Delhi HC allows ITC availment appeal to proceed on merits despite time limit challenges under sections 73/74

Delhi HC disposed of petition challenging validity of Notifications No. 9/2023 extending time limits for SCN issuance under sections 73/74. Petitioner contested excess ITC availment SCN and questioned procedural compliance under Section 168A. Court directed that petitioner's pending appeal be adjudicated on merits without dismissal on limitation grounds, while keeping notification validity question open pending SC decision in HCC-SEW-MEIL-AAG JV case and HC decision in Engineers India Limited case.

---

---

1. ISSUES PRESENTED and CONSIDERED

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

• The validity and vires of Notification No. 9/2023-Central Tax dated 31st March, 2023 and Notification No. 9/2023-State Tax dated 22nd June, 2023, issued under Section 168A of the Central Goods and Services Tax Act, 2017 ("CGST Act").
• Whether the impugned notifications were issued following the due procedure, including the necessity of prior recommendation by the GST Council as mandated under Section 168A of the CGST Act.
• The legality of extending the limitation period for adjudication of show cause notices and passing orders under Section 73 of the CGST Act and the corresponding State GST Acts by virtue of the impugned notifications.
• The challenge to the impugned show cause notice dated 9th December, 2023 and the consequent order dated 15th April, 2024, particularly with respect to alleged excess availment of Input Tax Credit (ITC) and the basis of such adjudication.
• The question of limitation and whether orders passed beyond the prescribed period can be sustained.
• Whether the petitioner was denied a fair opportunity to present its case, including the absence of personal hearings and the passing of ex-parte orders.
• The applicability and effect of appellate remedies under Section 107 of the CGST Act in relation to the challenges raised.

2. ISSUE-WISE DETAILED ANALYSIS

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

The impugned notifications purportedly extend the time limit for adjudication of show cause notices and passing of orders under Section 73 of the CGST Act. The notifications were challenged on grounds that the proper procedure was not followed, specifically that the prior recommendation of the GST Council, a mandatory requirement under Section 168A, was either absent or improperly obtained.

The Court examined the broader legal framework under Section 168A, which allows extension of limitation periods only upon prior recommendation of the GST Council. The Court noted that while Notification No. 9/2023-Central Tax had the GST Council's prior recommendation, Notification No. 56/2023-Central Tax was challenged for being issued contrary to the statutory mandate, with ratification occurring post issuance.

Precedents from various High Courts were considered, revealing a divergence of opinion: the Allahabad and Patna High Courts upheld the validity of the notifications, whereas the Guwahati High Court quashed Notification No. 56/2023-Central Tax. The Telangana High Court expressed reservations about the validity of Notification No. 56/2023 but did not conclusively decide the issue. This split has resulted in the Supreme Court entertaining a Special Leave Petition (SLP) to resolve these conflicting views.

The Supreme Court's intervention, as reflected in the order dated 21st February, 2025, explicitly framed the issue as whether the time limit for adjudication under Section 73 of the CGST and SGST Acts could be extended by the impugned notifications issued under Section 168A. The Supreme Court acknowledged the cleavage of opinion among High Courts and issued notice accordingly.

The Punjab and Haryana High Court, in light of the Supreme Court's pending decision, refrained from expressing any opinion on the validity of Section 168A or the notifications, directing that the matter be governed by the Supreme Court's eventual ruling. This judicial discipline was noted and followed by the Delhi High Court in the present matter.

Challenge to the Show Cause Notice and Impugned Order on Excess ITC Availment

The petitioner contended that the impugned order was premised on an incorrect finding that the petitioner had availed excess ITC based on the assumption that suppliers had not deposited the tax. The petitioner submitted documentary evidence of receipt of goods from registered suppliers and payment of dues, challenging the factual basis of the order.

The Court observed that the petitioner had an efficacious alternative remedy in the form of an appeal under Section 107 of the CGST Act. Consequently, the Court declined to entertain this challenge in the writ petition, relegating the petitioner to pursue the appellate process. This approach aligns with the principle that writ jurisdiction is not to be exercised where statutory remedies are available.

Further, the petitioner raised issues regarding the impugned order being unsigned and passed beyond the limitation period. The Court directed the respondents to obtain instructions on these points and listed the matter for further hearing.

Limitation and Effect of Extension Notifications

The petitioner challenged the extension of limitation period granted by the impugned notifications, contending that such extensions were invalid due to procedural defects and absence of GST Council recommendation.

The Court acknowledged that the validity of these notifications was under active consideration by the Supreme Court and thus refrained from deciding on the issue at this stage. However, the Court emphasized that the petitioner's appeal filed under Section 107, including the mandatory pre-deposit, would be adjudicated on merits and would not be dismissed on grounds of limitation, in view of the pendency of the Supreme Court proceedings.

Fair Opportunity and Procedural Fairness

The petitioner argued that it was denied a fair opportunity to present its case, citing the inability to file replies and absence of personal hearings, which resulted in ex-parte orders and substantial demands and penalties.

The Court noted these submissions and categorized the pending cases into six broad categories, proposing that orders be passed affording opportunity to petitioners to present their stand before the adjudicating authorities. The Court indicated that in some cases, appellate remedies might be allowed to proceed without prejudging the validity of the impugned notifications.

Effect of Pending Supreme Court Proceedings

The Court repeatedly noted that the ultimate determination of the validity of the impugned notifications is pending before the Supreme Court in SLP No. 4240/2025. Accordingly, the Court exercised judicial restraint in adjudicating on the notifications and related limitation issues, deferring to the higher forum's eventual ruling.

In the meantime, the Court disposed of the present petition with directions that the appeal already filed by the petitioner under Section 107 of the CGST Act be adjudicated on merits without dismissal on limitation grounds. The Court clarified that any order passed shall be subject to the outcome of the Supreme Court's decision and the Court's own decision in related matters.

3. SIGNIFICANT HOLDINGS

"The validity of the impugned notifications is left open. Any order passed by the appellate 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."

"The petitioner has an equally efficacious remedy of an appeal under Section 107 of the CGST Act / the DGST Act and therefore this Court does not consider it apposite to consider the same in this petition."

"The appeal filed by the Petitioner shall now be adjudicated on merits and shall not be dismissed on the ground of limitation."

Core principles established include:

• Extension of limitation under Section 168A of the CGST Act requires prior recommendation of the GST Council; failure to comply with this procedural requirement may render such notifications invalid.
• Judicial discipline mandates that pending the Supreme Court's decision on conflicting High Court judgments regarding the validity of such notifications, lower courts should refrain from expressing opinions and stay proceedings accordingly.
• Petitioners challenging factual findings regarding ITC availment must pursue statutory appellate remedies rather than writ petitions.
• Appeals filed during pendency of challenges to limitation extension notifications should be adjudicated on merits without dismissal on limitation grounds, subject to the outcome of higher court rulings.
• Procedural fairness, including the opportunity to be heard, is essential, and courts may direct adjudicating authorities to afford such opportunities before passing final orders.

---