Court grants appeal opportunity despite SCN date error; validity of GST notifications left open

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Case Name

M/s. Shudh Hospitality Private Limited vs. Goods and Service Tax Officer Ward-44, Delhi Department of Trade and Taxes, Government of N.C.T. of Delhi & Anr.

Writ Petition (C) No. 548/2025 and CM APPL. 2489/2025

Court: High Court of Delhi

Date of Decision: 7th May, 2025

Bench: Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta

Key Takeaways

1. Procedural Fairness Over Technical Defects: Even when a Show Cause Notice contains a procedural error (same date for issuance and reply), if the taxpayer actually participates in the proceedings by filing replies and attending hearings, courts may not quash the order on technical grounds alone.
2. Appellate Remedy Preferred: Courts prefer directing taxpayers to exhaust statutory appellate remedies under Section 107 of the CGST Act rather than entertaining writ petitions when factual disputes exist.
3. Validity of GST Notifications Sub-judice: The validity of Notification No. 56/2023-Central Tax dated 28th December, 2023 and Notification No. 9/2023-Central Tax dated 31st March, 2023 remains an open question, pending the Supreme Court’s decision in S.L.P No 4240/2025 titled M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors..
4. Judicial Discipline: Multiple High Courts have taken divergent views on the validity of these notifications, and the Delhi High Court chose to await the Supreme Court’s authoritative pronouncement rather than add to the conflicting jurisprudence.

Issue

The central legal questions in this case were:

1. Whether the Show Cause Notice dated 24th September 2023, which gave the same date for filing a reply, violated principles of natural justice and rendered the subsequent order invalid?
2. Whether Notification No. 56/2023-Central Tax dated 28th December, 2023 and Notification No. 9/2023-Central Tax dated 31st March, 2023 are valid, particularly in light of the procedural requirements under Section 168A of the CGST Act, 2017?

Facts

Timeline of Events:

• 24th September 2023: The Sales Tax Officer issued a Show Cause Notice (SCN) under Section 73 of the CGST/DGST Act to M/s Shudh Hospitality Private Limited. The peculiar thing about this notice was that it mentioned 24th September 2023 as both the date of issuance and the date by which the reply had to be filed.
• 28th October 2023: Despite the date issue, the petitioner actually filed a detailed reply to the SCN, relying on various documents.
• 12th December 2023: The Sales Tax Officer issued a reminder through the GST portal, giving another opportunity for personal hearing as per Section 75(4) of the DGST Act.
• 21st December 2023: Shri Babu Lal, the accountant of the firm, appeared before the officer and requested 15 days to file a detailed reply. However, this request was not accepted due to time constraints.
• 30th December 2023: The Sales Tax Officer passed the impugned order determining tax, interest, and penalty under Section 73(9) of the CGST/DGST Act, 2017. The order noted that the reply was not supported with relevant documents regarding claims of Input Tax Credit (ITC) related to blocked credit under Section 17(5) and ITC claimed from cancelled suppliers.

The Petitioner’s Business:

M/s Shudh Hospitality Private Limited is a company engaged in hospitality services. The dispute arose from issues related to Input Tax Credit claims.

The Challenged Notifications:

The petitioner also challenged the constitutional validity of two notifications that extended time limits for GST proceedings:

• Notification No. 56/2023-Central Tax dated 28th December, 2023
• Notification No. 9/2023-Central Tax dated 31st March, 2023

Arguments

Petitioner’s Arguments:

1. Violation of Natural Justice: The primary argument was that the SCN dated 24th September 2023 gave the same date for filing a reply, which was procedurally unfair and violated principles of natural justice. This made it impossible for the petitioner to respond in time.
2. Invalid Notifications: The petitioner challenged the validity of Notification No. 56/2023 and Notification No. 9/2023, arguing that they were issued without following proper procedure under Section 168A of the CGST Act, which requires prior recommendation of the GST Council before extending deadlines.
3. Lack of Opportunity: The petitioner contended that despite the procedural defects, they were not given adequate opportunity to present their case.

Respondent’s (Tax Department’s) Arguments:

1. Actual Participation: The respondents pointed out that despite the date issue in the SCN, the petitioner had actually filed a detailed reply on 28th October 2023, demonstrating that they were not prejudiced by the technical error.
2. Multiple Opportunities: The tax department argued that the petitioner was given multiple opportunities:

• Filed reply on 28th October 2023
• Reminder issued on 12th December 2023
• Accountant appeared on 21st December 2023

1. Substantive Issues: The department contended that the reply was not supported with relevant documents regarding:

• ITC related to blocked credit under Section 17(5) of CGST Act
• ITC claimed from cancelled suppliers and suppliers who had not filed GSTR-3B
• As per Section 16 of CGST/DGST Act, ITC cannot be availed if tax is not paid to the government

1. Reasoned Order: The impugned order was a reasoned order that considered the reply but did not accept it due to lack of supporting documentation.

Key Legal Precedents

The judgment references several important legal developments and cases:

1. Pending Supreme Court Matter

S.L.P No 4240/2025 titled M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors.

