The Delhi High Court, in the case of G-Technologies v. Commissioner of DGST, (2025) 30 Centax 510 (Del.), decided on 06.05.2025, held that any adjudication under Section 73 of the Central Goods and Services Tax (hereinafter referred to as
“CGST”) Act, 2017, that bypasses mandatory procedural safeguards such as issuing a Show-Cause Notice (hereinafter referred to as “SCN”) granting an opportunity to file a reply, and providing a personal hearing violates principles of natural justice and is liable to be quashed. The Court further observed that while it would not rule on the constitutional validity of retrospective limitation-extension notifications under Section 168A due to a pending matter before the Supreme Court, such retrospective delegation raises serious legal and constitutional concerns requiring authoritative judicial scrutiny.
FACTS
G-Technologies (hereinafter referred to as “the Petitioner”), a mid-sized enterprise engaged in the supply of IT hardware and software solutions, was served with a show-cause notice under Section 73 of the CGST Act, 2017, for alleged non-payment of GST for the financial year 2018–19.
The notice cited discrepancies in the Input Tax Credit (hereinafter referred to as “ITC”) claimed, based on third-party data and internal departmental audits.
However, the Petitioner contended that it was neither afforded a reasonable opportunity to file a reply nor granted a personal hearing before the order-in-original was passed.
On the contrary, the impugned order, passed by the Adjudicating Authority, the Commissioner of DGST (hereinafter referred to as “the Respondent”), demanded recovery of tax along with interest and penalty.
What complicated the matter further was the invocation of extended limitation under two notifications – Notification No. 9/2023 and Notification No. 56/2023 issued under Section 168A of the CGST Act, which extended the timeline for adjudication on the grounds of COVID-19-related disruptions. These notifications were purportedly issued based on recommendations of the GST Council.
The Petitioner questioned whether such recommendations had been made prior to issuance, and whether such extensions could be granted retrospectively.
Hence, the Petitioner aggrieved by both the denial of a fair hearing and the retrospective application of limitation extensions, filed a writ petition under Article 226 of the Constitution before the Delhi High Court.
ISSUES BEFORE THE HIGH COURT
- Whether the adjudication under Section 73 of the CGST Act violated principles of natural justice by denying a personal hearing and not considering the SCN reply.
- Whether the notifications under Section 168A extending limitation can be applied retrospectively.
CONTENTIONS OF THE PARTIES
The Petitioner contended that the impugned order was passed in blatant violation of the principles of natural justice.
The Petitioner further argued that the mandatory procedure under Section 73, which includes service of a show-cause notice and the grant of an opportunity for a hearing, was bypassed entirely.
The Petitioner received no communication calling for its reply, nor was any date fixed for oral submissions. The absence of these essential procedural safeguards rendered the entire adjudicatory process illegal and vitiated the final order.
The Petitioner further challenged the validity of Notification Nos. 9/2023 and 56/2023 issued under Section 168A and argued that these notifications were issued without any prior recommendation from the GST Council, as required under the provision. Additionally, the retrospective extension of limitation, particularly after the period had already expired, was impermissible and unconstitutional.
The Petitioner also emphasized that the judicial process should not condone administrative shortcuts, especially where fiscal consequences of serious magnitude are at stake.
Further, The Petitioner argued that the adjudicatory process must be transparent, participatory, and responsive to the taxpayer’s submissions, failing which it infringes Article 14 and Article 265 of the Constitution.
On the other hand, the Respondent contended that the Petitioner was served with due notice under Section 73 and that the order-in-original had been passed after taking into account all relevant records, including system-generated mismatch reports.
It was argued that the Petitioner had not responded within the time allowed and had failed to request an extension, thereby forfeiting its right to be heard. On this basis, the Respondent proceeded to determine tax liability ex parte.
The Respondents further defended the legality of the impugned notifications. It was argued that the COVID-19 pandemic constituted a force majeure situation, thereby activating the operation of Section 168A. The power under Section 168A permitted both prospective and retrospective application, and the notifications in question had been issued pursuant to deliberations at the GST Council meetings. Even if the formal recommendation of the Council was issued later, the process of consultation had taken place, satisfying the legislative intent behind Section 168A.
