Authority must consider appeal on merits instead of dismissing on limitation grounds after proper SCN reply consideration

HC set aside the impugned order and directed the Appellate Authority to consider the appeal on merits without dismissing it on limitation grounds. The court found that the petitioner's reply to the SCN was duly considered by the Adjudicating Authority. The validity of notifications extending time limits for SCN issuance under sections 73/74 was left open, with any appellate order subject to pending SC decisions in related matters.

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The core legal questions considered in this judgment revolve around the validity and procedural propriety of certain tax notifications and consequential orders issued under the Goods and Services Tax (GST) regime, specifically:

• Whether the impugned Notifications Nos. 09/2023-Central Tax, 56/2023-Central Tax, 09/2023-State Tax, and 56/2023-State Tax, issued under Section 168A of the Central Goods and Services Tax Act, 2017 (GST Act), are valid and vires.
• Whether the procedural requirements, including the prior recommendation of the GST Council as mandated under Section 168A, were complied with before issuance of these notifications.
• The legality of extending deadlines for adjudication of show cause notices and passing of orders under Section 73 of the GST Act and the corresponding State GST Acts through these notifications.
• The impact of the validity or invalidity of these notifications on the demands raised and penalties imposed on the Petitioner.
• Whether the Petitioner is entitled to relief in the form of opportunity to be heard or appellate remedies notwithstanding challenges to the notifications themselves.
• The appropriate course of action pending the final adjudication by the Supreme Court on the validity of these notifications.

Issue-wise Detailed Analysis:

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

The impugned notifications were issued purportedly under Section 168A of the GST Act, which empowers extension of time limits for adjudication and passing orders related to tax demands. The Petitioner challenged these notifications primarily on procedural grounds, contending that the mandatory prior recommendation of the GST Council was either absent or improperly obtained, thus rendering the notifications invalid.

The Court examined the legal framework under Section 168A, which explicitly requires the GST Council's prior recommendation before extending deadlines. The Court noted that while Notification No. 9/2023-Central Tax had the requisite prior recommendation, Notification No. 56/2023-Central Tax was issued without such prior recommendation, with ratification given only after issuance, violating the statutory mandate. Similarly, Notification No. 56/2023-State Tax was issued after the expiry of the limitation period set by an earlier notification, raising further questions of validity.

The Court referenced divergent judicial precedents from various High Courts: the Allahabad High Court upheld Notification No. 9, the Patna High Court upheld Notification No. 56, while the Guwahati High Court quashed Notification No. 56. The Telangana High Court observed invalidity of Notification No. 56 without deciding on the vires, and this issue is currently sub judice before the Supreme Court in S.L.P No. 4240/2025.

The Supreme Court's interim order in the said SLP acknowledged the cleavage of opinion among High Courts and issued notice, indicating the matter's complexity and the necessity for authoritative resolution.

The Punjab and Haryana High Court, in related petitions, refrained from expressing opinions on the validity of Section 168A and the notifications, deferring to the Supreme Court's eventual decision, and continued interim reliefs accordingly.

Impact of Pending Supreme Court Proceedings and Interim Relief

The Court recognized that the validity of the impugned notifications is a matter presently before the Supreme Court, which has yet to deliver a final verdict. Given this, the Court adopted a cautious approach, refraining from pronouncing on the notifications' validity. Instead, it aligned with judicial discipline and precedent by deferring to the Supreme Court's forthcoming decision.

In light of this, the Court disposed of several petitions in a batch, subject to the Supreme Court's outcome, and retained jurisdiction over parallel State notifications. The Court proposed categorizing pending cases and granting reliefs such as permitting parties to file replies, avail personal hearings, and pursue appellate remedies, thereby ensuring procedural fairness despite the ongoing validity challenge.

Procedural Fairness and Opportunity to be Heard

Several counsels contended that irrespective of the notifications' validity, the Petitioners were denied adequate opportunity to respond to show cause notices or participate in hearings, resulting in ex-parte orders and substantial demands and penalties.

The Court acknowledged these submissions and emphasized the importance of affording Petitioners a fair chance to present their case. It observed that in some instances, orders had been passed without considering replies or personal hearings, which could prejudice the Petitioners.

Consequently, the Court set aside the impugned demand order dated 30th August 2024 and directed that the appeal filed by the Petitioner challenging this order be heard on merits without dismissal on limitation grounds. The Court mandated that the Appellate Authority hear the Petitioner and pass orders in accordance with law, thereby ensuring procedural justice.

Application of Law to Facts and Treatment of Competing Arguments

The Court carefully balanced the competing interests of the revenue authorities and the Petitioners. While acknowledging the revenue's reliance on the impugned notifications for extending limitation periods and raising demands, the Court also recognized the Petitioners' right to due process and fair adjudication.

By deferring the question of the notifications' validity to the Supreme Court and focusing on procedural safeguards, the Court maintained the status quo without prejudging the substantive issues. This approach prevented irreparable harm to the Petitioners while preserving the revenue's statutory powers subject to judicial scrutiny.

Conclusions

• The validity of the impugned notifications issued under Section 168A of the GST Act is a substantial legal question currently pending before the Supreme Court.
• Procedural compliance, including prior recommendation by the GST Council, is mandatory for such notifications; failure to comply may render them invalid.
• Pending Supreme Court adjudication, High Courts have adopted a restrained approach, refraining from expressing opinions on validity and continuing interim reliefs.
• Petitioners are entitled to procedural fairness, including opportunity to file replies, personal hearings, and appellate remedies, especially where ex-parte orders have been passed.
• The impugned demand order was set aside, and the appeal is to be heard on merits without limitation objections.
• The ultimate fate of the notifications and related orders is subject to the Supreme Court's decision in S.L.P No. 4240/2025 and related matters.

Significant Holdings:

"In terms of Section 168A, prior recommendation of the GST Council is essential for extending deadlines."

"The notification incorrectly states that it was on the recommendation of the GST Council" where ratification was subsequent to issuance.

"Keeping in view the judicial discipline, we refrain from giving our opinion with respect to the vires of Section 168-A of the Act as well as the notifications issued in purported exercise of power under Section 168-A of the Act which have been challenged, and we direct that all these present connected cases shall be governed by the judgment passed by the Hon'ble Supreme Court and the decision thereto shall be binding on these cases too."

"The impugned order is set aside. After hearing the Petitioner, the order shall be passed by the Appellate Authority in accordance with law."

"Any order passed by the Appellate Authority shall be subject to the outcome of the decision of the Supreme Court."

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