This is the most crucial precedent mentioned. The Supreme Court is currently examining whether time limits for adjudication of show cause notices and passing orders under Section 73 of the GST Act for financial year 2019-2020 could be extended by issuing notifications under Section 168A of the GST Act.

The Supreme Court’s order dated 21st February 2025 noted:

• The challenge relates to Notification No.13/2022 dated 5-7-2022 and Notification Nos. 9 and 56 of 2023
• These notifications were issued under Section 168A of the Central Goods and Services Tax Act, 2017
• There is a “cleavage of opinion amongst different High Courts of the country”
• The matter was made returnable on 7-3-2025

2. Divergent High Court Views

The judgment notes that various High Courts have taken different positions on the validity of these notifications:

a) Allahabad High Court: Upheld the validity of Notification No. 9

b) Patna High Court: Upheld the validity of Notification No. 56

c) Guwahati High Court: Quashed Notification No. 56 of 2023 (Central Tax)

d) Telangana High Court: While not delving into the vires of the notifications, made certain observations regarding the invalidity of Notification No. 56 of 2023 (Central Tax). This judgment is now under consideration by the Supreme Court

e) Punjab and Haryana High Court: Vide order dated 12th March 2025, disposed of all writ petitions in terms of interim orders, directing that all cases shall be governed by the judgment to be passed by the Supreme Court

3. Lead Petition Before Delhi High Court

W.P.© 16499/2023 titled 'DJST Traders Pvt. Ltd. vs. Union of India and Ors.'

This was the lead petition in a batch of cases before the Delhi High Court challenging the same notifications. The Court heard parties at length on 22nd April 2025 regarding the validity of the impugned notifications.

4. Statutory Provisions Referenced

Section 168A of the Central Goods and Services Tax Act, 2017: This section deals with the power to extend time limits. The key issue is whether prior recommendation of the GST Council is essential for extending deadlines.

Section 73 of the CGST/DGST Act: Deals with determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any wilful misstatement or suppression of facts.

Section 75(4) of the DGST Act: Provides for opportunity of personal hearing.

Section 107 of the Central Goods and Service Tax Act, 2017: Provides for appeals to the Appellate Authority.

Section 16 of CGST/DGST Act: Deals with eligibility and conditions for taking input tax credit.

Section 17(5) of CGST Act: Specifies blocked credits - input tax credit that cannot be availed.

Rule 100(2) and Rule 142(1)(a) of CGST/DGST Rules, 2017: Deal with the procedure for issuing show cause notices.

Article 226 of the Constitution of India: Provides for the power of High Courts to issue writs.

5. Judicial Discipline Principle

The Punjab and Haryana High Court’s approach of refraining from giving an opinion on the vires of Section 168A and the notifications, keeping in view “judicial discipline” since the matter is pending before the Supreme Court, was noted with approval.

Judgement

Outcome: The petition was disposed of (not dismissed or allowed in the traditional sense) with specific directions.

Court’s Reasoning:

1. On the Procedural Defect in SCN:

The Court acknowledged that the SCN dated 24th September 2023 mentioned the same date for filing a reply. However, the Court found that this technical defect did not cause actual prejudice to the petitioner because:

• The petitioner filed a detailed reply on 28th October 2023
• The petitioner relied on various documents in the reply
• The petitioner’s accountant appeared on 21st December 2023
• Multiple opportunities were given through reminders

1. On the Impugned Order:

The Court examined the order dated 30th December 2023 and found it to be a “reasoned order” that:

• Considered the taxpayer’s reply
• Explained why the reply was not accepted (lack of supporting documents)
• Gave multiple opportunities for personal hearing
• Proceeded only after sufficient opportunities were provided

1. On the Validity of Notifications:

The Court explicitly chose not to decide the validity of Notification No. 56/2023 and Notification No. 9/2023 at this stage because:

• The matter is pending before the Supreme Court in S.L.P No 4240/2025
• Various High Courts have taken divergent views
• Judicial discipline requires waiting for the Supreme Court’s authoritative pronouncement

Orders Passed:

1. Appellate Remedy Granted: The petitioner is permitted to file an appeal under Section 107 of the CGST Act, 2017, albeit belatedly.
2. Timeline: The appeal must be filed by 10th July 2025 with the required pre-deposit.
3. Protection from Limitation: If the appeal is filed within the stipulated date, it shall not be dismissed on the ground of limitation and shall be heard on merits.
4. Conditional Relief: Any order passed by the Adjudicating Authority shall be subject to the outcome of the Supreme Court’s decision in S.L.P No 4240/2025.
5. Open Question: The issue regarding the validity of the impugned notifications is expressly left open.

Who Won?

This is a nuanced outcome. The petitioner received partial relief:

• ✓ Got the opportunity to file a belated appeal
• ✓ Protection from dismissal on limitation grounds
• ✗ The impugned order was not quashed
• ? The validity of notifications remains undecided

The tax department also achieved partial success:

• ✓ The impugned order was not set aside
• ✓ The Court found it to be a reasoned order
• ? The validity of their notifications remains subject to Supreme Court decision

FAQs

Q1: What was the main problem with the Show Cause Notice in this case?

