Demand Order cannot be passed without considering the reply and providing an opportunity of hearing

The Hon'ble Delhi High Court in Aviral Technology Solutions and Telecom Pvt. Ltd. v. Union of India [W.P. (C) No. 4961 of 2025 dated April 23, 2025] set aside the Order passed by the Department of Trade & Taxes as the reply filed by the Assessee alongwith the supporting documents were not considered and the opportunity of being heard was also not provided before passing the Order. Accordingly, the matter was remanded back with the issue regarding the validity of the Notification No. 9/2023-Central Tax, dated March 31, 2023 and Notification No. 56/2023-Central Tax, dated December 28, 2023 ("the Impugned Notifications"), extending time limit for passing of order under Section 73(9) of the Central Goods and Service Tax Act, 2017 ("the CGST Act"), that was left open as the same is sub judice before the Hon'ble Supreme Court in the case of M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors. [Special Leave to Appeal (C) No. 4240/ 2025 dated February 21, 2025]. Any subsequent decision of the Adjudicatory Authority was made subject to the decision of the Hon'ble Supreme Court.

Facts:

M/s. Aviral Technology Solutions and Telecom Pvt. Ltd. ("the Petitioner") was issued a Show Cause Notice dated December 14, 2023("the Impugned SCN") followed by the Department of Trade & Taxes ("the Respondent or the Adjudicating Authority") pertaining to period April 2018 to March 2019.

On February 26, 2024, the Petitioner had filed a reply to the SCN issued upon it along with supporting documents. However, the said reply was not considered by the Sales Tax Officer and the Impugned Order was passed in complete disregard of the reply filed by the Petitioner.

Further, an Order dated April 21, 2024 ("the Impugned Order") passed under Section 73 of the CGST Act.

The Petitioner challenged the Impugned Notifications

Aggrieved by the Impugned SCN and the Impugned Order, the Petitioner filed the present Writ Petition. Additionally, the present Petition also challenged the Impugned Notifications.

Issue:

Whether the demand order can be passed without considering the reply and providing an opportunity of hearing?

Held:

The Hon'ble Delhi High Court in W.P. (C) No. 4961 of 2025 held as under:

• Noted that, the reply filed by the Petitioner along with the supporting documents have not been duly considered before the passing of the Impugned Order. Additionally, the Petitioner has not been afforded an opportunity to be heard. It is also unclear as to whether a personal hearing notice was uploaded on the GST Portal or not or was communicated in any other manner to the Petitioner.
• Observed that, the Impugned Order has been passed without hearing the Petitioner, an opportunity ought to be afforded to the Petitioner to contest the matter on merits.
• Directed that, the Respondent to issue a notice for personal hearing to the Petitioner and consider the reply along with the submissions made in the personal hearing proceedings and pass a fresh order accordingly. Accordingly, set aside the Impugned Order.
• Held that, the issue in respect of the validity of the Impugned Notifications is left open and any order passed by the Respondent shall be subject to the outcome of the decision of the Supreme Court.

Our Comments:

Section 75 of the CGST Act governs 'General provisions relating to determination of tax'. Section 75(4) of the CGST Act prescribes for a grant of an opportunity of personal hearing in case where any adverse decision is contemplated against a person.

Further, Section 168A of the CGST Act governs 'Power of Government to extend time limit in special circumstances' which empowers the Central Government to extend the time limit on recommendation of the GST Council in respect of actions which cannot be completed or complied with due to force majeure and the Impugned Notifications were issued under the same provision.

These Impugned Notifications were sub judice before the Hon'ble Supreme Court in the case of HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors. (supra) on the ground that proper procedure was not followed before the issuance of the Impugned Notificationsand extension was granted contrary to the mandate under Section 168A of the CGST Act.

The Supreme Court issued notice in a Special Leave Petition ("SLP") challenging the Telangana High Court judgment that upheld the validity of the Impugned Notifications, issued under Section 168A, for extending the limitation period under Section 73(10) of the CGST Act to pass orders under Section 73(9) of the CGST Act, except for Notification No. 56/2023.

The Telangana High Court, while hearing a large batch of writ petitions, aligned with the Allahabad and Patna High Court, ruling that the phrase "in respect of actions" under Section 168A of the CGST Act is "very wide" to include actions delayed due to force majeure during the COVID-19 period. Regarding Notification No. 56/2023, the High Court held that its ratification by the 53rd GST Council, six months after it was issued based on the GST Implementation Committee/Law Committee's decision, could not validate it.

Focusing solely on the legality, validity, and propriety of the Impugned Notifications, the Supreme Court framed the key issue for consideration in the SLP as whether the time limit for adjudication of Show Cause Notices in passing orders under Section 73 of the CGST Act for the financial year 2019-20 has been arbitrarily extended by issuing these Notifications.

Notification No. 09/2023-CT was challenged on the ground that in the absence of force majeure, the Government could not have exercised the power under Section 168A of the CGST Act.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED