Court remands GST case for fresh hearing; notification validity left open.

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Case Name

Korea Marine Transport Co. Ltd. v. Sales Tax Officer Class II AVATO Ward 204 & Ors.(High Court of Delhi)

W.P.(c) 323/2025 & CM APPL. 1540/2025 

Decided on: 7th May, 2025

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

Key Takeaways

1. Proper consideration of replies is mandatory: Tax authorities must meaningfully consider the replies and documents submitted by taxpayers before passing adjudication orders. A cursory dismissal is not acceptable.
2. Validity of notifications kept open: The Court deliberately did not decide on the constitutional validity of Notification No. 9/2023-Central Tax dated 31st March, 2023, and Notification No. 9/2023-State Tax dated 22nd June, 2023, as this issue is pending before the Supreme Court.
3. Matter remanded for fresh adjudication: The impugned order was set aside, and the case was sent back to the adjudicating authority with directions to issue a personal hearing notice and consider the Petitioner’s submissions properly.
4. Access to GST Portal to be ensured: The Court directed that the Petitioner should be given access to the GST Portal to view notices and related documents.
5. Subject to Supreme Court decision: Any fresh order passed will be subject to the outcome of S.L.P. No. 4240/2025 titled M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors. pending before the Supreme Court, and W.P.© 9214/2024 titled Engineers India Limited v. Union of India & Ors. pending before the Delhi High Court.

Issue

The central legal questions in this case were:

1. Whether the impugned order dated 30th December, 2023, passed by the Sales Tax Officer was valid when it failed to properly consider the detailed reply filed by the Petitioner?
2. Whether Notification No. 9/2023-Central Tax dated 31st March, 2023, and Notification No. 9/2023-State Tax dated 22nd June, 2023, are ultra vires (beyond the powers of) the Central Goods and Service Tax Act, 2017 and Delhi Goods and Service Tax Act, 2017?

Facts

• Korea Marine Transport Co. Ltd. is the Petitioner, a company that was issued a Show Cause Notice dated 24th November, 2023 under the GST law.
• The notice was issued in form DRC-01 under Section 73 of the DGST/CGST Act, 2017, demanding payment of tax along with interest.
• The Petitioner was given 30 days to file objections, reply, or supporting documents in form DRC-06 if they disagreed with the proposed tax demand.
• The Petitioner did file a detailed reply on 24th November, 2023, presenting their case with various grounds and supporting documents.
• However, on 30th December, 2023, the Sales Tax Officer Class II/AVATO, Ward 204, Delhi passed an order rejecting the reply. The order stated that the reply was “incomplete, not duly supported by adequate documents, without proper justification and thus unable to clarify the issue”.
• The tax demand was confirmed, and the Petitioner was directed to deposit the amount within three months, failing which recovery proceedings under Section 79 of the CGST Act would be initiated.
• Aggrieved by this order, the Petitioner filed this writ petition under Article 226 of the Constitution of India, challenging both the order and the validity of certain GST notifications.

Arguments

Petitioner’s Arguments (Korea Marine Transport Co. Ltd.)

1. Non-consideration of detailed reply: The Petitioner argued that they had filed a comprehensive reply to the Show Cause Notice with various grounds and supporting documents, but the adjudicating authority completely failed to consider these submissions.
2. Challenge to notifications: The Petitioner challenged Notification No. 9/2023-Central Tax dated 31st March, 2023, and Notification No. 9/2023-State Tax dated 22nd June, 2023, on the ground that these notifications were ultra vires (beyond the legal authority) of the Central Goods and Service Tax Act, 2017 and Delhi Goods and Service Tax Act, 2017.
3. Procedural fairness: The Petitioner contended that the order was passed without proper application of mind and without affording them a fair opportunity to present their case.

Respondent’s Arguments (Tax Authorities)

The specific arguments of the respondents are not detailed in the judgment, but the impugned order indicates:

1. Reply not satisfactory: The tax authorities took the position that the Petitioner’s reply was “not clear and satisfactory” and was incomplete without adequate supporting documents.
2. Demand confirmed: Based on their assessment, the authorities confirmed the tax demand and directed payment.

