Delhi HC dismisses petition challenging tax adjudication order, finds no natural justice violation, allows Section 107 CGST appeal option

The Delhi HC dismissed a petition challenging an adjudication order and notifications issued by the Central Board of Indirect Taxes and Customs. The petitioner alleged violation of natural justice, claiming the impugned order was cryptic and failed to consider their reply. The HC found the order was reasoned and duly considered the petitioner's response. The court declined to set aside the order but permitted the petitioner to file an appeal under Section 107 of the CGST Act, 2017 if required.

---

---

The core legal questions considered by the Court in this matter are:

1. Whether the impugned notifications Nos. 9/2023-Central Tax and 56/2023-Central Tax issued by the Central Board of Indirect Taxes and Customs comply with the procedural requirements under Section 168A of the Central Goods and Services Tax Act, 2017, particularly regarding the necessity of prior recommendation by the GST Council for extending deadlines related to adjudication under the GST Act.

2. Whether the adjudication order dated 31st December, 2023 passed by the Sales Tax Officer under Section 73 of the DGST/CGST Act, 2017, is valid, specifically considering the Petitioner's contention that the order is cryptic and does not adequately consider the reply filed.

3. The broader issue of whether the time limit for adjudication of show cause notices and passing of orders under Section 73 of the GST Act and corresponding State GST Acts for the financial year 2019-2020 could be extended by issuance of the impugned notifications under Section 168A of the GST Act.

4. The question of whether the impugned notifications were issued following the proper procedure, including whether the GST Council's recommendation was obtained prior to issuance, and the implications of any procedural irregularity on the validity of the notifications.

5. The treatment of ex-parte adjudication orders passed against Petitioners who were allegedly unable to file replies or avail personal hearings.

Issue-wise Detailed Analysis

1. Validity of the impugned notifications Nos. 9/2023 and 56/2023 under Section 168A of the GST Act

Relevant legal framework and precedents: Section 168A of the Central Goods and Services Tax Act, 2017 mandates that any extension of the time limit for adjudication of show cause notices and passing of orders must be made on the prior recommendation of the GST Council. The notifications in question purportedly extended such deadlines.

Several High Courts have taken divergent views on the validity of these notifications. The Allahabad High Court upheld Notification No. 9, the Patna High Court upheld Notification No. 56, whereas the Guwahati High Court quashed Notification No. 56. The Telangana High Court expressed reservations regarding Notification No. 56 but did not conclusively rule on its vires. This cleavage of opinions has led to the Supreme Court taking cognizance of the issue in SLP No. 4240/2025.

Court's interpretation and reasoning: The Delhi High Court acknowledged the conflicting judicial opinions and the pendency of the matter before the Supreme Court. It noted that Notification No. 9 was issued following the GST Council's recommendation, whereas Notification No. 56 was issued prior to such recommendation, which was only given subsequently, thus potentially violating the statutory mandate under Section 168A.

Application of law to facts: The Court recognized that the procedural irregularity in the issuance of Notification No. 56, if established, could render it invalid. However, given the ongoing Supreme Court proceedings, the Court refrained from expressing a definitive opinion on the validity of the notifications.

Treatment of competing arguments: The Court considered the submissions challenging the notifications on procedural grounds and noted the interim orders and judicial restraint exercised by other High Courts pending Supreme Court adjudication.

Conclusion: The Court held that the challenge to the notifications shall be subject to the Supreme Court's final decision and accordingly did not decide on their validity.

2. Validity of the adjudication order dated 31st December, 2023

Relevant legal framework and precedents: Section 73 of the DGST/CGST Act, 2017 empowers the Sales Tax Officer to adjudicate demands arising from show cause notices. The principles of natural justice require that the adjudicating authority consider replies filed and provide reasoned orders.

Court's interpretation and reasoning: The Petitioner contended that the impugned order was cryptic and failed to consider the reply filed on 7th December, 2023. The Court examined the order and found it to be a reasoned order wherein the Petitioner's submissions were duly considered. The Court noted that a personal hearing was also granted to the Petitioner.

Key evidence and findings: The record showed the reply was filed in time and a personal hearing was conducted. The impugned order contained reasoning addressing the Petitioner's contentions.

Application of law to facts: Since the order was reasoned and considered the Petitioner's reply, the Court declined to set aside the adjudication order.

Treatment of competing arguments: The Petitioner's grievance of ex-parte adjudication was addressed by noting that personal hearings were granted and replies were considered.

Conclusion: The Court upheld the adjudication order but permitted the Petitioner to file an appeal under Section 107 of the CGST Act, 2017 within 30 days with requisite pre-deposit, which shall not be dismissed on limitation grounds and shall be adjudicated on merits.

3. Relief and interim measures pending Supreme Court decision

The Court observed that many writ petitions challenging the notifications were pending before various High Courts and the Supreme Court. The Punjab and Haryana High Court had disposed of related petitions, deferring to the Supreme Court's forthcoming decision and maintaining interim orders.

The Delhi High Court also refrained from expressing a final view on the validity of the notifications and directed that the outcome of the Supreme Court's decision would be binding on the parties.

Regarding cases where adjudication orders were passed ex-parte due to inability to file replies or avail personal hearings, the Court indicated a prima facie view that affected Petitioners should be afforded an opportunity to place their stand before the adjudicating authority or pursue appellate remedies, without deciding the validity of the notifications at this stage.

Significant Holdings

"Insofar as Notification No. 56/2023 (Central Tax) the challenge is that the extension was granted contrary to the mandate under Section 168A of the Central Goods and Services Tax Act, 2017 and ratification was given subsequent to the issuance of the notification. The notification incorrectly states that it was on the recommendation of the GST Council."

"Since the challenge to the above mentioned notifications is presently under consideration before the Supreme Court ... 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."

"A perusal of the impugned order and the attachment would show that the former is in fact a reasoned order wherein the Petitioner's reply has been duly considered. Hence, this Court is not inclined to set aside the impugned order."

"If the appeal is filed along with the requisite pre-deposit 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 requirement of prior recommendation by the GST Council under Section 168A for extension of adjudication timelines is mandatory, and failure to comply may render notifications invalid.
• Judicial restraint is appropriate when conflicting High Court decisions exist and the Supreme Court is seized of the matter.
• Adjudication orders must be reasoned and consider the replies filed to satisfy principles of natural justice.
• Interim relief and procedural opportunities must be granted to parties affected by ex-parte orders, especially where procedural fairness is in question.
• Appeals against adjudication orders should be entertained on merits if filed within stipulated time with requisite pre-deposit, notwithstanding limitation issues.

Final determinations:

• The Court did not decide on the validity of the impugned notifications, leaving the issue open pending the Supreme Court's ruling.
• The impugned adjudication order was upheld as reasoned and fair.
• The Petitioner was permitted to file an appeal against the adjudication order within 30 days, which shall be heard on merits.
• Interim procedural reliefs were indicated for Petitioners unable to file replies or attend hearings, with directions to afford opportunities before further adjudication.

---