GST adjudication order set aside for denying personal hearing and not considering petitioner's replies

The Delhi HC set aside an adjudication order in a GST matter involving extension of time limits for show cause notices and validity of Notification No. 9/2023-Central Tax. The court found that the petitioner's replies were not duly considered and no personal hearing was provided. The matter was remanded to the adjudicating authority for hearing on merits. The court directed provision of GST Portal access to enable filing of replies and accessing notices. However, the validity of the impugned notifications remains open, subject to the SC's decision in a related case.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) The validity and legality of the impugned Notification No. 9/2023-Central Tax dated 31st March, 2023 and related notifications issued under Section 168A of the Central Goods and Services Tax Act, 2017 (hereinafter "GST Act"), particularly regarding the extension of time limits for adjudication under Section 73 of the GST Act;

(b) Whether the proper procedure, including the prior recommendation of the GST Council as mandated under Section 168A, was followed before issuance of the impugned notifications;

(c) The correctness of the impugned Show Cause Notice (SCN) dated 30th November, 2023 and the subsequent order dated 26th April, 2024, including the treatment of the Petitioner's reply and the conduct of personal hearings;

(d) The validity and propriety of the rectification order dated 18th July, 2024 rejecting the Petitioner's rectification application without considering the grounds raised;

(e) The scope of relief available to the Petitioner given the pendency of the constitutional validity of the notifications before the Supreme Court;

(f) The procedural fairness and adherence to principles of natural justice in the adjudication process under GST law.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) and (b): Validity of the impugned notifications issued under Section 168A of the GST Act

Relevant legal framework and precedents: Section 168A of the GST Act empowers the Central Government to extend the time limit for adjudication of show cause notices and passing of orders under Section 73. However, this extension requires prior recommendation of the GST Council. The validity of notifications issued under this provision has been challenged on grounds of procedural non-compliance and retrospective ratification.

Various High Courts have taken divergent views on these notifications. The Allahabad High Court upheld Notification No. 9/2023, while the Patna High Court upheld Notification No. 56/2023. Conversely, the Guwahati High Court quashed Notification No. 56/2023 (Central Tax). The Telangana High Court observed on the invalidity of Notification No. 56/2023 but did not conclusively rule on its vires. This cleavage of opinion has led to the Supreme Court admitting Special Leave Petitions (SLPs) for final adjudication.

Court's interpretation and reasoning: The Delhi High Court recognized the conflicting judicial opinions and the pendency of the issue before the Supreme Court. It refrained from expressing any opinion on the validity of the impugned notifications, deferring to the Supreme Court's forthcoming decision. The Court noted the importance of judicial discipline and the binding nature of the Supreme Court's ruling on this issue.

Key evidence and findings: The Court referred to the procedural history, including the timing of recommendations by the GST Council and issuance of notifications, and the varying judicial pronouncements. The Supreme Court's interim orders and the pendency of SLP No. 4240/2025 were pivotal in the Court's approach.

Application of law to facts: Given the pendency of the constitutional validity of the notifications, the Court held that the question of the notifications' validity must await the Supreme Court's decision. Accordingly, the Court left the issue open and subject to the Supreme Court's outcome.

Treatment of competing arguments: The petitioner challenged the notifications' validity, while respondents relied on the notifications' purported compliance with Section 168A. The Court balanced these arguments by deferring to the Supreme Court and refraining from pre-emptive adjudication.

Conclusions: The Court held that the validity of the impugned notifications is a live issue pending before the Supreme Court and declined to decide on it. The Court's order explicitly preserves the parties' rights pending the Supreme Court's ruling.

Issue (c), (d), and (f): Validity of the impugned Show Cause Notice, adjudication order, and rectification order; procedural fairness and natural justice

Relevant legal framework and precedents: Under Section 73 of the GST Act, the adjudicating authority issues show cause notices and passes orders after considering the taxpayer's reply. Principles of natural justice require that the taxpayer be given an opportunity to be heard, including personal hearings where appropriate, and that replies filed be duly considered. Rectification applications under GST law must be examined on merits, and reasons must be recorded for rejection.