Key Legal Precedents

The judgment references several important legal matters and provisions:

Statutory Provisions

1. Section 73 of the CGST Act, 2017 and DGST Act: This section deals with the determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed.
2. Section 79 of the CGST Act: This section pertains to recovery of tax and other amounts.
3. Section 168A of the Central Goods and Services Tax Act, 2017: This section deals with the power to extend time limits. The validity of notifications issued under this section was a key issue.
4. Article 226 of the Constitution of India: This article gives High Courts the power to issue writs for enforcement of fundamental rights and for any other purpose.

Related Cases and Proceedings

The Court noted that the validity of the impugned notifications was being challenged in multiple forums:

1. W.P.© 16499/2023 titled DJST Traders Pvt. Ltd. v. Union of India and Ors. - This was the lead petition in a batch of cases before the Delhi High Court challenging the same notifications.
2. S.L.P. No. 4240/2025 titled M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors. - This Special Leave Petition is pending before the Supreme Court of India and deals with the validity of Notification Nos. 9 and 56 of 2023 (Central Tax). The Supreme Court’s order dated 21st February, 2025, noted that there is a “cleavage of opinion amongst different High Courts of the country” on these issues.
3. W.P.© 9214/2024 titled Engineers India Limited v. Union of India & Ors. - This is the lead matter before the Delhi High Court concerning challenges to parallel State Notifications.

Divergent High Court Views

The Court noted that various High Courts across India have taken different positions on the validity of these notifications:

• Allahabad High Court: Upheld the validity of Notification No. 9 of 2023 (Central Tax).
• Patna High Court: Upheld the validity of Notification No. 56 of 2023 (Central Tax).
• Guwahati High Court: Quashed Notification No. 56 of 2023 (Central Tax).
• Telangana High Court: Made observations regarding the invalidity of Notification No. 56 of 2023 (Central Tax) without fully delving into the vires.
• Punjab and Haryana High Court: Vide order dated 12th March, 2025, disposed of writ petitions while keeping interim orders operative, stating that all cases would be governed by the Supreme Court’s judgment and maintaining judicial discipline.

Court’s Approach on Judicial Discipline

Following the Punjab and Haryana High Court’s approach, the Delhi High Court also exercised judicial restraint and refrained from deciding on the validity of the notifications, given that the matter is pending before the Supreme Court.

Judgement

The Delhi High Court, through Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta, delivered the following judgment on 7th May, 2025:

Decision

1. Impugned order set aside: The Court set aside the order dated 30th December, 2023, passed by the Sales Tax Officer.
2. Matter remanded for fresh adjudication: The case was sent back to the adjudicating authority for fresh consideration.

Reasoning

The Court’s reasoning was straightforward and focused on procedural fairness:

• Non-consideration of reply: The Court examined the impugned order and found that while the Petitioner had filed a detailed reply with various grounds, the adjudicating authority had dismissed it summarily without proper consideration.
• Inadequate reasoning: The order merely stated that the reply was “incomplete, not duly supported by adequate documents, without proper justification” without actually examining the specific grounds raised by the Petitioner.
• Violation of natural justice: By not properly considering the Petitioner’s submissions, the authority violated principles of natural justice.

Directions Issued

The Court issued the following specific directions:

1. Personal hearing to be provided: The adjudicating authority shall issue a notice for personal hearing to the Petitioner.
2. Communication on email: The personal hearing notice shall be communicated to the Petitioner on the email address: pulkit@enurelegal.com.
3. Consider reply and submissions: The reply filed by the Petitioner dated 24th November, 2023, along with submissions made during the personal hearing, shall be considered before passing a fresh order.
4. Access to GST Portal: Access to the GST Portal, if not already available, shall be ensured to enable the Petitioner to access notices and related documents.
5. Rights and remedies kept open: All rights and remedies of the parties are left open.

Validity of Notifications - Left Open

Crucially, the Court made it clear that:

• Issue of validity not decided: The question regarding the validity of the impugned notifications (Notification No. 9/2023-Central Tax and Notification No. 9/2023-State Tax) was left open and not decided.
• Subject to Supreme Court decision: Any order passed by the adjudicating authority shall be subject to the outcome of:
• S.L.P. No. 4240/2025 (M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors.) pending before the Supreme Court.
• W.P.© 9214/2024 (Engineers India Limited v. Union of India & Ors.) pending before the Delhi High Court regarding State notifications.

