2025 (11) TMI 69 - HC - GST

Petition allowed; impugned adjudication set aside and remitted to respondent for fresh adjudication with one more opportunity

HC allowed the petition, set aside the impugned adjudication order and remitted the matter to the 2nd respondent for fresh adjudication in accordance with ... Audit proceedings barred by time limitation - petitioner did not receive the notices issued by the respondents and hence could not submit reply/ documents to the same - revenue submits that the period of limitation has been extended by the respondents vide N/N. 13/2022 dated 05.07.2022, N/N. 9 and 56 of 2023 dated 31.03.2023 and 08.12.2023 respectively and as such, it cannot be said that the proceedings are barred by limitation - HELD THAT:- One more opportunity is required to be granted in favour of the petitioner by setting aside the impugned adjudication order and remitting the matter back to the respondents for reconsideration afresh in accordance with law by issuing certain directions. Under these circumstances, in order to avoid multiplicity of proceedings and to ensure that there are no conflicting orders, it is deemed just and appropriate to direct the 2nd respondent to reconsider the matter afresh and pass a fresh adjudication order in accordance with law - petition allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether adjudication proceedings initiated under Section 73 of the CGST/KGST Act, 2017 pursuant to an Audit Report under Section 65(6) are barred by limitation in view of Section 73(10) when Notifications purporting to extend limitation are challenged before the Apex Court. 2. Whether an ex parte order-in-original passed for non-prosecution of show-cause proceedings (for failure to respond to notices under Section 65 and show-cause notice under Section 73) should be set aside and matter remitted for fresh adjudication where the assessee alleges non-receipt of notices and offers to file replies/documents. 3. Whether the High Court should remand the matter for fresh adjudication and exclude a specific intervening period from computation of limitation pending disposal of a challenge to the Notifications extending limitation by the Apex Court. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Limitation under Section 73(10) vis-à-vis Notifications extending limitation Legal framework: Section 73(10) prescribes the period of limitation for initiating recovery/assessment under Section 73. Statutory notifications issued by competent authority sought to extend limitation periods in exercise of executive power; such extensions affect the viability of proceedings otherwise time-barred. Precedent Treatment: The Court notes that the validity of the Notifications extending limitation is pending adjudication before the Apex Court (SLP). The judgment does not overrule or follow specific precedents on the validity of those Notifications but treats the pending challenge as having direct bearing on limitation. Interpretation and reasoning: Where the validity of executive Notifications that extend limitation is sub judice before the Apex Court, those Notifications may materially affect the question whether proceedings are time-barred. Given the pending adjudication at the highest forum, the Court considered it appropriate to defer final adjudication of the limitation question and to avoid multiplicity or conflicting orders. Ratio vs. Obiter: Ratio - it is proper to await outcome of Apex Court challenge to Notifications before concluding on limitation where that outcome would determine jurisdictional viability of impugned proceedings. Obiter - no definitive pronouncement on the validity of the Notifications themselves was made. Conclusions: The Court declined to decide whether Section 73(10) bars the proceedings because the Notifications extending limitation are under challenge before the Apex Court; the Court directed reconsideration after disposal of that challenge and excluded the intervening period for limitation purposes. Issue 2 - Setting aside ex parte adjudication and remitting for fresh adjudication where non-receipt of notices is alleged Legal framework: Natural justice and statutory adjudicatory procedures require opportunity to be heard before passing decisions under Sections 65 and 73; statute provides for audit notices (Section 65) and show-cause (Section 73), with right to reply and appeal under Section 107. Precedent Treatment: The Court applied established principles favouring hearing and reconsideration where procedural infirmities (non-receipt of notice, failure to consider later submissions) are persuasively alleged. The judgment does not cite or distinguish specific case law but follows settled norms of adjudication and audi alteram partem. Interpretation and reasoning: The petitioner asserted non-receipt of the audit and show-cause notices and produced a post-adjudication rectification letter with documents that were not considered. The respondents issued reminders and proceeded ex parte when no reply was received. In light of the pending Apex Court challenge on limitation and the petitioner's willingness to file responses if given an opportunity, the Court concluded that fairness and avoidance of multiplicity of proceedings warranted setting aside the ex parte order and remitting the matter for fresh consideration. Ratio vs. Obiter: Ratio - where non-receipt of statutory notices is credibly alleged and fresh adjudication would be materially affected by pending higher court decisions, setting aside ex parte orders and remitting for fresh adjudication is appropriate. Obiter - the Court did not lay down a general rule on when rectification requests post-ex parte orders must be entertained. Conclusions: The Court set aside the ex parte order-in-original and the appellate order rejecting the appeal as time-barred, and remitted the matter for fresh adjudication by the authority that passed the original order, directing that the authority reconsider afresh in accordance with law. Issue 3 - Remand pending Apex Court decision and exclusion of interim period from limitation Legal framework: Courts may stay or remand proceedings and prescribe exclusion of periods for limitation where pending higher court determinations will decide questions central to the viability of proceedings; judicial directions to exclude periods are ancillary to equitable reliefs and prevention of prejudice. Precedent Treatment: The Court relied on equitable supervisory jurisdiction to avoid multiplicity and conflicting orders pending final adjudication by the Apex Court. No specific precedents were discussed or overruled. Interpretation and reasoning: To prevent duplication and inconsistent rulings, and because the Apex Court's decision on the Notifications will determine limitation, the Court remitted the matter for fresh adjudication only after disposal of the SLP. The Court further directed that the period between the impugned adjudication order and the date on which the Apex Court disposes of the SLP be excluded for the purpose of limitation, thereby protecting the petitioner from prejudice arising from the remand period. Ratio vs. Obiter: Ratio - remand conditioned on disposal of a pending Apex Court matter that bears on jurisdiction/limitation is a legitimate exercise to ensure consistent adjudication; exclusion of the intervening period from limitation is appropriate to preserve parties' rights pending higher court outcome. Obiter - the broader circumstances under which such exclusions should generally be ordered were not exhaustively delineated. Conclusions: The Court remitted the matter for fresh adjudication after disposal of the pending Apex Court challenge and ordered exclusion of the period from the original adjudication date to the date of disposal of the SLP for limitation computation; the petition was allowed subject to costs payable to the High Court Legal Services Authority. Ancillary procedural rulings and reliefs Interpretation and reasoning: The Court exercised supervisory jurisdiction to set aside both the order-in-original and the appellate order (the latter having rejected appeal on account of delay) and directed fresh adjudication rather than outright quashing on merits, reflecting a preference for adjudication on merits after opportunity of hearing and after resolution of the limitation issue by the Apex Court. Conclusions: The impugned orders were set aside and the matter remitted for fresh adjudication; a cost of Rs. 10,000 was imposed; and liberty was effectively preserved for the adjudicating authority to consider any replies/documents the petitioner may file in the fresh proceedings in accordance with law.