Authority's order set aside for violating natural justice principles by not considering reply or providing personal hearing opportunity

Delhi HC set aside the impugned order passed by the Adjudicating Authority without considering petitioner's reply or providing opportunity for personal hearing. The court found violation of principles of natural justice as the SCN and consequent order were passed without hearing the petitioner. The matter was remanded back to the Adjudicating Authority with directions to consider petitioner's reply dated 7th November, 2023 and issue notice for personal hearing before passing fresh order.

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The core legal issues considered in this judgment include:

1. The validity and vires of 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 of show cause notices and passing of orders under Section 73 of the GST Act.

2. Whether the procedural requirements, including the prior recommendation of the GST Council as mandated under Section 168A, were complied with in issuing the impugned notifications.

3. The legality of passing adjudication orders without affording the petitioner an opportunity of personal hearing, especially when a detailed reply to the show cause notice had been filed.

4. The implications of conflicting judicial opinions from various High Courts on the validity of the impugned notifications and the effect of pending Supreme Court proceedings on the adjudication of these issues.

5. The scope of the Court's intervention in pending cases where the validity of the impugned notifications is under challenge before the Supreme Court.

Issue-wise Detailed Analysis:

1. Validity of Notification No. 9/2023-Central Tax and Related Notifications under Section 168A of the GST Act

The legal framework centers on Section 168A of the GST Act, which requires that any extension of time limits for adjudication of show cause notices and passing of orders must be preceded by a recommendation from the GST Council. The petitioner challenged the vires of Notification No. 9/2023-Central Tax dated 31st March, 2023, on the ground that the proper procedure was not followed.

The Court noted that this issue had been extensively litigated across various High Courts, resulting in divergent opinions. The Allahabad and Patna High Courts upheld the validity of the notifications, while the Guwahati High Court quashed Notification No. 56 of 2023 (Central Tax). The Telangana High Court observed possible invalidity of Notification No. 56 but did not conclusively decide the issue. The Supreme Court has been seized of the matter in S.L.P No. 4240/2025, where it is considering whether the time limits under Section 73 of the GST Act could be extended by issuing notifications under Section 168A.

The Court highlighted that the Supreme Court's order had acknowledged the cleavage of opinion and had issued notices, indicating the complexity and significance of the issue. The Punjab and Haryana High Court, recognizing the Supreme Court's primacy, refrained from expressing any opinion on the validity of Section 168A or the notifications and directed that the interim orders continue until the Supreme Court's final adjudication.

The Court, therefore, acknowledged that the question of validity remains open and is pending before the Supreme Court, and any decision in the present matter must be subject to the Supreme Court's ruling.

2. Compliance with Procedural Fairness and Opportunity of Personal Hearing

The petitioner contended that despite filing a detailed reply to the show cause notice dated 27th September 2023, no opportunity for personal hearing was granted before passing the impugned order dated 28th December 2023. The petitioner argued that the order was passed ex-parte and without considering the reply, violating principles of natural justice.

The impugned order itself noted that the petitioner's reply was deemed not comprehensive and unsupported by relevant documents, and although an opportunity for personal hearing was granted, the petitioner allegedly did not avail of it. Consequently, the adjudicating authority proceeded to create a demand and impose penalty under Section 73 of the GST Act.

The Court scrutinized this reasoning and found that the petitioner had indeed filed a reply and that no personal hearing was afforded. The Court held that passing an order without hearing the petitioner, especially after a reply was filed, violated the principles of natural justice. The Court emphasized that the petitioner must be given a fair opportunity to contest the show cause notice on merits, including personal hearing.

Accordingly, the Court set aside the impugned order and directed the adjudicating authority to consider the petitioner's reply dated 7th November 2023 and issue a fresh notice for personal hearing. The adjudicating authority was mandated to consider the submissions made during the personal hearing and pass a fresh order accordingly.

3. Impact of Pending Supreme Court Proceedings and Conflicting High Court Decisions

The Court acknowledged the ongoing Supreme Court proceedings concerning the validity of the impugned notifications and noted the conflicting decisions from various High Courts. It recognized the judicial discipline in refraining from expressing a definitive view on the validity of Section 168A and the notifications while the Supreme Court's decision is awaited.

The Court observed that many writ petitions had been disposed of with the stipulation that the validity of the impugned notifications would be subject to the Supreme Court's final decision. Similarly, in the present case, the Court left the question of validity open and clarified that any fresh order passed by the adjudicating authority would be subject to the outcome of the Supreme Court proceedings.

This approach preserves the rights and remedies of the parties while ensuring that the adjudication process is not unduly delayed, balancing the need for procedural fairness with the larger question of legal validity.

4. Scope of Relief and Directions to the Adjudicating Authority

Given the above analysis, the Court categorized the pending cases broadly and proposed that, notwithstanding the challenge to the notifications, parties should be afforded an opportunity to be heard and to place their stand before the adjudicating authority. The Court indicated that appellate remedies and further proceedings could be pursued without prejudging the validity of the notifications.

In the present case, the Court directed that the petitioner be provided access to the GST portal to enable access to notices and related documents. The Court also explicitly left all rights and remedies open to the parties, indicating that the present order was procedural and without prejudice to substantive rights.

Significant Holdings:

"And whereas, it is noticed that the Taxpayer has filed its reply with regard to above mentioned DRC 01 and the reply was not found comprehensive and not supported with relevant documents, an opportunity to submit reply and for the sake of principal of natural justice, opportunity for Personal Hearing, under Section 75(4) DGST Act, was granted to the taxpayer. In response to the DRC-01 the registered person has not availed opportunity of hearing provided to him in this office."

The Court, however, found this reasoning flawed and held that the petitioner was not afforded a personal hearing despite filing a reply, and therefore the impugned order was liable to be set aside.

"Accordingly, the impugned order is set aside. The Adjudicating Authority shall consider the reply dated 7th November, 2023, filed by the Petitioner and shall issue a notice for personal hearing to the Petitioner."

"However, it is made clear that the issue in respect of the validity of the impugned notification 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."

Core principles established include:

• The procedural fairness under the GST regime mandates that a show cause notice must be adjudicated only after considering the taxpayer's reply and affording an opportunity of personal hearing.
• Extension of time limits under Section 168A of the GST Act requires compliance with the procedural mandate of prior GST Council recommendation, and the validity of such notifications is a substantial legal question pending before the Supreme Court.
• Judicial discipline requires lower courts to refrain from expressing conclusive opinions on issues pending before the Supreme Court, while ensuring that procedural rights of parties are protected.
• Pending the Supreme Court's decision on the validity of notifications, adjudicating authorities should proceed with the adjudication process by ensuring compliance with principles of natural justice.

Final determinations on each issue are:

• The validity of the impugned notifications under Section 168A remains undecided and is subject to the Supreme Court's final ruling.
• The impugned order passed without affording personal hearing to the petitioner is set aside.
• The adjudicating authority is directed to consider the petitioner's reply, provide personal hearing, and pass a fresh order.
• The rights and remedies of the parties are preserved, and access to relevant GST portal documents must be provided.

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