Adjudication order set aside for denying natural justice after show cause notice uploaded without petitioner's knowledge

Delhi HC set aside an adjudication order due to violation of natural justice principles. The show cause notice (SCN) was uploaded on 'Additional Notices Tab' without petitioner's knowledge, and the impugned order was passed without providing personal hearing or considering petitioner's reply. Following precedent from Neelgiri Machinery case involving similar circumstances, the court remanded the matter for fresh consideration. The department had rectified portal issues post-January 2024, but the SCN predated these changes. The court directed fresh adjudication after proper hearing and consideration of petitioner's submissions.

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The core legal questions considered by the Court include: (i) the validity and procedural propriety of Notification No. 56/2023-Central Tax issued under Section 168A of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), (ii) the legality of extending time limits for adjudication under Section 73 of the CGST Act via such notifications, (iii) the procedural fairness in issuance and adjudication of show cause notices (SCNs), particularly whether the Petitioner was afforded adequate notice and opportunity for personal hearing, and (iv) the impact of ongoing Supreme Court proceedings on the adjudication of the present petition.

Regarding the validity of Notification No. 56/2023-Central Tax, the Court examined whether the notification complied with the procedural mandate under Section 168A of the CGST Act, which requires prior recommendation of the GST Council before extending statutory deadlines. The Petitioner contended that the notification was issued without such prior recommendation, and the ratification was given only post-issuance, rendering it invalid. This contention was contextualized within a broader judicial landscape where various High Courts had divergent views: the Allahabad and Patna High Courts upheld the validity of similar notifications, whereas the Guwahati High Court quashed Notification No. 56/2023. The Telangana High Court also expressed reservations about the notification's validity, and this issue is presently sub judice before the Supreme Court in S.L.P No. 4240/2025. The Supreme Court granted notice and interim relief, acknowledging the cleavage of opinion among High Courts.

The Court noted that the Punjab and Haryana High Court, respecting judicial discipline, refrained from expressing an opinion on the vires of Section 168A and related notifications, deferring to the Supreme Court's forthcoming decision. This approach was endorsed to maintain consistency and avoid conflicting rulings while the apex court's judgment was awaited.

On the procedural fairness aspect, the Petitioner challenged the impugned show cause notice dated 5th December 2023 on the ground that it was uploaded under the 'Additional Notices Tab' on the GST portal, which allegedly did not bring it to the Petitioner's notice effectively. Consequently, the Petitioner was unable to file a reply or participate in a personal hearing, leading to an ex-parte order dated 5th April 2024. The Court relied on precedents where similar circumstances led to remand of matters to ensure fair opportunity. Specifically, the Court referred to decisions where the uploading of SCNs under 'Additional Notices & Orders' rather than the main 'Notices & Orders' tab was held insufficient for effective communication, thereby violating principles of natural justice.

The Court's reasoning emphasized that procedural fairness mandates that notices must be communicated in a manner reasonably calculated to inform the affected party. The absence of a personal hearing and failure to provide the Petitioner with a meaningful opportunity to respond rendered the impugned order unsustainable. The Court observed that post-January 2024, the Department had improved the portal's interface to enhance visibility of notices, but since the SCN in question was issued prior to this change, the Petitioner's grievance was justified.

Applying these principles, the Court set aside the impugned demand orders dated 23rd April 2024 and 5th December 2023. It directed the Petitioner to file replies within thirty days to the show cause notices dated 4th December 2023 and 23rd September 2023. The Court mandated that future hearing notices be communicated not only via the portal but also through email and phone, ensuring actual receipt and opportunity to be heard. The matter was remanded to the adjudicating authority for fresh consideration on merits after affording the Petitioner a personal hearing.

Regarding the challenge to the impugned notification itself, the Court expressly refrained from adjudicating its validity, leaving the issue open and subject to the Supreme Court's decision in the pending SLP. The Court clarified that any order passed by the adjudicating authority following the remand would be provisional and contingent on the apex court's ruling.

In addressing competing arguments, the Court balanced the Petitioner's right to due process against the Department's interest in tax administration. While acknowledging the Department's procedural improvements post-January 2024, the Court underscored that procedural lapses in the present case warranted relief. The Court also recognized the ongoing judicial uncertainty regarding the notifications' validity and prudently avoided preempting the Supreme Court's authoritative pronouncement.

Significant holdings include the Court's unequivocal statement that "orders are not to be passed in default" and that "the Petitioner is given an opportunity to file its reply and is heard on merits," underscoring the inviolability of natural justice in tax adjudications. The Court's direction to communicate hearing notices through multiple channels reflects a core principle that effective notice is essential for fair adjudication.

Furthermore, the Court's decision to set aside the impugned demand orders and remand the matter for fresh adjudication while leaving the validity of the impugned notification open preserves the principle of judicial restraint and respect for hierarchical adjudication.

In conclusion, the Court determined that the procedural irregularities in serving the show cause notice and denying personal hearing invalidated the impugned order. The Petitioner was entitled to a fresh opportunity to respond and be heard. The broader question of the validity of Notification No. 56/2023-Central Tax remains pending before the Supreme Court, and the outcome of that proceeding will govern subsequent adjudications. The Court's approach balances procedural fairness with judicial discipline, ensuring that substantive rights are protected without encroaching upon the apex court's jurisdiction.

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