The Respondents also urged the Court to show judicial restraint and avoid pronouncing on the constitutional validity of the notifications as the same issue was sub judice before the Supreme Court in HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax, SLP No. 4240/2025. It was submitted that until such time as the Apex Court renders its decision, lower courts should refrain from declaring the notifications invalid.
DECISION AND FINDINGS
The Hon’ble Delhi High Court began by reiterating the foundational importance of natural justice in fiscal adjudication. It emphasized that tax administration, while often dealing with voluminous records and systemic deadlines, cannot compromise on procedural due process. Section 73 of the CGST Act specifically enshrines procedural protections, including the issuance of an SCN, time to file a reply, and the option of a personal hearing. These are not mere formalities but substantive entitlements of the taxpayer, flowing from constitutional guarantees of fairness and equality before the law.
The Court found that the order-in-original was passed without serving the SCN on the Petitioner, without fixing a date for hearing, and without considering any representation. The adjudication was entirely ex parte, and the record did not indicate any justification for such departure from procedure. The failure to follow statutory procedure under Section 73 was held to be fatal to the adjudicatory process. The Court reiterated that administrative convenience cannot override procedural rights.
The Court noted that the Petitioner’s arguments were substantial and echoed concerns being litigated in other High Courts, suggesting the issue required urgent resolution at the highest judicial forum.
The Hon’ble Delhi High Court quashed the impugned order-in-original on the ground of violation of natural justice. It held that the Respondent had failed to comply with mandatory procedural requirements under Section 73 of the CGST Act. The matter was remanded back to the Respondent with directions to issue a fresh SCN, afford the Petitioner reasonable time to reply, and grant a personal hearing before passing any fresh order. No conclusive finding was given on the constitutional validity of the impugned notifications under Section 168A, in deference to the Supreme Court’s pending adjudication.
The Court reaffirmed that compliance with principles of natural justice is not a dispensable formality but a statutory imperative under the CGST framework. An order passed in violation of Section 73’s procedural safeguards is legally unsustainable. It also held that ex parte adjudication must be resorted to only when there is documented evidence of wilful default or non-cooperation by the taxpayer, not otherwise. Furthermore, while the Court did not invalidate the notifications under Section 168A, it highlighted that retrospective extension of limitation raises serious constitutional questions unless backed by express statutory authority and procedural propriety.
AMLEGALS REMARKS
This decision by the Hon’ble Delhi High Court strikes a crucial balance between judicial activism and judicial restraint. On one hand, it takes a firm stand on the non-negotiability of natural justice, especially under tax statutes that confer significant coercive powers on the state. On the other hand, it demonstrates prudence by refraining from ruling on constitutional issues that are already before the Supreme Court. This approach not only avoids jurisdictional overreach but also ensures legal uniformity once the Apex Court pronounces its verdict.
This judgment carries wide-ranging implications for taxpayers and tax administrators alike. For taxpayers, particularly small and medium enterprises, it provides judicial reassurance that procedural fairness will be strictly enforced. The ruling empowers them to challenge adjudicatory orders that are passed in haste or without due process. For the tax authorities, the judgment acts as a reminder to ensure that digitized workflows do not override basic human interaction and procedural transparency. At a broader level, the case contributes to the evolving jurisprudence on the interpretation of Section 168A and the outer limits of delegated legislative authority in tax law.
The ruling underscores the importance of digitization not becoming a substitute for procedural diligence. While automated systems improve efficiency, they must be programmed to ensure compliance with procedural mandates like issuing notices, confirming receipt, and tracking hearing schedules. A failure to do so could lead to widespread nullification of orders, increasing the litigation burden on courts.
– Team AMLEGALS
For any queries or feedback, feel free to reach out to laksha.bhavnani@amlegals.com or hiteashi.desai@amlegals.com