Court’s Decision
The Delhi High Court set aside the impugned Order-in-Original dated 26th April 2024 passed under Section 73 of the DGST/CGST Act, 2017 on the ground that no reply had been filed by the petitioner and personal hearings were not availed. The Court held that the petitioner ought to be provided an opportunity to be heard on merits. It accordingly remanded the matter to the Adjudicating Authority and permitted the petitioner to file a reply by 10th July 2025, with a direction that a personal hearing be granted thereafter.
The Court clarified:
“The impugned order is set aside and the matter is relegated to the Adjudicating Authority to be heard on merits.”
Facts
The petitioner challenged:
- An Order-in-Original dated 26th April 2024 issued under Section 73 of the DGST/CGST Act, 2017.
- A Show Cause Notice dated 7th November 2023.
- Notifications 56/2023 and 09/2023 issued under Section 168A of the CGST Act by the CBIC.
The petitioner claimed that it was not served with a pre-consultation notice in Form GST DRC-01A, thereby denying it an opportunity to file a reply or attend personal hearings scheduled on four separate dates. Consequently, an ex-parte adjudication order was passed raising a significant tax demand and imposing penalties.
Issues
- Whether the impugned Order-in-Original was valid in the absence of a pre-consultation notice and without availing personal hearings.
- Whether the impugned Notifications were issued in violation of Section 168A of the CGST Act.
- Whether the petitioner is entitled to a fresh opportunity to contest the Show Cause Notice on merits.
Petitioner’s Arguments
- The petitioner submitted that no pre-consultation notice under Rule 142(1A) of the CGST Rules was issued before the Show Cause Notice.
- It was denied the opportunity to file a reply or attend personal hearings scheduled on four dates.
- The impugned notifications extending the time period under Section 73 were issued without following the correct procedure and without prior recommendation of the GST Council, making them legally infirm.
Respondent’s Arguments
- The respondents opposed the petition but the order does not detail their substantive submissions.
- It was submitted that hearings were provided on four different dates, implying that due process was followed.
Analysis of the Law
The Court considered Rule 142(1A) of the CGST Rules, which mandates a pre-consultation notice in Form DRC-01A before issuance of a Show Cause Notice under Section 73. The Court also considered the broader legal challenge to Notifications 09 and 56 of 2023 issued under Section 168A of the CGST Act.
Precedent Analysis
The Court noted that:
- The Allahabad High Court upheld Notification 09/2023.
- The Patna High Court upheld Notification 56/2023.
- The Guwahati High Court quashed Notification 56/2023.
- The Telangana High Court questioned the validity of Notification 56/2023.
- The matter is currently pending before the Supreme Court in SLP No. 4240/2025, where notice has been issued and hearings are awaited.
Additionally, the Punjab and Haryana High Court disposed of similar petitions by deferring to the outcome of the Supreme Court’s decision.
Court’s Reasoning
The Court held that:
- Since the petitioner did not file a reply or avail of the hearings, the adjudicating authority had passed the order ex parte.
- However, as no pre-consultation notice was issued and personal hearings were not effectively availed, it was appropriate to remand the matter to allow the petitioner to be heard on merits.
The Court noted:
“The Petitioner ought to be provided another opportunity to be heard on merits.”
It directed that access to the GST Portal be ensured for the petitioner and that a personal hearing be granted after filing of reply.
Conclusion
The impugned adjudication order dated 26th April 2024 was set aside. The matter was remanded to the Adjudicating Authority. The petitioner was granted time till 10th July 2025 to file a reply, and the Adjudicating Authority was directed to grant a personal hearing thereafter. The issue concerning the validity of Notifications 09 and 56 of 2023 was left open to be decided by the Supreme Court.
Implications
- The judgment underscores the importance of procedural fairness under GST law, particularly the mandatory issuance of pre-consultation notices and provision of personal hearings.
- It clarifies that even if notifications under Section 168A are valid, procedural lapses in adjudication cannot be overlooked.
- The decision preserves the petitioner’s rights pending Supreme Court adjudication on the broader validity of the impugned notifications.