The Show Cause Notice dated 24th September 2023 mentioned the same date (24th September 2023) as both the date of issuance and the deadline for filing a reply. This appeared to give the taxpayer zero time to respond, which seemed like a violation of natural justice. However, the Court found that the petitioner actually filed a reply on 28th October 2023 and participated in subsequent proceedings, so the technical defect didn’t cause real prejudice.

Q2: Why didn’t the Court decide whether the GST notifications were valid or invalid?

The Court exercised judicial restraint because the Supreme Court is currently examining the same question in S.L.P No 4240/2025. Different High Courts across India have given conflicting decisions on these notifications - some upheld them, others struck them down. Rather than add to this confusion, the Delhi High Court decided to wait for the Supreme Court’s authoritative decision.

Q3: What are Notification No. 56/2023 and Notification No. 9/2023 about?

These notifications extended the time limits for GST authorities to complete certain proceedings, particularly for issuing show cause notices and passing orders under Section 73 of the GST Act. The controversy is whether these extensions were validly issued under Section 168A of the CGST Act, which requires prior recommendation from the GST Council.

Q4: What does it mean that the petition was “disposed of” rather than “allowed” or “dismissed”?

“Disposed of” means the Court has closed the petition but not in the traditional win-lose manner. Instead, the Court gave specific directions - allowing the petitioner to file a belated appeal while keeping the larger constitutional question open. It’s a middle path that provides practical relief while avoiding a premature decision on the validity of the notifications.

Q5: What is the practical impact of this judgment on the petitioner?

The petitioner now has until 10th July 2025 to file an appeal under Section 107 of the CGST Act with the required pre-deposit. This appeal won’t be dismissed for being filed late. However, any favorable order the petitioner gets will be subject to what the Supreme Court ultimately decides about the validity of the time-extension notifications.

Q6: What is Section 168A of the CGST Act and why is it controversial?

Section 168A gives the government power to extend time limits for various GST proceedings. The controversy is about the procedure - whether the government must get a recommendation from the GST Council before issuing such notifications, or whether getting approval after (ratification) is acceptable. In the case of Notification No. 56/2023, the challenge is that ratification came after the notification was issued, and it incorrectly stated it was based on GST Council recommendation.

Q7: What were the substantive tax issues in this case?

The tax department raised concerns about the petitioner’s Input Tax Credit (ITC) claims:

1. ITC related to blocked credit under Section 17(5) of CGST Act (certain expenses for which ITC cannot be claimed)
2. ITC claimed from suppliers whose registrations were cancelled
3. ITC claimed from suppliers who hadn’t filed their GSTR-3B returns
4. The department’s position was that if the supplier hasn’t paid tax to the government, the recipient can’t claim ITC under Section 16.

Q8: Why did the Court say the impugned order was a “reasoned order”?

The Court found that the order dated 30th December 2023 was not arbitrary because it:

• Acknowledged that the taxpayer filed a reply
• Explained specifically why the reply was not accepted (lack of supporting documents)
• Documented the multiple opportunities given for personal hearing
• Showed that the accountant appeared and requested more time
• Explained why the request for extension couldn’t be granted (time constraints)
• This demonstrated that the tax officer had applied his mind to the matter.

Q9: What happens if the Supreme Court strikes down these notifications?

If the Supreme Court declares Notification No. 56/2023 or Notification No. 9/2023 invalid, then the time extensions they provided would be void. This could mean that many show cause notices and orders issued during the extended period would be time-barred and invalid. That’s why the Delhi High Court made it clear that any order in this case is subject to the Supreme Court’s decision.

Q10: Can other taxpayers in similar situations rely on this judgment?

Yes, taxpayers facing similar situations where:

• There are procedural defects in show cause notices but they actually participated in proceedings
• They want to challenge orders but also question the validity of the time-extension notifications
• They missed appeal deadlines

Such taxpayers can cite this judgment to request courts to allow them to file belated appeals while the larger constitutional question is pending before the Supreme Court. However, each case will be decided on its own facts.

Q11: What is the significance of the pre-deposit requirement mentioned in the judgment?

When filing an appeal under Section 107 of the CGST Act, the appellant must deposit a certain percentage of the disputed tax amount (typically 10% of the disputed tax or the entire disputed input tax credit, whichever is higher). The Court’s order requiring pre-deposit means the petitioner must comply with this statutory requirement when filing the belated appeal.

Q12: How does this case reflect the broader GST litigation landscape?

This case illustrates several systemic issues in GST litigation:

• Procedural irregularities in notices issued by tax authorities
• Conflicting interpretations by different High Courts creating legal uncertainty
• The challenge of balancing revenue collection with taxpayer rights
• The Supreme Court’s role in harmonizing divergent High Court decisions
• Courts’ preference for directing taxpayers to exhaust statutory remedies rather than entertaining writ petitions