GST registration cancelled for non-existent firm, writ petition dismissed, appeal under section 107 permitted with pre-deposit

The Delhi HC dismissed a writ petition challenging a SCN issued under sections 73/74 of CGST Act and related order, where the petitioner's registration was cancelled as the firm was non-existent. The court held that since the reply was considered, personal hearing was granted, and the order is appealable under section 107, it does not warrant interference under writ jurisdiction. The petitioner was permitted to file appeal under section 107 with prescribed pre-deposit by July 10, 2025, with assurance that limitation would not bar the appeal given the pending writ petition.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

• Whether the impugned Show Cause Notice dated 27th May, 2024 and the order in Form GST DRC-07 dated 31st August, 2024 are legally sustainable.
• The vires and validity of Notification 56/2023 (Central Tax) dated 28th December, 2023 and Notification 09/2023 (Central Tax) dated 31st March, 2023, particularly regarding procedural compliance under Section 168A of the Central Goods and Services Tax Act, 2017 (CGST Act).
• Whether the extension of time limits for adjudication under Section 73 of the CGST Act and the SGST Act for the financial year 2019-2020 could be validly granted by the impugned notifications issued under Section 168A of the CGST Act.
• Whether the Petitioner was afforded adequate opportunity to file replies and avail personal hearings before passing the impugned adjudication order.
• The effect of conflicting High Court decisions on the validity of the impugned notifications and the implications of pending Supreme Court proceedings on the matter.

2. ISSUE-WISE DETAILED ANALYSIS

Validity of the Impugned Notifications under Section 168A of the CGST Act

Legal Framework and Precedents: Section 168A of the CGST Act empowers the Central Government to extend the time limit for issuance of show cause notices and completion of adjudication proceedings beyond the prescribed period, subject to prior recommendation of the GST Council. The impugned notifications 09/2023 and 56/2023 were issued purportedly under this provision to extend limitation periods for adjudication of GST demands for FY 2019-20.

Several High Courts have taken divergent views on the validity of these notifications. The Allahabad High Court upheld Notification No. 9/2023, the Patna High Court upheld Notification No. 56/2023, while the Guwahati High Court quashed Notification No. 56/2023. The Telangana High Court expressed reservations about Notification No. 56/2023's validity, and this issue is presently under consideration by the Supreme Court in SLP No. 4240/2025.

Court's Interpretation and Reasoning: The Court noted the conflicting judicial opinions and acknowledged that the matter was sub judice before the Supreme Court. It observed that Notification No. 56/2023 was challenged on the ground that it was issued without prior recommendation of the GST Council, with ratification occurring only after issuance, contrary to the mandate of Section 168A. The Court also referred to the Punjab and Haryana High Court's decision to refrain from expressing an opinion on the validity of Section 168A and the notifications, deferring to the Supreme Court's forthcoming ruling.

Application of Law to Facts: Given the ongoing Supreme Court proceedings and the judicial divergence, the Court refrained from adjudicating the validity of the impugned notifications. It emphasized that the outcome of the Supreme Court's decision would be binding on the parties and the Court itself.

Treatment of Competing Arguments: The Petitioner challenged the notifications' validity, while the Respondents relied on the notifications to sustain the extension of limitation for adjudication. The Court balanced the competing views by deferring the issue to the Supreme Court, thereby maintaining judicial discipline and avoiding conflicting rulings.

Conclusion: The Court left the question of the notifications' validity open, subject to the Supreme Court's final adjudication.

Validity of the Impugned Show Cause Notice and Adjudication Order

Legal Framework and Precedents: Under the CGST Act, issuance of a show cause notice and adjudication orders must comply with principles of natural justice, including providing the taxpayer an opportunity to be heard and consider their replies. Section 107 of the CGST Act provides the remedy of appeal against such orders.

Court's Interpretation and Reasoning: The Petitioner contended that despite filing a reply on 27th June 2024, it was neither considered nor was a personal hearing granted before passing the impugned order. The Court examined the record and found that a personal hearing was fixed on 28th June 2024. The impugned order explicitly noted the Petitioner's reply and reasons for disagreement, including reliance on a precedent from the Kolkata High Court affirming the validity of Input Tax Credit (ITC) despite retrospective cancellation of supplier registration.

The adjudicating authority, however, rejected the reply on the basis that the supplier's registration was cancelled due to the non-existence of the firm, thus justifying the demand. The Court found that the reply was considered and a personal hearing was granted, negating the Petitioner's claim of procedural denial.

Application of Law to Facts: Since the order was passed after considering the Petitioner's reply and affording a personal hearing, the Court held that the impugned order did not warrant interference under writ jurisdiction.

Treatment of Competing Arguments: The Petitioner's argument of non-consideration and denial of hearing was countered by the adjudicating authority's record. The Court accepted the latter, emphasizing procedural compliance.

Conclusion: The impugned order was held to be valid and appealable under Section 107 of the CGST Act.

Opportunity for Appeal and Interim Reliefs

The Court permitted the Petitioner to file an appeal under Section 107 of the CGST Act along with the prescribed pre-deposit by 10th July, 2025. It directed that if the appeal was filed within the stipulated time, the Appellate Authority would not dismiss it on the ground of limitation and would hear the Petitioner on merits. The Court also mandated that the Petitioner be provided access to the GST Portal to enable filing of replies and access to notices and related documents.

The Court clarified that all rights and remedies of the parties were left open and that the appellate proceedings would be subject to the Supreme Court's final decision on the validity of the impugned notifications.

3. SIGNIFICANT HOLDINGS

The Court's crucial legal reasoning includes the following verbatim excerpts:

"The impugned order clearly records... 'Response of the tax payer: The reasons cited by the tax payer for disagreeing/partially disagreeing are:... It is submitted that even if supplier's registration has been cancelled retrospectively it will not affect the availment of ITC qua Noticee. The issue has been squarely covered by the Hon'ble High Court of Kolkata...'"

"The reply of taxpayer has been examined from GST portal and found reply is not satisfactory/comprehensive/incomplete supporting document, as the supplier is cancelled due to non-existence of the firm. Hence, demand is created."

"Considering the fact that the reply has been considered, a personal hearing was granted and the impugned order is an appealable order under Section 107 of Central Goods and Services Tax Act, 2017, the Court is of the opinion that the order does not warrant interference under the writ jurisdiction."

"Since the matter is pending before the Hon'ble Supreme Court, the interim order passed in the present cases, would continue to operate and would be governed by the final adjudication by the Supreme Court on the issues in the aforesaid SLP-4240-2025."

Core principles established include:

• Extension of limitation periods under Section 168A of the CGST Act requires strict adherence to procedural mandates, including prior GST Council recommendation.
• Judicial discipline necessitates deferring to the Supreme Court's ruling when conflicting High Court opinions exist on the validity of statutory notifications.
• Adjudication orders passed after considering replies and affording personal hearings do not warrant interference under writ jurisdiction.
• Parties must be afforded opportunities to file appeals and access procedural mechanisms, including access to the GST Portal for effective participation.

Final determinations:

• The validity of the impugned notifications remains undecided and is subject to the Supreme Court's outcome in SLP No. 4240/2025.
• The impugned Show Cause Notice and adjudication order were validly passed after considering the Petitioner's reply and granting a personal hearing.
• The Petitioner is entitled to file an appeal under Section 107 of the CGST Act within a stipulated time, with assurance against dismissal on limitation grounds and with access to necessary procedural facilities.

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