Delhi HC sets aside GST order for violating natural justice, grants time till July 2025 for SCN reply

Delhi HC set aside GST order dated 5th August 2024 and remanded matter to Adjudicating Authority. Petitioner challenged SCN and consequent order along with vires of Notification No. 56/2023-Central Tax and State Tax notifications. Court found SCN was uploaded on Additional Notices Tab without petitioner's knowledge, violating natural justice principles. Following precedent in Neelgiri Machinery case, court granted petitioner time till 10th July 2025 to file SCN reply. Adjudicating Authority directed to provide personal hearing opportunity thereafter. Petition allowed by way of remand.

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The core legal questions considered in this judgment include:

1. Whether the impugned Show Cause Notice (SCN) and consequent order passed by the Sales Tax Officer are valid, particularly in light of the manner in which the SCN was communicated to the Petitioner.

2. The vires and validity of Notification No. 56/2023 (Central Tax) dated 28th December 2023 and Notification No. 56/2023 (State Tax) dated 11th July 2024, specifically whether these notifications were issued in compliance with the procedural requirements under Section 168A of the Central Goods and Services Tax Act, 2017 (GST Act).

3. The legality of extending the time limits for adjudication of show cause notices and passing orders under Section 73 of the GST Act and the corresponding State GST Act by issuing the impugned notifications.

4. Whether the Petitioner was afforded a fair opportunity to be heard, including the adequacy of communication of notices and the availability of personal hearings.

Issue-wise Detailed Analysis

Validity of the Impugned Notifications (Notification No. 56/2023 Central and State Tax)

The impugned notifications purportedly extended the time limits for adjudication under the GST framework. The Petitioner challenged these notifications on the ground that they were issued without following the proper procedure mandated by Section 168A of the GST Act, which requires prior recommendation of the GST Council before extending deadlines.

The Court noted that this issue was already under consideration in a batch of petitions before the High Court and was further pending before the Supreme Court in S.L.P No. 4240/2025. Various High Courts had divergent views on the validity of these notifications: the Allahabad and Patna High Courts upheld them, while the Guwahati High Court quashed Notification No. 56/2023 (Central Tax). The Telangana High Court had also expressed reservations about the validity of Notification No. 56/2023 (Central Tax), and the Supreme Court had issued notices and interim orders in the matter.

The Court emphasized judicial discipline and deferred to the Supreme Court's pending adjudication, refraining from expressing any opinion on the validity of these notifications. It acknowledged that the outcome of the Supreme Court's decision would be binding on all related matters.

Communication of Show Cause Notices and Opportunity to be Heard

The Petitioner contended that the SCN dated 21st May 2024 was uploaded only on the 'Additional Notices Tab' of the GST portal, which was not adequately brought to their attention, resulting in the Petitioner being unaware of the notice. Consequently, the impugned order dated 5th August 2024 was passed ex parte without providing a personal hearing or an opportunity to file a reply.

The Court examined precedents from this High Court where similar issues had arisen. In particular, the Court referred to earlier judgments where orders passed without proper communication of SCNs and without affording an opportunity to be heard were set aside and remanded for fresh adjudication. The Court noted that the GST portal had been updated after 16th January 2024 to make the 'Additional Notices' tab more visible, but in this case, the Petitioner was still prejudiced due to lack of proper notice and hearing.

Accordingly, the Court held that the impugned order was liable to be set aside for violation of the principles of natural justice. It directed that the Petitioner be granted time to file a reply to the SCN, and that the Adjudicating Authority must provide a personal hearing, with the hearing notice communicated both via email and mobile phone to ensure actual receipt.

Extension of Time Limits under Section 168A of the GST Act

The notifications in question purportedly extended the statutory time limits for adjudication of GST matters. Section 168A requires prior recommendation by the GST Council for such extensions. The Court acknowledged the controversy surrounding whether the notifications complied with this requirement, as the notifications stated that they were issued on the recommendation of the GST Council, but in some instances, the ratification was given only after issuance.

The Court noted the ongoing Supreme Court proceedings addressing this precise issue and deferred any final determination until the Supreme Court's decision. It also observed that the Punjab and Haryana High Court had refrained from expressing any opinion on this matter, directing that the interim orders would continue until the Supreme Court's final adjudication.

Application of Law to Facts and Treatment of Competing Arguments

The Court balanced the procedural irregularities alleged by the Petitioner against the pending legal questions about the validity of the notifications. While the Court refrained from ruling on the validity of the notifications themselves, it recognized the fundamental importance of procedural fairness in tax adjudication.

The Court accepted the Petitioner's contention that the SCN had not been properly communicated and that no personal hearing was granted, which violated the principles of natural justice. The Department's argument that the notices were available on the portal was insufficient to meet the requirement of fair notice, especially given the portal's prior configuration.

Accordingly, the Court held that the impugned orders based on such defective communication had to be set aside and the matter remanded for fresh adjudication with proper opportunity to the Petitioner.

Conclusions

The Court set aside the impugned order dated 5th August 2024 and the demand orders dated 23rd April 2024 and 5th December 2023. It granted the Petitioner time until 10th July 2025 to file replies to the SCNs, and directed that personal hearings be granted with proper communication.

Access to the GST portal and related documents was to be ensured to the Petitioner for effective participation in the proceedings. The Court explicitly left open the question of the validity of the impugned notifications, subject to the outcome of the Supreme Court's decision in S.L.P No. 4240/2025 and the High Court's own pending case concerning State Notifications.

Significant Holdings

On procedural fairness and communication of notices, the Court held:

"The impugned order dated 5th August, 2024 was passed without providing the Petitioner a personal hearing and in the absence of a reply on behalf of the Petitioner... the matter deserves to be remanded back to the concerned Adjudicating Authority."

"The hearing notices shall now not be merely uploaded on the portal but shall also be e-mailed to the Petitioner and upon the hearing notice being received, the Petitioner would appear before the Department and make its submissions."

On the validity of the impugned notifications, the Court stated:

"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 S.L.P No 4240/2025... and this Court in W.P.(C) 9214/2024."

On judicial discipline and deference to the Supreme Court, the Court observed the necessity of awaiting the apex court's ruling before expressing any opinion on the vires of the notifications.

Core principles established include the essential requirement of fair notice and opportunity to be heard in tax adjudication proceedings, especially where notices are served electronically via government portals. The Court emphasized that mere uploading of notices on less visible tabs of the portal does not satisfy the requirement of effective communication.

The judgment preserves the parties' rights and remedies, ensuring that procedural fairness is maintained pending final adjudication on the substantive validity of the notifications extending limitation periods under the GST Act.

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