Disposal

The petition was disposed of with all pending applications also disposed of.

FAQs

1. What was the main issue in this case?

The main issue was whether the tax authorities properly considered the Petitioner’s detailed reply before confirming a tax demand. Additionally, the Petitioner challenged the validity of certain GST notifications, but the Court did not decide on that aspect.

2. Did the Court decide whether the GST notifications were valid or invalid?

No, the Court deliberately did not decide on the validity of Notification No. 9/2023-Central Tax and Notification No. 9/2023-State Tax. This question was left open because it is currently pending before the Supreme Court in S.L.P. No. 4240/2025 and before the Delhi High Court in W.P.© 9214/2024.

3. Why did the Court set aside the tax demand order?

The Court found that the adjudicating authority had not properly considered the detailed reply filed by the Petitioner. The order simply dismissed the reply as “incomplete” without actually examining the specific grounds and documents submitted. This violated principles of natural justice.

4. What happens next in this case?

The matter goes back to the adjudicating authority (Sales Tax Officer) for fresh consideration. The authority must:

• Issue a personal hearing notice to the Petitioner
• Consider the reply dated 24th November, 2023
• Consider submissions made during the personal hearing
• Pass a fresh order after proper consideration.

5. Will the fresh order be final?

No, the fresh order will be subject to the outcome of the Supreme Court’s decision in S.L.P. No. 4240/2025 and the Delhi High Court’s decision in W.P.© 9214/2024 regarding the validity of the notifications.

6. What is Section 73 of the CGST Act?

Section 73 of the CGST Act deals with the determination of tax that has not been paid, has been short paid, or has been erroneously refunded, or where input tax credit has been wrongly availed. It provides the procedure for issuing show cause notices and determining tax liability.

7. What is Section 168A of the CGST Act, and why is it important here?

Section 168A of the CGST Act deals with the power to extend time limits for various proceedings under the GST law. The challenged notifications (Notification Nos. 9 and 56 of 2023) were issued under this section to extend deadlines. The controversy is whether these notifications were issued following proper procedure, particularly whether they had the prior recommendation of the GST Council as required.

8. Why are different High Courts giving different decisions on these notifications?

There is a “cleavage of opinion” among High Courts because they have interpreted the procedural requirements differently. Some High Courts (Allahabad, Patna) have upheld the notifications, while others (Guwahati) have struck them down. The Telangana High Court made observations about invalidity. This divergence is precisely why the Supreme Court is now examining the issue.

9. What does “ultra vires” mean?

“Ultra vires” is a Latin term meaning “beyond the powers.” When the Petitioner challenged the notifications as ultra vires, they were arguing that the notifications were issued beyond the legal authority granted by the CGST Act and DGST Act.

10. What is the significance of the Punjab and Haryana High Court’s approach?

The Punjab and Haryana High Court, in its order dated 12th March, 2025, chose not to decide on the validity of the notifications out of “judicial discipline” since the matter is pending before the Supreme Court. Instead, it kept interim orders operative and stated that all cases would be governed by the Supreme Court’s final decision. The Delhi High Court followed a similar approach.

11. What does “remanded for fresh adjudication” mean?

“Remanded” means the case is sent back to the lower authority (in this case, the Sales Tax Officer) to reconsider and pass a fresh order. The Court is essentially giving the tax authorities another chance to properly examine the Petitioner’s case.

12. Can the Petitioner still challenge the fresh order if they’re not satisfied?

Yes, the Court specifically stated that “all rights and remedies of the parties are left open,” which means the Petitioner can pursue further legal remedies, including appeals, if they are dissatisfied with the fresh order.

13. What is the practical impact of this judgment?

This judgment reinforces that tax authorities must meaningfully consider taxpayers’ replies and cannot pass orders mechanically. It also shows that courts are waiting for the Supreme Court to settle the controversy regarding the validity of time extension notifications under GST law. Until then, proceedings will continue but remain subject to the final Supreme Court decision.

14. What should taxpayers in similar situations do?

Taxpayers facing similar situations should:

• File detailed replies with proper documentation
• Request personal hearings
• Ensure they have access to the GST Portal
• Keep track of the Supreme Court’s decision in S.L.P. No. 4240/2025
• Consider seeking legal advice on whether to challenge orders or wait for the Supreme Court’s decision.