Order set aside for violating natural justice principles - petitioner denied adequate opportunity for reply and personal hearing

Delhi HC set aside the impugned order for violating principles of natural justice as petitioner was denied adequate opportunity to file reply and attend personal hearings. The court found the order was passed without considering petitioner's stand. Petitioner was granted fresh opportunity with time till 10th July 2025 to file reply to show cause notice. Upon filing reply, adjudicating authority must issue notice for personal hearing. The petition was disposed of with the order being set aside.

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1. ISSUES PRESENTED and CONSIDERED

- Whether the impugned order dated 28th August, 2024 passed by the Sales Tax Officer is valid, particularly when the petitioner was not given adequate opportunity to file a reply or attend personal hearings.

- Whether the Notification No. 56/2023-Central Tax dated 28th December, 2023 (and related notifications) issued under Section 168A of the Central Goods and Services Tax Act, 2017, are constitutionally valid and legally sustainable, particularly concerning the procedural requirements under the GST Act.

- Whether the adjudication and demand raised against the petitioner, amounting to Rs. 81,59,476/-, is justified based on proper reconciliation of returns filed by the petitioner.

- The impact of ongoing proceedings before the Supreme Court regarding the validity of the impugned notifications on the present petition.

- Whether the petitioner should be granted an opportunity to file a reply and attend personal hearings in light of procedural deficiencies in the issuance and adjudication process.

2. ISSUE-WISE DETAILED ANALYSIS

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

The legal framework centers on Section 168A of the Central Goods and Services Tax Act, 2017, which mandates the prior recommendation of the GST Council before extending deadlines for adjudication under the GST regime. The notifications challenged include Notification No. 56/2023-Central Tax and Notification No. 9/2023-Central Tax.

Precedents reveal a divergence of judicial opinion: the Allahabad and Patna High Courts upheld the validity of these notifications, whereas the Guwahati High Court quashed Notification No. 56/2023. The Telangana High Court made observations hinting at invalidity but did not conclusively decide the issue. The Supreme Court has admitted Special Leave Petitions (SLP No. 4240/2025) concerning these notifications, with interim orders staying the matter and noting the cleavage of opinion among High Courts.

The Court recognized that the validity of these notifications is currently sub judice before the Supreme Court, and accordingly, refrained from expressing any definitive opinion on their vires. The Punjab and Haryana High Court had similarly deferred to the Supreme Court's eventual ruling, emphasizing judicial discipline.

Thus, the Court held that the question of validity remains open and any adjudication or orders passed would be subject to the outcome of the Supreme Court proceedings.

Procedural Fairness in the Adjudication Process

The petitioner contended that the Show Cause Notice (SCN) dated 20th May, 2024 was uploaded on the 'Additional Notices Tab' of the GST portal, which was not brought to their attention, resulting in non-filing of replies and non-appearance at personal hearings. This procedural lapse led to ex-parte adjudication and imposition of a substantial demand.

The Respondent-Department countered that the SCN issuance post-16th January, 2024 followed rectification of the portal to ensure visibility of notices.

The Court examined the impugned order and noted that the adjudicating authority passed the order without considering the petitioner's stand, despite reminders dated 09.07.2024 and 29.07.2024. This omission violated principles of natural justice, as the petitioner was denied a meaningful opportunity to be heard.

Accordingly, the Court concluded that the impugned order deserved to be set aside on grounds of procedural unfairness and granted the petitioner liberty to file a detailed reply and appear for personal hearings.

Justification of the Demand Raised

The petitioner asserted that both monthly and annual returns were filed accurately and consistently, and that the demand of over Rs. 81 lakhs was based on an incorrect reconciliation by the department. The department had not undertaken a proper and thorough examination of the returns before raising the demand.

The Court did not delve into the merits of the demand at this stage, recognizing that the petitioner's opportunity to present their case was denied. The Court's directions for fresh adjudication after hearing the petitioner effectively preserved the petitioner's right to contest the demand on factual and legal grounds.

Impact of Pending Supreme Court Proceedings

The Court acknowledged the pendency of the Supreme Court matter concerning the validity of the impugned notifications and explicitly stated that the issue of validity is left open. Any fresh order passed by the adjudicating authority shall be subject to the Supreme Court's final decision in SLP No. 4240/2025.

The Court emphasized that all rights and remedies of the parties remain open, thereby preserving the procedural and substantive rights pending the apex court's ruling.

Access to GST Portal and Procedural Directions

Recognizing the petitioner's difficulty in accessing notices and submitting replies, the Court directed that access to the GST portal be provided to enable the petitioner to upload replies and access all relevant notices and documents. The Court also specified communication channels (email and mobile number) for personal hearing notices to ensure effective communication.

3. SIGNIFICANT HOLDINGS

"The impugned order, as stated above, has been passed without taking into account the stand of the Petitioner. Hence, this Court is of the opinion that the impugned order deserves to be set aside and the Petitioner shall be granted another opportunity to file a reply and to attend a personal hearing."

"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 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 necessity of adherence to principles of natural justice, particularly the right to be heard, before passing adjudication orders under GST law.
• The importance of procedural compliance in the issuance and communication of Show Cause Notices, including proper visibility on the GST portal.
• The recognition that the extension of time limits under Section 168A of the GST Act requires prior recommendation of the GST Council, and that the validity of notifications issued without strict adherence to this procedure is a matter pending before the Supreme Court.
• The preservation of parties' rights to challenge demands and orders, subject to the outcome of higher judicial scrutiny on the validity of notifications.

Final determinations:

• The impugned adjudication order dated 28th August, 2024 is set aside due to procedural irregularity.
• The petitioner is granted time until 10th July, 2025 to file a reply to the SCN, and the adjudicating authority shall conduct a fresh personal hearing and pass a fresh order.
• The validity of the impugned notifications remains undecided and is subject to the Supreme Court's pending decision.
• Access to the GST portal shall be ensured for the petitioner to facilitate compliance with procedural requirements.

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