Tab' on the GST portal, a location which the Petitioner contended was not adequately visible or accessible. Consequently, the Petitioner did not receive proper notice and was deprived of the opportunity to file replies or appear for personal hearings. This procedural lapse rendered the impugned order dated 18th December 2023 unsustainable.Key evidence and findings: The Court relied on the Petitioner's submissions and prior rulings where similar facts led to remand of matters for fresh adjudication. The Court noted that post 17th January 2024, the Department had made changes to the portal to make SCNs more visible, but since the SCN in question predates this, the procedural deficiency persisted.Application of law to facts and treatment of competing arguments: The Court applied the principle that procedural fairness is fundamental and that technical or administrative shortcomings in notice issuance cannot prejudice the Petitioner. The Department's argument that the SCN was uploaded on the portal was insufficient without proper communication and opportunity for hearing.Conclusion: The impugned demand orders were set aside. The Petitioner was granted 30 days to file replies to the SCNs, with the Department directed to send hearing notices by email and phone in addition to portal uploads. The adjudicating authority was mandated to consider the Petitioner's submissions afresh and pass orders after affording a personal hearing.Effect of Pending Supreme Court Proceedings and Judicial DisciplineRelevant legal framework and precedents: The principle of judicial discipline requires subordinate courts and tribunals to await the Supreme Court's ruling on issues of law that are under its consideration, especially when there is a divergence of opinion among High Courts.Court's interpretation and reasoning: The Court observed that multiple High Courts have taken conflicting views on the validity of the impugned notifications and that the Supreme Court's decision in SLP No. 4240/2025 is pending. The Punjab and Haryana High Court's order was cited, which refrained from expressing opinions on the vires of Section 168A and related notifications, directing all connected cases to be governed by the Supreme Court's decision.Application of law to facts: The Court followed this approach, refraining from deciding on the validity of the impugned notifications and instead focusing on ensuring procedural fairness in the interim.Conclusion: The Court held that the challenge to the impugned notification shall be subject to the Supreme Court's outcome, and all adjudication orders shall be provisional and subject to the final decision.3. SIGNIFICANT HOLDINGS'Since the challenge to the above mentioned notifications is presently under consideration before the Supreme Court in S.L.P No 4240/2025 ... 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.''The impugned demand orders dated 23rd April, 2024 and 5th December, 2023 are accordingly set aside. In response to show cause notices dated 04th December, 2023 and 23rd September, 2023, the Petitioner shall file its replies within thirty days. The hearing notices shall now not be merely uploaded on the portal but shall also be e-mailed to the Petitioner and upon the hearing notice being received, the Petitioner would appear before the Department and make its submissions. The show cause notices shall be adjudicated in accordance with law.''It is the petitioner's case that he had not received the impugned SCN and, therefore, he had no opportunity to respond to the same. For the same reason, the petitioner claims that he had not appear for a personal hearing before the Adjudicating Authority ... The present petition is allowed and the impugned order is set aside.' (Citing prior rulings)Core principles established include:Procedural fairness and natural justice require that SCNs be adequately communicated and parties be given a fair opportunity to respond and be heard before passing orders.Extension of time limits under Section 168A CGST Act must comply with the statutory mandate of prior GST Council recommendation.Where conflicting High Court opinions exist and the Supreme Court is seized of the matter, subordinate courts must await the Supreme Court's decision on the validity of notifications and related issues.Interim relief can be granted to ensure that parties are not prejudiced by procedural lapses during pendency of higher judicial scrutiny.Final determinations on each issue:The validity of the impugned notifications is left open pending Supreme Court adjudication.The impugned orders passed without affording the Petitioner a proper hearing are set aside.The Petitioner is granted an opportunity to file replies and be heard in a personal hearing, with procedural safeguards to ensure proper communication.All further adjudication shall be subject to the Supreme Court's final ruling on the validity of the notifications.