Delhi HC sets aside GST adjudication order for violating natural justice principles under Section 168A

Delhi HC set aside adjudication order in GST case where petitioner challenged show cause notice issued beyond limitation period. Petitioner argued extension notification was ultra vires Section 168A of CGST Act 2017 and violated natural justice principles by denying hearing opportunity. Court noted similar challenge pending before SC and found petitioner was not given opportunity to file reply or attend personal hearing. Matter remanded to adjudicating authority with directions to allow petitioner to file reply by July 15, 2025, and provide personal hearing thereafter.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether the extension of the limitation period for adjudication under the Central Goods and Services Tax Act, 2017 (CGST Act) by Notification No. 56/2023 - Central Tax (impugned notification) was valid and within the scope of Section 168A of the CGST Act.

- Whether the impugned notification, issued long after the COVID-19 pandemic, could be justified as an exercise of power under Section 168A, which permits extension of limitation only under "force majeure" circumstances.

- Whether the impugned Show Cause Notice (SCN) and demand order were issued beyond the prescribed period of limitation and thus liable to be quashed.

- Whether the Petitioner was denied due opportunity to file reply and to appear for personal hearing before passing the impugned order.

- The effect of conflicting decisions of various High Courts on the validity of Notification No. 56/2023 and related notifications extending limitation periods under the CGST Act.

- The impact of pending Supreme Court proceedings on the validity of the impugned notifications and the consequent proceedings initiated thereunder.

2. ISSUE-WISE DETAILED ANALYSIS

Validity of Notification No. 56/2023 under Section 168A of the CGST Act

The relevant legal framework is Section 168A of the CGST Act, which empowers extension of limitation for adjudication of show cause notices and passing of orders, but only under specific conditions, notably "force majeure". The Petitioner contended that the impugned notification extending limitation was ultra vires as it was issued well after the COVID-19 pandemic and did not satisfy the "force majeure" criteria.

The Court noted that this issue was under active consideration before multiple High Courts and the Supreme Court. The Allahabad and Patna High Courts had upheld the validity of similar notifications, whereas the Guwahati High Court quashed Notification No. 56/2023. The Telangana High Court had expressed doubts about the validity but did not conclusively rule on the vires. This cleavage of judicial opinions underscored the complexity of the issue.

The Supreme Court had admitted Special Leave Petitions (SLPs) challenging these notifications and issued notices, with interim orders preserving the status quo. The Supreme Court's order specifically highlighted the question whether the time limit for adjudication under Section 73 of the CGST Act and corresponding State GST Acts could be extended by such notifications under Section 168A.

The Court emphasized that the notifications purported to be issued on the recommendation of the GST Council, but in the case of Notification No. 56/2023, the recommendation was made subsequent to issuance, thus violating procedural mandates under Section 168A. This procedural irregularity raised serious questions on the validity of the notification.

Application of Limitation and Procedural Fairness in Passing Orders

On facts, the Petitioner argued that the impugned SCN dated 4th December, 2023 was uploaded on the 'Additional Notices Tab' of the GST Portal and thus did not come to their knowledge in a timely manner. Although a reminder was issued on 19th January, 2024, the Petitioner's reply dated 28th January, 2024 sought adjournment citing personal family reasons. The Adjudicating Authority, however, passed the impugned order on 16th April, 2024 without granting any adjournment or personal hearing.

The Court found that the Petitioner was denied a fair opportunity to be heard, which is a fundamental principle of natural justice. The absence of personal hearing and the ex-parte passing of the order were significant procedural lapses. The Court also observed that the Petitioner had filed a reply and sought adjournment, which was not considered.

Effect of Pending Supreme Court Proceedings and Conflicting High Court Judgments

The Court acknowledged the ongoing Supreme Court proceedings (SLP No. 4240/2025) which were determinative of the validity of the impugned notifications. It noted the judicial discipline observed by other High Courts, such as the Punjab and Haryana High Court, which refrained from expressing opinions on the validity of Section 168A and related notifications pending Supreme Court adjudication.

In light of this, the Court refrained from deciding the vires of the impugned notifications and instead disposed of the petitions with liberty to the parties to pursue remedies post the Supreme Court's final decision.

Relief and Directions

Given the procedural deficiencies and the pendency of the Supreme Court proceedings, the Court set aside the impugned order dated 16th April, 2024 and relegated the matter back to the Adjudicating Authority. The Petitioner was granted an opportunity to file a reply to the impugned SCN by 15th July, 2025 and to appear personally at a hearing to be scheduled by the Adjudicating Authority.

The Court directed that notice of the personal hearing be communicated to the Petitioner through specified email and phone contact details and that access to the GST Portal be ensured for the Petitioner to facilitate filing of replies and access to notices.

The Court explicitly left open the question of validity of the impugned notifications, stating that the Adjudicating Authority's order would be subject to the Supreme Court's final decision in the pending SLP.

3. SIGNIFICANT HOLDINGS

The Court held:

"The challenge to the impugned notification is pending before the Supreme Court and the fact that the Petitioner has not been provided an opportunity to file a reply or attend a personal hearing, this Court is inclined to give an opportunity to the Petitioner to file a reply and appear personally to make the submissions before the Adjudicating Authority."

"The impugned order is set aside and the matter is relegated back to the concerned Adjudicating Authority. The Petitioner is permitted to file a reply to the impugned SCN by 15th July, 2025. Upon filing of such reply, the Adjudicating Authority shall provide the Petitioner a personal hearing."

"All the rights and remedies of the parties are left open. Access to the GST Portal, if not already available, shall be ensured to be provided to the Petitioner to enable filing of reply and access to the notices and related documents."

"It is made clear that the issue in respect of the validity of the impugned notifications is left open and the order of the Adjudicating Authority shall be subject to the outcome of the decision of the Supreme Court in S.L.P No 4240/2025."

The Court established the core principle that procedural fairness, including the opportunity to file replies and personal hearings, is indispensable even where the validity of the notification extending limitation is under challenge before a higher forum. It also underscored the necessity of judicial discipline by deferring substantive adjudication on the validity of the notifications to the Supreme Court, given conflicting High Court decisions.

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