Order set aside for violating natural justice principles in GST proceedings under sections 73/74 without hearing petitioner

Delhi HC set aside an order passed under GST provisions without affording the petitioner an opportunity to be heard regarding a show cause notice issued under sections 73/74. The court found that the SCN and consequent order were passed without hearing the petitioner, violating principles of natural justice. The matter was remanded to the Adjudicating Authority to consider the petitioner's reply and conduct fresh proceedings. The validity of Central and State Tax Notifications regarding time limit extensions was left open, subject to pending SC and HC decisions. GST Portal access was directed to be provided to the petitioner.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court 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 (CGST Act), particularly regarding the extension of time limits for adjudication of show cause notices and passing of orders for the Financial Year 2019-20.
• Whether the impugned notifications were issued following the proper statutory procedure, including the requirement of prior recommendation by the GST Council as mandated under Section 168A of the CGST Act.
• The legality of the impugned order dated 24th August 2024 passed by the Sales Tax Officer, which was issued without affording the Petitioner an opportunity of personal hearing or to file a reply to the show cause notice dated 14th May 2024.
• The applicability and impact of judicial precedents and pending Supreme Court proceedings on the validity of the impugned notifications and consequential orders.
• The appropriate relief and procedural directions in cases where adjudication orders have been passed ex-parte due to non-participation of the Petitioner.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Impugned Notifications under Section 168A of the CGST Act

Relevant Legal Framework and Precedents: Section 168A of the CGST Act empowers the government to extend the time limit for adjudication of show cause notices and passing of orders. The issuance of such notifications requires prior recommendation of the GST Council. Several High Courts have examined the validity of Notifications Nos. 9/2023 and 56/2023, with conflicting outcomes: the Allahabad and Patna High Courts upheld the notifications, whereas the Guwahati High Court quashed Notification No. 56/2023 (Central Tax). The Telangana High Court made observations on the invalidity of Notification No. 56/2023 (Central Tax), and this issue is presently under consideration before the Supreme Court in S.L.P. No. 4240/2025.

Court's Interpretation and Reasoning: The Court acknowledged the divergence of judicial opinions and the pendency of the Supreme Court's adjudication on the matter. It noted that the notifications were challenged on procedural grounds, primarily the absence of prior GST Council recommendation before issuance, which is mandatory under Section 168A. The Court refrained from expressing any opinion on the validity of these notifications, deferring to the Supreme Court's forthcoming decision.

Application of Law to Facts: Given the ongoing Supreme Court proceedings and the conflicting High Court rulings, the Court held that the validity of the impugned notifications would remain subject to the Supreme Court's final decision. The Court also noted that the Punjab and Haryana High Court had disposed of similar writ petitions, staying its hand pending the Supreme Court's ruling.

Treatment of Competing Arguments: The Petitioner challenged the notifications' validity on procedural grounds, while the Respondents relied on the notifications' purported compliance with Section 168A. The Court balanced these competing contentions by deferring the substantive issue to the Supreme Court, thereby maintaining judicial discipline and avoiding contradictory rulings.

Conclusion: The Court held the question of the notifications' validity open and subject to the Supreme Court's determination.

Issue 2: Legality of the Impugned Order Passed Without Affording Opportunity of Hearing

Relevant Legal Framework and Precedents: Principles of natural justice require that a show cause notice be responded to and that the affected party be afforded a reasonable opportunity of hearing before passing an adjudication order. Section 73 of the CGST Act mandates issuance of a show cause notice and prescribes penalties and interest. The impugned order was passed ex-parte on the ground that the Petitioner had not filed any reply or appeared for personal hearing despite reminders.

Court's Interpretation and Reasoning: The Court observed that the impugned order was cryptic, non-speaking, and vague, and that the Petitioner was not afforded a proper opportunity to file a reply or appear for personal hearing. The Court emphasized that the principles of natural justice had been violated as the adjudication was conducted ex-parte without hearing the Petitioner's side.

Key Evidence and Findings: The records showed that the Petitioner did not submit a reply to the show cause notice, nor appeared for the personal hearing scheduled. However, the Court found that the Petitioner had been denied adequate opportunity to participate meaningfully in the proceedings, which warranted setting aside the impugned order.

Application of Law to Facts: The Court applied the fundamental principle that no order affecting the rights of a party should be passed without affording an opportunity of hearing, especially in tax adjudication matters involving penalties and demands.

Treatment of Competing Arguments: While the Respondents argued that sufficient opportunities were provided, including reminders, the Court found that the Petitioner's inability to file replies or attend hearings due to various reasons justified granting a fresh opportunity.

Conclusion: The Court set aside the impugned order and directed that the Petitioner be granted time to file a reply and be given a personal hearing before a fresh adjudication order is passed.

Issue 3: Procedural Relief and Directions Pending Final Adjudication

Relevant Legal Framework: The Court has inherent powers under Articles 226 and 227 of the Constitution to ensure fair adjudication and to protect fundamental rights, including the right to be heard.

Court's Interpretation and Reasoning: Recognizing the pendency of the Supreme Court's decision on the validity of the notifications and the Petitioner's inability to participate effectively in the adjudication, the Court proposed a pragmatic approach. It categorized the pending cases and allowed for procedural reliefs such as filing replies, personal hearings, and appellate remedies without prejudicing the question of validity of the notifications.

Application of Law to Facts: The Court granted the Petitioner time till 10th July 2025 to file a reply to the show cause notice and directed the Adjudicating Authority to issue a personal hearing notice. It also mandated that the fresh order be passed after considering the Petitioner's submissions and that all rights and remedies remain open.

Treatment of Competing Arguments: The Court balanced the Respondents' interest in timely tax assessment with the Petitioner's right to due process, ensuring that adjudication is conducted fairly and transparently.

Conclusion: The Court disposed of the writ petition with directions for fresh adjudication post opportunity of hearing, while leaving the question of notifications' validity open pending Supreme Court decision.

3. SIGNIFICANT HOLDINGS

"The impugned order is nonspeaking, cryptic and vague in nature and has therefore been issued in complete violation of the principles of natural justice and is thereby liable to be set aside on the said ground."

"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."

Core principles established include the mandatory requirement of prior GST Council recommendation for issuance of time-extension notifications under Section 168A, the necessity of adherence to natural justice principles in tax adjudication, and the judicial discipline of deferring to the Supreme Court in matters of conflicting High Court decisions.

Final determinations on each issue are:

• The validity of the impugned notifications is not decided but reserved for the Supreme Court.
• The impugned order passed without hearing the Petitioner is set aside for violation of natural justice.
• The Petitioner is granted an opportunity to file a reply and be heard, with fresh adjudication to follow.
• All rights and remedies remain open, and the matter is disposed of with directions for procedural fairness pending higher adjudication.

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