HC: Prior Section 74 Order Ignored, Rs. 2.48 Cr GST Demand Remanded

The writ petition questioned the order dated 29th August 2024 of the Sales Tax Officer for the Financial Year 2019-20, and the Show Cause Notice dated 20th May 2024. The amount of Rs. 2.48 Cr was demanded from April 2019 to March 2020. The challenge was also to Notification No.9/2023-Central Tax dated 31st March 2023, Notification No.56/2023-Central Tax dated 28th December 2023, and Notification No. 56/2023-State Tax dated 11th July 2024. It was pointed out that for the quarter December 2019 to March 2020, an order dated 8th February 2021 had already been passed under Section 74 raising a demand of Rs. 31,87,572/-, which was under appeal. It was contended that a proceeding under Section 73 for the same financial year was not permissible and that the petitioner’s reply to the Show Cause Notice had not been considered by the adjudicating authority while passing the impugned order.

The Court noted that divergent views on the validity of the notifications had been taken by different High Courts and that the issue was pending before the Supreme Court. Related proceedings were also pending before this Court. Submissions included that multiple reassessments for the same financial year were not permissible and that the demand raised in the earlier proceedings was included again. The record was examined to see if the reply and submissions had been duly considered and whether the impugned order could be sustained.

Central Issue: Whether the demand of Rs. 2,48,82,739 for FY 2019-20 raised under Section 73 could be sustained in view of a prior order under Section 74, and whether reliance on the notifications for extension of limitation was valid.

HC Held: The Court held that the adjudicating authority did not take into consideration the implication of the Order passed ex-parte on 8th February 2021 under Section 74 of the CGST Act and the obsolescence of demand. It was observed that the petitioner had given a reply to the Show Cause Notice of 20th May 2024, but the same was not kept in mind. The Court held that such omissions required that the impugned order of 29th August 2024 be quashed. The Court ruled that such omissions rendered the challenged order of 29th August 2024 be quashed. The issue was ordered to be remanded to the adjudicating authority for fresh adjudication. The petitioner was directed to be granted access to the GST portal, personal hearing, and free opportunity of reply prior to issuance of any fresh order.

The Court explained that the adjudication shall be subject to the ruling of the Supreme Court in SLP No. 4240/2025 and subject to proceedings pending in W.P.(C) 9214/2024. The adjudicating authority was asked to pass a fresh reasoned order, free from the operation of the previous order. All rights and remedies of the parties were reserved.

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