High Court Upholds Taxpayer Rights in GST Proceedings; Fresh Hearing Ordered in Section 73 Demand Case

A person sitting at a desk writes on a notepad while looking at a computer screen displaying a GST document with a checkmark, accompanied by icons representing legal scales and notifications.

The Delhi High Court has recently quashed a tax demand issued under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act) and ordered a fresh assessment in the case of M/s The Supper Club through its Partner, Savar Duggal vs. Govt. of NCT of Delhi & Ors. Considering the fact that the Petitioner did not get a proper opportunity to be heard and the replies filed by the Petitioner to the SCN have not been duly considered, the Court is of the opinion that the matter deserves to be remanded to the concerned Adjudicating Authority.

Case Summary:

Petitioner: M/s The Supper Club (through partner Mr. Savar Duggal)
Respondents: Govt. of NCT of Delhi & Others
Bench: Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta
Date of Decision: 26th May 2025
Writ Petition No.: W.P.(C) 7194/2025

Background:

  • The petition challenged:
    1. Show Cause Notice (SCN) dated 11th Dec 2023 for FY 2018-19.
    2. Order dated 27th April 2024 passed under Section 73 of the CGST Act, 2017.
    3. Validity of Notification No. 56/2023 – Central Tax dated 28th Dec 2023 and corresponding State Notification dated 11th July 2024.

Court’s Observations:

  1. Challenge to Notification No. 56/2023 (Central & State):
    • Notifications issued under Section 168A of CGST Act, 2017.
    • Contentious as GST Council’s recommendation came after the issuance.
    • The matter is already pending before the Supreme Court in SLP No. 4240/2025 (M/s HCC-SEW-MEIL-AAG JV).
    • High Courts across India have had divergent views:
      • Allahabad HC upheld Notification No. 9.
      • Patna HC upheld Notification No. 56.
      • Guwahati HC quashed Notification No. 56.
      • Telangana HC made adverse remarks (subject to SLP in SC).
  2. Lack of Proper Hearing:
    • Petitioner responded twice (11-Mar-2024 and 10-Apr-2024), citing clerical error rectified via credit note in June 2019.
    • No consideration of replies in the impugned order.
    • No personal hearing provided – violative of principles of natural justice.

Key Legal Reference:

  • Section 73(1) of CGST Act, 2017:
    Deals with demand where tax is not paid or short paid or ITC wrongly availed or utilized, for reasons other than fraud or willful misstatement.
  • Section 168A of CGST Act, 2017:
    Allows the government to extend time limits during force majeure circumstances, but only on the recommendation of GST Council.

Final Directions by Court:

  1. Impugned Order Set Aside – due to failure to consider reply and lack of personal hearing.
  2. Matter Remanded to Adjudicating Authority:
    • Must issue fresh notice for personal hearing.
    • Consider replies and oral submissions afresh.
  3. Fresh Order to be passed, subject to:
    • Outcome of SLP No. 4240/2025 before Supreme Court.
    • Proceedings in W.P.(C) 9214/2024 (Engineers India Ltd.) pending before Delhi High Court.

Rights & Remedies:

  • All rights/remedies of the Petitioner are kept open.
  • Access to GST Portal to be restored for Petitioner for document access.

Conclusion:

The Delhi High Court has prioritized fair hearing and natural justice, especially in light of the pending constitutional and procedural validity of the extension-related Notifications. The judgment ensures that until the Supreme Court decides on the vires of Notification No. 56/2023, the taxpayer is not prejudiced for want of hearing.