Delhi HC sets aside GST order under sections 73/74 for violating natural justice, grants hearing opportunity

Delhi HC set aside an order passed under GST sections 73/74 for violating natural justice principles as the petitioner was not afforded opportunity to be heard before the SCN and consequent order. Court granted time till July 10, 2025 for filing reply to SCN and directed adjudicating authority to conduct personal hearing before passing fresh order. The validity of Central and State Tax Notifications 9/2023 and 56/2023 regarding extension of time limits was left open, subject to pending SC and HC decisions. GST portal access was ordered for the petitioner.

---

---

1. ISSUES PRESENTED and CONSIDERED

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

• The validity and vires of the impugned Central and State Tax Notifications Nos. 9/2023 and 56/2023 issued under Section 168A of the Central Goods and Services Tax Act, 2017 ("GST Act"), particularly whether these notifications were lawfully issued with the requisite prior recommendation of the GST Council and within the prescribed limitation period.
• Whether the time limit for adjudication of show cause notices and passing of orders under Section 73 of the GST Act and the corresponding State GST Act for the financial year 2019-20 could be extended by issuing the said notifications under Section 168A of the GST Act.
• Whether the impugned show cause notice (SCN) and consequent adjudication order passed against the petitioner were valid, particularly focusing on the principles of natural justice, including the opportunity of being heard and filing of a reply to the SCN.
• The effect of pending proceedings before the Supreme Court and other High Courts on the adjudication of the present petition, especially regarding the validity of the impugned notifications.
• The reliefs available to the petitioner in light of the above issues, including the possibility of allowing the petitioner to file replies and be heard despite the validity or invalidity of the notifications being under judicial consideration.

2. ISSUE-WISE DETAILED ANALYSIS

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

Legal Framework and Precedents: Section 168A of the GST Act empowers the government to extend the time limit for adjudication of show cause notices and passing of orders beyond the prescribed period, subject to prior recommendation of the GST Council. The notifications impugned were issued under this provision to extend deadlines for the financial year 2019-20. The validity of these notifications has been challenged on procedural grounds, including non-compliance with the requirement of prior GST Council recommendation and issuance beyond the limitation period.

Several High Courts have taken divergent views on these notifications. 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 observed on the invalidity of Notification No. 56/2023 without deciding the vires, and this issue is currently pending before the Supreme Court 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 the challenge to the notifications involves complex legal questions about the procedural compliance under Section 168A and limitation issues. The Court refrained from adjudicating the validity of the notifications, deferring to the Supreme Court's final determination.

Application of Law to Facts and Treatment of Competing Arguments: The Court recognized the procedural irregularities alleged in the issuance of Notification No. 56/2023, particularly the post-facto ratification and issuance after expiry of limitation. It noted the ongoing judicial scrutiny and the importance of judicial discipline in awaiting the Supreme Court's verdict before adjudicating the validity in the present petition.

Conclusion: The Court left the question of validity of the impugned notifications open, subject to the Supreme Court's decision in SLP No. 4240/2025 and related proceedings before itself in W.P.(C) 9214/2024.

Extension of Time Limit for Adjudication under Section 73 of the GST Act

Legal Framework and Precedents: Section 73 of the GST Act prescribes the time limit for adjudication of show cause notices relating to tax demands. Section 168A permits extension of such time limits by notifications issued with GST Council's approval. The issue is whether the impugned notifications validly extended the limitation period for FY 2019-20.

Court's Reasoning: The Court noted that this issue is central to the ongoing Supreme Court proceedings and acknowledged the split in judicial opinions across various High Courts. It recognized that the extension of limitation by notifications is contingent on strict compliance with statutory mandates, which is under challenge.

Conclusion: The Court refrained from deciding this issue and awaited the Supreme Court's authoritative ruling.

Violation of Principles of Natural Justice in Passing the Impugned Order

Legal Framework: Principles of natural justice require that a party against whom adverse orders are proposed must be given a fair opportunity to be heard and to file replies or explanations to show cause notices.

Key Evidence and Findings: The impugned order noted that the petitioner neither filed any reply to the SCN nor appeared for personal hearing despite repeated opportunities. The adjudicating authority proceeded ex-parte to create a demand and impose penalties.

Court's Interpretation and Reasoning: The Court found that the petitioner was not afforded an adequate opportunity to be heard, violating natural justice principles. The order was described as nonspeaking, cryptic, and vague, further underscoring procedural infirmities. The Court emphasized that even if the notifications were valid, the petitioner must be given a chance to contest the matter on merits.

Application of Law to Facts: Since no reply was filed and no personal hearing was granted, the Court set aside the impugned order and granted the petitioner time to file a reply and be heard through personal hearing.

Treatment of Competing Arguments: While the respondents argued for upholding the order, the Court prioritized adherence to natural justice over procedural expediency, noting that the petitioner's inability to file replies and appear for hearings warranted relief.

Conclusion: The Court ordered fresh adjudication after affording the petitioner an opportunity to file replies and be heard, thereby restoring procedural fairness.

Effect of Pending Supreme Court Proceedings and Judicial Discipline

Legal Framework and Precedents: The principle of judicial discipline requires lower courts to respect and await the Supreme Court's decision on issues pending before it, especially where there is a division of opinion among High Courts.

Court's Reasoning: The Court noted that the Punjab and Haryana High Court had refrained from expressing opinions on the validity of Section 168A and related notifications, directing parties to await the Supreme Court's decision. The Delhi High Court followed the same approach, recognizing the importance of judicial comity and consistency.

Conclusion: The Court disposed of the petition subject to the outcome of the Supreme Court's decision, leaving the question of validity of notifications open and preserving all rights and remedies of the parties.

Reliefs and Procedural Directions

The Court granted the petitioner time until 10th July 2025 to file a reply to the SCN. Upon filing, the adjudicating authority was directed to issue a notice for personal hearing and consider the petitioner's submissions before passing a fresh order. The Court also directed that access to the GST portal be provided to the petitioner for uploading replies and accessing notices and documents. It clarified that the fresh order would be subject to the Supreme Court's and this Court's decisions in the related matters.

3. SIGNIFICANT HOLDINGS

"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."

"The validity of the impugned notifications is left open. Any order passed by the Adjudicating Authority shall be subject to the outcome of the decision of the Supreme Court in S.L.P No 4240/2025 titled M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors. and of this Court in W.P.(C) 9214/2024 titled Engineers India Limited v. Union of India &Ors."

"All rights and remedies of the parties are left open. Access to the GST Portal, shall be provided to the Petitioner to enable uploading of the reply as also access to the notices and related documents."

Core principles established include the imperative of adherence to natural justice in tax adjudication proceedings, even where statutory notifications extending limitation periods are under judicial challenge. The Court underscored the necessity of judicial discipline by deferring the validity of contentious notifications to the Supreme Court, ensuring uniformity in legal interpretation.

Final determinations on each issue are:

• The Court refrained from deciding the validity of the impugned notifications, leaving the matter to the Supreme Court.
• The extension of limitation by the impugned notifications is subject to the Supreme Court's decision.
• The impugned adjudication order was set aside for violation of natural justice, and the petitioner was granted opportunity to file replies and be heard.
• Procedural directions were issued to facilitate fair adjudication without prejudice to the ultimate validity of the notifications.

---