Delhi HC directs fresh order after finding denial of personal hearing violated natural justice under Section 73 CGST Act

The Delhi HC disposed of a writ petition challenging a show cause notice and consequent order under Section 73 of the CGST Act. The court noted that the validity of Notification No. 9/2023-Central Tax is pending before the SC in a related matter, making the present challenge subject to that outcome. Finding that the petitioner was denied a personal hearing in violation of natural justice principles, the HC directed the adjudicating authority to provide the petitioner an opportunity for personal hearing, consider their reply and submissions, and pass a fresh order accordingly.

---

---

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in the judgment include:

• Whether the show cause notice dated 17th September, 2023 and the consequent order dated 31st December, 2023 issued under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act) are legally valid.
• The validity of Notification No. 9/2023-Central Tax dated 31st March, 2023 issued by the Central Board of Indirect Taxes and Customs, particularly in relation to the procedural requirements under Section 168A of the CGST Act.
• Whether the extension of time limits for adjudication under Section 73 of the CGST Act through Notifications Nos. 9 and 56 of 2023 was valid, considering the necessity of prior recommendation by the GST Council as mandated by Section 168A.
• The impact of the ongoing Supreme Court proceedings on the validity of the impugned notifications and related orders.
• Whether the petitioner was denied the opportunity of personal hearing before the impugned order was passed, and if so, whether this denial vitiates the order.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Show Cause Notice and the Impugned Order under Section 73 of the CGST Act

Relevant Legal Framework and Precedents: Section 73 of the CGST Act deals with determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized. The procedural fairness under the Act mandates issuance of a show cause notice (SCN) and an opportunity of personal hearing before passing any order.

Court's Interpretation and Reasoning: The Court noted that the petitioner filed a reply to the SCN on 22nd February 2023 and was subsequently issued a personal hearing notice. However, due to the proprietor's ill health, the petitioner could not attend the hearing. The impugned order was passed thereafter.

Key Evidence and Findings: The petitioner's inability to attend the personal hearing was substantiated by their submissions. The Court found that the petitioner was effectively denied the opportunity of personal hearing, which is a fundamental procedural requirement.

Application of Law to Facts: The Court held that since the petitioner was unable to avail the personal hearing, the impugned order passed ex-parte cannot stand. The principles of natural justice require that the petitioner be afforded a personal hearing before any adverse order is passed.

Treatment of Competing Arguments: While the respondents might have argued that the impugned order was validly passed, the Court emphasized procedural fairness over the finality of the order at this stage.

Conclusions: The Court directed that the adjudicating authority issue a fresh notice for personal hearing to the petitioner and reconsider the matter on merits, taking into account the petitioner's reply and submissions during the hearing.

Issue 2: Validity of Notification No. 9/2023-Central Tax and Related Notifications under Section 168A of the CGST Act

Relevant Legal Framework and Precedents: Section 168A of the CGST Act mandates that any extension of time limits for adjudication of show cause notices and passing orders requires prior recommendation of the GST Council. The notifications in question purportedly extend such time limits.

Various High Courts have taken differing views on the validity of these notifications. The Allahabad High Court upheld Notification No. 9, the Patna High Court upheld Notification No. 56, while the Guwahati High Court quashed Notification No. 56. The Telangana High Court raised doubts about the validity of Notification No. 56, and this issue is presently under consideration by the Supreme Court in SLP No. 4240/2025.

Court's Interpretation and Reasoning: The Court acknowledged the divergence in judicial opinions and the ongoing Supreme Court proceedings. It recognized that the validity of the impugned notifications is a complex issue requiring authoritative adjudication at the highest level.

Key Evidence and Findings: The Court referred to the Supreme Court's order dated 21st February 2025, which issued notice on the SLP challenging the notifications and noted the cleavage of opinion among High Courts.

Application of Law to Facts: Given the pendency of the Supreme Court matter, the Court refrained from expressing any opinion on the validity of the notifications. It held that any decision on the notifications in the present proceedings would be subject to the Supreme Court's final determination.

Treatment of Competing Arguments: The Court balanced the need to respect judicial discipline and avoid contradictory rulings by deferring to the Supreme Court's pending adjudication.

Conclusions: The Court left the question of the notifications' validity open and stated that any order passed by the adjudicating authority in the present case would be subject to the outcome of the Supreme Court's decision.

Issue 3: Impact of Supreme Court Proceedings and Interim Orders by Other High Courts

Relevant Legal Framework and Precedents: Judicial discipline and principles of comity require lower courts to refrain from issuing conflicting rulings when the Supreme Court is seized of the matter.

Court's Interpretation and Reasoning: The Court noted that several High Courts, including Punjab and Haryana, Bombay, and others, have either disposed of similar petitions or stayed proceedings pending the Supreme Court's decision. The Punjab and Haryana High Court explicitly deferred to the Supreme Court's forthcoming ruling and maintained interim orders accordingly.

Key Evidence and Findings: The Court relied on the Punjab and Haryana High Court's order dated 12th March 2025 and the Supreme Court's order dated 21st February 2025.

Application of Law to Facts: The Court aligned its approach with the principle of judicial discipline by not expressing any opinion on the notifications' validity and by directing that the matter be governed by the Supreme Court's final decision.

Treatment of Competing Arguments: The Court recognized the petitioners' concerns about the impact of pending adjudications and the need for procedural fairness but balanced this against the necessity to await the Supreme Court's ruling.

Conclusions: The Court disposed of the petition with directions for personal hearing but without prejudging the validity of the notifications, thereby preserving the status quo pending the Supreme Court's decision.

3. SIGNIFICANT HOLDINGS

The Court held:

"Since the Petitioner has not been able to avail the opportunity of personal hearing, the same ought to be afforded to the Petitioner to contest the matter on merits."

"The reply filed by the Petitioner to the SCN along with the submissions made in the personal hearing proceedings shall be duly considered by the Adjudicating Authority and fresh order with respect to the SCN shall be passed accordingly."

"However, it is made clear that the issue in respect of the validity of the impugned notification is left open. Any order passed by the Adjudicating Authority shall be subject to the outcome of the decision of the Supreme Court."

Core principles established include:

• The fundamental requirement of affording a personal hearing before passing an adjudication order under the CGST Act.
• The recognition that extensions of limitation periods under Section 73 of the CGST Act must comply with the procedural mandate under Section 168A, including prior GST Council recommendation.
• The necessity of judicial discipline and comity in deferring to the Supreme Court's pending adjudication on contentious issues of law.
• The preservation of parties' rights to be heard and to contest demands, notwithstanding the pendency of questions regarding the validity of notifications.

Final determinations on each issue are:

• The impugned order under Section 73 is set aside insofar as it was passed without personal hearing, and a fresh hearing and adjudication are mandated.
• The validity of Notification No. 9/2023 and related notifications is left open and subject to the Supreme Court's final decision.
• The proceedings and orders in the present petition are to be governed by the outcome of the Supreme Court's ruling in SLP No. 4240/2025.

---