2025 (5) TMI 1211 - HC - GST

GST portal access denial leads to show cause notice being set aside with extended reply deadline

Delhi HC set aside the impugned order due to miscommunication where petitioner lacked GST portal access when SCN was issued. Court granted petitioner ... Extension of time limit of issuance of SCN u/s 73 / 74 - Validity and vires of Notification No. 9/2023-Central Tax and Notification No. 9/2023-State Tax - procedural requirements under Section 168A for prior to the issuance of notifications - cancellation of registration retrospectively - No knowledge of the issuance of SCN - Challenging the SCN and impugned order - HELD THAT:- Clearly, there has been a miscommunication in this matter as the Petitioner did not have access to the GST portal at the time when the SCN was issued. The Petitioner shall, accordingly, be given access to the portal for a period of at least two months. The impugned order is set aside. The Petitioner is granted time till 10th July 2025, to file the reply to SCN. Upon filing of the reply, the Adjudicating Authority shall issue a notice for personal hearing to the Petitioner. The reply filed by the Petitioner to the SCN along with the submissions made in the personal hearing proceedings shall be duly considered by the Adjudicating Authority and fresh order with respect to the SCN shall be passed accordingly. However, it is made clear that the issue in respect of 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 M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors. and of this Court in Engineers India Limited v. Union of India & Ors.[2025 (4) TMI 60 - SC ORDER]. 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. The present writ petition is disposed of in above terms. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court 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 (hereinafter, 'GST Act').Whether the proper procedure, including prior recommendation of the GST Council as mandated under Section 168A of the GST Act, was followed before issuance of the impugned notifications extending the time limit for adjudication of show cause notices and passing of orders under Section 73 of the GST Act.The legality of raising a demand through a show cause notice (SCN) dated 25th September 2023 for the Financial Year 2017-18, when the Petitioner's GST registration had been cancelled retrospectively from 1st July 2017.The procedural fairness in adjudication, particularly whether the Petitioner was afforded adequate opportunity to file replies and participate in hearings, given the suspension and cancellation of GST registration and consequent lack of access to the GST portal.The impact of pending Supreme Court proceedings on the adjudication of challenges to the impugned notifications and related orders.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of the Impugned Notifications under Section 168A of the GST ActRelevant legal framework and precedents: Section 168A of the GST Act mandates that any extension of the time limit for adjudication of show cause notices and passing of orders requires a prior recommendation of the GST Council. The notifications challenged were issued purportedly under this provision.Various High Courts have taken divergent views on the validity of these notifications. The Allahabad High Court upheld Notification No. 9/2023 (Central Tax), the Patna High Court upheld Notification No. 56/2023 (Central Tax), whereas the Guwahati High Court quashed Notification No. 56/2023 (Central Tax). The Telangana High Court raised concerns regarding the validity of Notification No. 56/2023 (Central Tax), and this issue is presently under consideration by the Supreme Court in S.L.P No. 4240/2025.Court's interpretation and reasoning: The Delhi High Court acknowledged the conflicting judicial opinions and the pendency of the Supreme Court's adjudication on the matter. It refrained from expressing any definitive view on the validity of the impugned notifications, deferring to the Supreme Court's forthcoming decision.Treatment of competing arguments: The Court recognized the submissions challenging the notifications on procedural grounds, particularly the absence or improper timing of GST Council recommendations. It noted the ongoing judicial debate and the necessity of judicial discipline in awaiting the Supreme Court's ruling.Conclusion: The Court held the issue of validity of the impugned notifications open and subject to the Supreme Court's final determination in S.L.P No. 4240/2025. It directed that all related matters be governed by the Supreme Court's decision.Issue 2: Legality of Raising Demand via Show Cause Notice Post Cancellation of GST RegistrationRelevant legal framework: Section 73 of the GST Act governs the issuance of show cause notices and adjudication for recovery of tax not paid or short paid. Cancellation of GST registration under the Act impacts the taxpayer's rights and procedural access.Key evidence and findings: The Petitioner's GST registration was cancelled retrospectively from 1st July 2017 by an order