GST order set aside for violating natural justice principles, petitioner granted hearing opportunity and portal access

Delhi HC set aside an order passed under GST provisions without affording the petitioner an opportunity to be heard, violating principles of natural justice. The court granted time until July 10, 2025, to file reply to the show cause notice and directed the adjudicating authority to conduct personal hearing before passing fresh order. The validity of relevant notifications extending time limits for SCN issuance was left open, subject to SC decision in Engineers India Limited case. GST portal access was ordered for the petitioner.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this judgment include:

• Whether the impugned notifications issued under Section 168A of the Central Goods and Services Tax Act, 2017 (GST Act) and corresponding State Tax notifications extending the time limit for adjudication of show cause notices and passing of orders are valid and legally sustainable.
• Whether the procedural requirements, including the prior recommendation of the GST Council as mandated under Section 168A of the GST Act, were complied with before issuance of the impugned notifications.
• The impact of conflicting High Court decisions on the validity of these notifications and the role of the Supreme Court in resolving these conflicts.
• Whether the petitioner was afforded a fair opportunity to file a reply to the show cause notice (SCN) and to be heard before the impugned order was passed, in compliance with the principles of natural justice.
• The scope and extent of relief available to petitioners in light of the ongoing judicial review of the validity of the impugned notifications.

2. ISSUE-WISE DETAILED ANALYSIS

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

Relevant legal framework and precedents: Section 168A of the GST Act requires that any extension of the time limit for adjudication of show cause notices and passing orders must be preceded by a recommendation of the GST Council. The impugned notifications-Central Tax Notification Nos. 9/2023 and 56/2023, and corresponding State Tax notifications-purportedly extend these deadlines.

Several High Courts have considered the validity of these notifications with divergent outcomes: the Allahabad High Court upheld Notification No. 9/2023 (Central Tax), the Patna High Court upheld Notification No. 56/2023 (Central Tax), while the Guwahati High Court quashed Notification No. 56/2023 (Central Tax). The Telangana High Court expressed reservations regarding Notification No. 56/2023 (Central Tax) and its observations are under consideration by the Supreme Court in SLP No. 4240/2025.

Court's interpretation and reasoning: The Court noted the cleavage of opinion among various High Courts on the validity of the impugned notifications and acknowledged that the Supreme Court is seized of the matter. The Supreme Court's order dated 21st February 2025 highlights the central issue of whether the time limits under Section 73 of the GST Act could be extended by the impugned notifications under Section 168A.

Application of law to facts: While the Court recognized the ongoing judicial scrutiny, it refrained from expressing an opinion on the validity of the impugned notifications, respecting judicial discipline and awaiting the Supreme Court's final determination. The Punjab and Haryana High Court similarly deferred to the Supreme Court's decision and maintained interim orders.

Treatment of competing arguments: The Court considered submissions challenging the notifications on procedural grounds, including the absence of prior GST Council recommendation or improper timing of issuance. However, it deferred these issues to the Supreme Court, which is the appropriate forum to resolve the conflicting judicial views.

Conclusions: The Court held that the question of the validity of the impugned notifications remains open and is subject to the Supreme Court's final adjudication.

Opportunity to be Heard and Principles of Natural Justice

Relevant legal framework and precedents: The principles of natural justice require that a party against whom adverse action is proposed must be given a fair opportunity to present their case, including filing a reply to a show cause notice and being heard before passing an order.

Court's interpretation and reasoning: The petitioner contended that no opportunity was afforded to file a reply to the SCN and that the impugned order was passed ex-parte, being nonspeaking, cryptic, and vague. The Court examined the impugned order, which explicitly noted "No reply/clarification filed by the defaulter firm," indicating the petitioner's non-participation.

Key evidence and findings: The absence of any reply or clarification from the petitioner and the cryptic nature of the impugned order were critical facts. The Court found that the petitioner was denied a hearing, violating natural justice.

Application of law to facts: The Court concluded that the impugned order was liable to be set aside for failure to afford the petitioner an opportunity to be heard. The Court emphasized the necessity of allowing the petitioner to file a reply and participate in personal hearings before any final adjudication.

Treatment of competing arguments: While the respondents may have relied on the validity of the notifications and the impugned order, the Court prioritized fundamental procedural fairness over the merits of the underlying tax demand at this stage.

Conclusions: The Court set aside the impugned order and directed the adjudicating authority to provide the petitioner with an opportunity to file a reply and be heard through personal hearing, ensuring compliance with natural justice.

Interim Relief and Procedural Directions Pending Supreme Court's Decision

Court's interpretation and reasoning: Recognizing the ongoing litigation and conflicting judicial pronouncements, the Court sought to balance the interests of justice by allowing petitioners to contest their cases on merits without prejudicing the outcome of the Supreme Court's decision on the notifications' validity.

Application of law to facts: The Court categorized pending cases and proposed that, depending on the category, petitioners may be permitted to file replies, avail personal hearings, and pursue appellate remedies. This approach avoids premature finality while preserving judicial resources.

Conclusions: The Court granted the petitioner time to file a reply by 10th July 2025, mandated issuance of personal hearing notices, and directed that fresh orders be passed after considering the petitioner's submissions. The Court explicitly left open the question of the notifications' validity, subject to the Supreme Court's ruling.

3. SIGNIFICANT HOLDINGS

"The Court has perused the records. In this petition, as mentioned above, no reply to the SCN has been filed by the Petitioner. Relevant portion of the impugned order reads as under:

'Observations and conclusion of the assessing authority :

Agreed with SCN amount Specific reasons entered

No reply/clarification filed by the defaulter firm.'

This Court is of the opinion that since the Petitioner has not been afforded an opportunity to be heard and the said SCN and the consequent impugned order have been passed without hearing the Petitioner, an opportunity ought to be afforded to the Petitioner to contest the matter on merits."

Core principles established:

• The issuance of notifications extending statutory time limits under Section 168A of the GST Act must comply with procedural requirements, including prior recommendation of the GST Council, failing which their validity is questionable.
• Where conflicting judicial opinions exist on the validity of such notifications, the Supreme Court's decision is binding and must be awaited before final adjudication.
• Fundamental principles of natural justice mandate that a party must be given a fair opportunity to file a reply and be heard before passing any adverse order.
• Interim relief and procedural accommodations may be granted to ensure fairness pending final judicial determination on the legality of impugned notifications.

Final determinations on each issue:

• The validity of the impugned notifications under Section 168A of the GST Act is left open and subject to the Supreme Court's decision in SLP No. 4240/2025.
• The impugned order passed without affording the petitioner an opportunity to be heard is set aside.
• The petitioner is granted time to file a reply to the SCN and to be heard through personal hearing, with the adjudicating authority directed to pass a fresh order thereafter.
• All rights and remedies of the parties are preserved, and access to the GST portal is to be provided to facilitate procedural compliance.

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