2025 (5) TMI 1113 - HC - GST

Revenue authorities must provide personal hearing before issuing demand orders, not just upload notices on portal

Delhi HC set aside demand orders dated 23rd April, 2024 and 5th December, 2023 following precedent in Neelgiri Machinery case. Court found violation of ... Challenge to impugned SCN and demand order - Vires of N/N. 56/2023 (Central Tax) dated 28th December, 2023 and Notification 09/2023 (Central Tax) dated 31st March, 2023 - extension of time limit for adjudication of show cause notices and passing orders u/s 73 of the GST Act - personal hearing not provided - violation of principles of natural justice - HELD THAT:- The Court has perused the records. In fact, 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 holding that '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 23th 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.' It is relevant to note that post 16th January 2024, the Department has effected changes in the portal to ensure that the SCNs become visible to parties. However, the SCN in the present case are of 23rd September, 2023 and 14th December, 2023. Therefore, following the above decision, the impugned order is set aside. Let the entire matter be considered afresh after giving a personal hearing notice to the Petitioner. Petition disposed off. The core legal questions considered by the Court in this matter include:1. Whether the impugned notifications-Notification 56/2023 (Central Tax) dated 28th December 2023 and Notification 09/2023 (Central Tax) dated 31st March 2023-issued under Section 168A of the Central Goods and Services Tax Act, 2017, are valid and intra vires, particularly regarding the procedural requirements such as prior recommendation of the GST Council and adherence to limitation periods.2. Whether the time limits 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 the impugned notifications.3. Whether the impugned show cause notices, which were uploaded under the 'Additional Notices Tab' on the GST portal and not communicated by other means, were duly served on the Petitioner, thereby ensuring the right to a fair hearing.4. Whether the adjudication orders passed ex-parte without personal hearings or replies from the Petitioner are valid.5. The appropriate relief to be granted to the Petitioner pending the final adjudication on the validity of the impugned notifications by the Supreme Court.Issue-wise Detailed AnalysisValidity of Impugned Notifications under Section 168A of the GST ActThe legal framework centers on Section 168A of the Central Goods and Services Tax Act, 2017, which governs the extension of time limits for adjudication of show cause notices and passing of orders under GST law. The Section mandates that any extension of limitation must be preceded by a recommendation from the GST Council.The Court noted that Notification No. 9/2023 (Central Tax) was issued following the proper procedure, with the GST Council's recommendation preceding the notification. However, Notification No. 56/2023 (Central Tax) was challenged on the ground that it was issued without prior recommendation, and the ratification by the GST Council occurred only after issuance, thus violating the statutory mandate. The notification incorrectly stated that it was issued on the GST Council's recommendation.Precedents from other High Courts were examined: 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 also observed invalidity in Notification No. 56 but did not conclusively decide the vires issue. This cleavage of judicial opinion was recognized as a significant factor.The Supreme Court has taken cognizance of the conflicting High Court decisions and has issued notice in the Special Leave Petition concerning the validity of these notifications. The Supreme Court's order dated 21st February 2025 highlights that the key issue is whether the time limits for adjudication under Section 73 of the GST Act and SGST Act could be extended by the impugned notifications issued under Section 168A.The Court, therefore, refrained from expressing any opinion on the validity of the impugned notifications, acknowledging that the matter is sub judice before the Supreme Court. The Punjab and Haryana High Court's order was also cited, which deferred to the Supreme Court's decision and disposed of connected petitions accordingly.Service of Show Cause Notices and Right to Personal HearingOn the factual matrix, the Petitioner contended that the impugned show cause notices dated 23rd September 2023 and 14th December 2023 were uploaded only on the 'Additional Notices Tab' of the GST portal and were not brought to their notice by any other means, such as email or physical service. Consequently, the Petitioner had no knowledge of the notices and was unable to file replies or avail personal hearings.The Court referred to its earlier decision in a similar matter where show cause notices uploaded only under the 'Additional Notices Tab' were held insufficient for proper service. The Court emphasized the principle that orders should not be passed ex-parte without affording the party an opportunity to be heard. It was noted that the Department had since made changes to the portal to make such notices more visible, but these changes post-dated the impugned notices.In the cited precedent, the Court set aside the impugned order and remanded the matter to the adjudicating authority with directions to provide the petitioner a fair opportunity to file replies and be heard. The Court reiterated that the hearing notices must be communicated not merely by uploading on the portal but also through email to ensure effective service.Applying this principle, the Court set aside the impugned demand orders dated 22nd December 2023 and 6th April 2024, granted the Petitioner thirty days to file replies, and directed that personal hearing notices be sent via email to the Petitioner's provided email ID. The adjudicating authority was instructed to consider the replies and pass orders in accordance with law.Relief Pending Final Adjudication on Validity of NotificationsWhile the Court refrained from deciding the validity of the notifications, it recognized the hardship faced by the Petitioner due to ex-parte orders and lack of opportunity to be heard. The Court thus granted interim relief by ensuring procedural fairness in adjudication pending the Supreme Court's final decision.The Court expressly left open all rights and remedies of the parties and clarified that the outcome of the adjudication would be subject to the Supreme Court's ruling on the validity of the impugned notifications in S.L.P No. 4240/2025.Treatment of Competing ArgumentsThe Department argued that the notifications were valid and that the Petitioner had access to the notices on the GST portal. The Petitioner countered that the notices were effectively not served as they were placed under a less conspicuous tab and that no personal hearings were granted, resulting in ex-parte orders.The Court balanced these competing contentions by relying on prior precedents emphasizing the right to be heard and effective service of notices. It acknowledged the Department's portal changes but emphasized that such changes were not retrospective and could not cure defects in service for notices issued earlier.ConclusionsThe Court concluded that:The validity of the impugned notifications is a substantive legal question pending before the Supreme Court and cannot be decided at this stage.The Petitioner was not afforded adequate opportunity to be heard due to defective service of show cause notices, warranting setting aside of the impugned demand orders.The Petitioner must be granted an opportunity to file replies and be heard through personal hearings, with notices communicated effectively via email and portal.The adjudication proceedings shall be conducted afresh in accordance with law, subject to the Supreme Court's ultimate decision on the validity of the notifications.Significant HoldingsOn the procedural aspect of service and hearing, the Court held:'Intention is to ensure that the Petitioner is given an opportunity to file its reply and is heard on merits and that orders are not passed in default.'Further, regarding the validity of the impugned notifications, the Court stated:'The issue in respect of the validity of the impugned notifications is left open and the order of the Appellate Authority shall be subject to the outcome of the decision of the Supreme Court in S.L.P No 4240/2025.'The Court established the core principle that procedural fairness in adjudication under GST law requires effective service of show cause notices and an opportunity for personal hearing before passing orders, especially when the validity of extension notifications is under judicial scrutiny.The final determinations were that the impugned demand orders were set aside for lack of proper service and hearing, the Petitioner was granted time to file replies, and fresh adjudication was mandated, while the substantive question of validity of the notifications remained pending before the Supreme Court.