dated 23rd December 2021. The SCN dated 25th September 2023 was issued after this cancellation. The Petitioner contended that due to cancellation, it had no access to the GST portal or relevant forms to respond to the SCN.Court's interpretation and reasoning: The Court found a clear miscommunication and procedural unfairness in issuing the SCN and proceeding with adjudication without providing the Petitioner access to the GST portal. The impugned order noted that no reply was filed and that the reply filed was unsatisfactory, yet the Petitioner's inability to access the portal was not adequately considered.Application of law to facts: The Court emphasized the importance of affording the Petitioner a meaningful opportunity to respond to the SCN. It set aside the impugned order and directed that the Petitioner be granted access to the GST portal for at least two months to file a reply.Treatment of competing arguments: While the Department contended that the Petitioner had failed to file a satisfactory reply, the Court balanced this against the Petitioner's lack of access and opportunity, holding that procedural fairness must prevail.Conclusion: The Court allowed the Petitioner time until 10th July 2025 to file a reply to the SCN and directed the Adjudicating Authority to provide a personal hearing thereafter before passing any fresh order.Issue 3: Procedural Fairness and Opportunity to be HeardRelevant legal framework: Principles of natural justice require that a party be given adequate opportunity to present its case, including access to documents and personal hearings before adverse orders are passed.Key evidence and findings: The Petitioner's application for copies of documents and access to the GST portal was initially ignored or inadequately addressed. The impugned order simultaneously recorded non-filing of reply and dissatisfaction with the reply, reflecting procedural irregularity.Court's interpretation and reasoning: The Court underscored the necessity of personal hearings and access to documents for fair adjudication. It mandated that the Adjudicating Authority issue a notice for personal hearing after receipt of the Petitioner's reply.Application of law to facts: The Court's directions ensured that the Petitioner's right to be heard was protected despite the administrative challenges posed by the cancellation of registration.Conclusion: The Court remedied the procedural lapse by providing access to the portal, time to file replies, and a personal hearing opportunity.Issue 4: Impact of Pending Supreme Court Proceedings on AdjudicationRelevant legal framework: Judicial discipline and principles of comity require lower courts to refrain from adjudicating on issues pending before the Supreme Court.Court's interpretation and reasoning: The Court noted that the Supreme Court was seized of the question of validity of the impugned notifications and had issued notices and interim orders. It therefore refrained from expressing any final view on the notifications and related issues.Application of law to facts: The Court disposed of the writ petition with liberty to the parties to pursue their remedies and made clear that any orders passed would be subject to the Supreme Court's final decision.Conclusion: The Court preserved the status quo and deferred to the Supreme Court's ultimate authority on the validity of the notifications and related legal questions.3. SIGNIFICANT HOLDINGS'The issue in respect of 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.''Clearly, there has been a miscommunication in this matter as the Petitioner did not have access to the GST portal at the time when the SCN was issued. The Petitioner shall, accordingly, be given access to the portal for a period of at least two months.''The impugned order is set aside. The Petitioner is granted time till 10th July 2025, to file the reply to SCN. Upon filing of the reply, the Adjudicating Authority shall issue a notice for personal hearing to the Petitioner.'Core principles established include:Extension of time limits for adjudication under the GST Act requires strict compliance with procedural mandates, including prior GST Council recommendation.Judicial restraint is warranted where conflicting High Court decisions exist and the Supreme Court is seized of the issue.Procedural fairness and natural justice require that a taxpayer must have access to relevant portals and documents and be given opportunity for personal hearing before adverse orders are passed, especially where registration cancellation impedes access.Orders passed without affording adequate opportunity to respond and participate are liable to be set aside.Final determinations on each issue were that the Court would not decide the validity of the impugned notifications but would ensure procedural fairness by setting aside the impugned order and directing the Adjudicating Authority to provide access, allow filing of replies, and conduct personal hearings. The ultimate fate of the notifications and related demands remains contingent on the Supreme Court's decision.