Court's interpretation and reasoning: The Court found that the Petitioner had filed a reply to the impugned SCN, which was not considered by the adjudicating authority. The order summary incorrectly recorded that no reply was furnished. Further, the rectification application was rejected without addressing the grounds raised by the Petitioner. The Court emphasized that such procedural lapses violate principles of natural justice and render the impugned order unsustainable.

Key evidence and findings: The Petitioner annexed the reply in form GST DRC-06 filed on 13th March, 2024, which was not reflected in the adjudication records. The rectification order incorrectly stated that no reply was filed. The Court examined these documents and found a clear procedural irregularity.

Application of law to facts: The Court applied the principles of natural justice and procedural fairness, holding that the Petitioner must be afforded an opportunity to be heard on merits. The failure to consider the reply and provide personal hearing warranted setting aside the impugned order and remanding the matter for fresh adjudication.

Treatment of competing arguments: The respondents contended that the orders were passed after due consideration of records available on the GST portal. The Court rejected this contention in light of the Petitioner's documented reply and absence of personal hearing, underscoring the necessity of due process.

Conclusions: The Court set aside the impugned order and rectification order, directing the adjudicating authority to hear the Petitioner afresh, allow filing of additional replies or documents by a specified date, and provide personal hearing. The Court also directed restoration of access to the GST portal for the Petitioner.

Issue (e): Relief available to the Petitioner pending Supreme Court decision

Court's interpretation and reasoning: While the validity of the impugned notifications is pending before the Supreme Court, the Court recognized the Petitioner's grievance of ex-parte adjudication and imposition of demands and penalties without adequate opportunity. The Court proposed categorizing cases and affording interim relief by permitting the Petitioner to file replies, seek personal hearings, and pursue appellate remedies without prejudging the validity of the notifications.

Application of law to facts: The Court's approach balances the need to maintain the status quo on the notifications' validity with the Petitioner's right to fair adjudication. It ensures that procedural fairness is not sacrificed pending the Supreme Court's final decision.

Conclusions: The Court disposed of the petition on terms permitting the Petitioner to be heard on merits and to avail all rights and remedies, subject to the Supreme Court's ultimate ruling on the notifications.

3. SIGNIFICANT HOLDINGS

"Considering the fact that Petitioner's replies has not been duly considered and no personal hearing is seen to have been provided, the Court is of the opinion that the impugned order deserves to be set aside."

"The matter is remanded to the concerned Adjudicating Authority for the Petitioner to be heard on merits. The Petitioner is permitted to file any additional reply or documents, if required, by 10th July, 2025. Personal hearing shall be provided to the Petitioner."

"All rights and remedies of the parties are left open. Access to the GST Portal, if not already available, shall be provided to the Petitioner to enable filing of the reply as also access to the notices and related documents."

"However, it is again made clear that the issue in respect of the validity of the impugned notifications is left open and the order of the adjudicating authority shall be subject to the outcome of the decision of the Supreme Court in S.L.P No 4240/2025."

Core principles established include:

• The necessity of adherence to procedural fairness and natural justice in GST adjudication proceedings, including due consideration of replies and provision of personal hearings.
• The requirement that extension of time limits under Section 168A of the GST Act must comply with procedural mandates, including prior GST Council recommendation, the validity of which is subject to Supreme Court scrutiny.
• The importance of judicial discipline in deferring to the Supreme Court's decision where conflicting High Court judgments exist on a legal question.
• The balancing of interim relief to taxpayers pending final adjudication on the validity of notifications, ensuring no prejudice due to procedural lapses.

Final determinations:

The Court set aside the impugned order and rectification order, remanded the matter for fresh adjudication with opportunity to the Petitioner to be heard, and left open the question of the notifications' validity pending the Supreme Court's decision. The petition was disposed of on these terms, with all rights and remedies preserved.

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