2025 (5) TMI 250 - HC - GST

Demand of Rs. 35 lakh confirmed after petitioner failed to respond despite sufficient opportunities provided

Delhi HC dismissed the petition challenging an adjudication order dated 25th August, 2024 and notice dated 28th December, 2023 issued by CBIC. Petitioner ... Violation of principles of natural justice - no personal hearing was given before making the demand - Challenge to adjudication order dated 25th August, 2024 and N/N. 56/2023-Central Tax dated 28th December, 2023 issued by the Central Board of Indirect Taxes and Customs - HELD THAT:- The Court has perused the record. The impugned order arises from the show cause notice dated 8th December, 2023. The DRC-06 Forms attached with the petition clearly reveal that sufficient opportunities were afforded to the Petitioner to file a reply. It is only upon the failure of the Petitioner to file the same, that the Ld. Assistant Commissioner has proceeded to pass the impugned order confirming the demand to the tune of Rs. 35,03,595/-. This Court is not inclined to set aside the impugned order - petition disposed off. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court include:Whether the impugned notifications No. 09/2023-Central Tax dated 31st March, 2023 and No. 56/2023-Central Tax dated 28th December, 2023 issued under Section 168A of the Central Goods and Services Tax Act, 2017 (CGST Act) are valid, particularly in light of the procedural requirements mandated under Section 168A, including the necessity of prior recommendation by the GST Council.Whether the extension of time limits for adjudication of show cause notices and passing of orders under Section 73 of the CGST Act for the financial year 2019-2020 could be validly effected by the impugned notifications.Whether the impugned adjudication order dated 5th April, 2024 passed by the Assistant Commissioner under Section 73 of the CGST Act is a non-speaking order, passed without affording the Petitioner adequate opportunity of being heard, thereby violating the principles of natural justice.The extent to which interim relief or procedural accommodations should be granted to petitioners who have been unable to file replies or avail personal hearings, resulting in ex-parte adjudication orders with substantial demands and penalties.The impact of conflicting judicial precedents from various High Courts and the ongoing Supreme Court proceedings on the determination of the validity of the impugned notifications and related procedural issues.2. ISSUE-WISE DETAILED ANALYSISValidity of the Impugned Notifications under Section 168A of the CGST ActThe legal framework governing the issuance of notifications extending time limits for adjudication under the CGST Act is Section 168A, which mandates that any such extension must be preceded by a recommendation of the GST Council. The Petitioner challenged both Notification No. 09/2023 and Notification No. 56/2023 on the ground that the latter was issued without prior GST Council recommendation, with ratification occurring only post issuance, thus violating statutory procedure.The Court noted a divergence in judicial opinions on this issue: the Allahabad and Patna High Courts upheld the validity of the notifications, whereas the Guwahati High Court quashed Notification No. 56/2023. The Telangana High Court expressed doubts on the validity of Notification No. 56/2023 without delving into detailed vires analysis. The Supreme Court has admitted Special Leave Petition No. 4240/2025, which raises the question of whether the time limit for adjudication under Section 73 of the GST Act could be extended via these notifications issued under Section 168A. The Supreme Court's order recognized a cleavage of opinion among High Courts and issued notice with interim relief pending final adjudication.Thus, the Court acknowledged that the validity of the impugned notifications is currently sub judice before the Supreme Court and that the issue is of significant legal importance, involving statutory interpretation and procedural compliance.Adjudication Order under Section 73 of the CGST ActThe Petitioner contended that the impugned adjudication order dated 5th April, 2024 was a non-speaking order passed without affording sufficient opportunity to be heard, thereby violating principles of natural justice. The Court examined the record, including the show cause notice dated 8th December, 2023 and the DRC-06 Forms, which demonstrated that the Petitioner was afforded multiple opportunities to file a reply but failed to do so.On these facts, the Court found no merit in the contention that the order was non-speaking or passed without due opportunity. The failure to respond led to the ex-parte confirmation of demand. Consequently, the Court declined to set aside the impugned order.Relief and Procedural Accommodations Pending Supreme Court DecisionWhile the validity of the notifications remains undecided, the Court recognized the practical difficulties faced by petitioners who were unable to file replies or attend personal hearings, resulting in ex-parte orders and significant financial demands and penalties. The Court identified six broad categories of cases and indicated a prima facie view that, depending on the category, petitioners should be allowed to place their stand before the adjudicating authority and pursue appellate remedies without prejudice to the question of the notifications' validity.The Court granted liberty to the Petitioner to file an appeal against the impugned order within 30 days, directing that such appeal would not be dismissed on limitation grounds if filed within the stipulated period and would be adjudicated on merits. The Court clarified that the appellate authority's order would remain subject to the Supreme Court's final decision on the notifications' validity.Judicial Discipline and Impact of Conflicting High Court DecisionsThe Court observed that multiple High Courts had issued conflicting rulings on the notifications' validity, and that the Supreme Court was seized of the matter. The Punjab and Haryana High Court had disposed of connected writ petitions by deferring to the Supreme Court's pending adjudication and refraining from expressing opinions on the vires of Section 168A or the notifications. This approach was endorsed to maintain judicial discipline and avoid conflicting outcomes pending the Supreme Court's ruling.3. SIGNIFICANT HOLDINGS'The challenge made by the Petitioner to the notifications in the present proceedings shall also be subject to the outcome of the decision of the Supreme Court.''The DRC-06 Forms attached with the petition clearly reveal that sufficient opportunities were afforded to the Petitioner to file a reply. It is only upon the failure of the Petitioner to file the same, that the Ld. Assistant Commissioner has proceeded to pass the impugned order confirming the demand.''If the appeal along with the requisite pre-deposit provided under Section 107 of the Central Goods and Services Tax Act, 2017 is filed within a period of 30 days, the same shall not be dismissed on the ground of limitation and shall be entertained and adjudicated on merits.'Core principles established include:The procedural requirement under Section 168A of the CGST Act for prior GST Council recommendation before issuing notifications extending adjudication timelines is a substantive legal question currently pending before the Supreme Court.In the absence of the Supreme Court's decision, High Courts are to exercise judicial restraint and avoid pronouncing on the validity of such notifications to maintain judicial discipline.Adjudication orders passed ex-parte due to the failure of the party to file replies despite being afforded sufficient opportunity do not violate principles of natural justice.Appellate remedies must be preserved and appeals entertained on merits notwithstanding limitation periods, particularly where procedural or substantive challenges to notifications are pending before higher courts.Final determinations:The Court declined to set aside the impugned adjudication order dated 5th April, 2024.The challenge to the validity of the impugned notifications was left open and subject to the Supreme Court's final decision.Petitioner was granted liberty to file an appeal within 30 days with protection against dismissal on limitation grounds.Pending applications were disposed of accordingly.