GST demand proceedings stayed as adjudication order under Section 73 was held prima facie unreasoned and passed without dealing with taxpayer’s reply

DHL Express India Private Limited v. Goods and Services Tax Council & Ors.
Delhi High Court — W.P.(C) 9753/2024
Order dated 18 July 2024
Category of dispute: GST demand / Limitation / Validity of special audit / Unreasoned adjudication order
Relevant provisions: Section 73, Section 66, Section 168A of the CGST Act, 2017; corresponding provisions of the DGST Act, 2017

Facts

The writ petition was instituted by DHL Express India Private Limited before the Delhi High Court assailing an adjudication order dated 26 April 2024 passed under Section 73 of the CGST Act / DGST Act for the tax period April 2018 to March 2019. The petitioner also challenged the show cause notice dated 30 January 2024 which culminated in the said order. The show cause notice itself was founded upon a special audit conducted under Section 66 of the CGST Act, initiated by a notice dated 24 August 2023. The petitioner contended that the special audit was initiated without fulfilment of statutory pre-conditions and that the entire proceedings were barred by limitation. In addition, the constitutional validity and applicability of Notification No. 56/2023–Central Tax issued under Section 168A of the CGST Act was questioned, particularly on the ground that no corresponding notification existed under the DGST Act. (Paras 5–6)

Questions for consideration

The writ petition raised interlinked jurisdictional and procedural questions, namely whether initiation of special audit under Section 66 was lawful in the absence of statutory satisfaction, whether the show cause notice and adjudication under Section 73 were time-barred, whether extension of limitation under Notification No. 56/2023–CT could apply in absence of a similar DGST notification, and whether an adjudication order which does not deal with the taxpayer’s reply or contentious issues can survive judicial scrutiny. (Paras 6–7)

Observations of the Court

The High Court recorded a prima facie finding that the adjudication order suffered from serious infirmities. The order neither discussed the contentious issues raised in the show cause notice nor examined the detailed reply submitted by the petitioner. The adjudicating authority had merely recorded a bald conclusion that the reply was “unsatisfactory” without assigning any reasons. The Court noted that such an approach undermines the principles of natural justice and statutory adjudication under the GST framework, where reasoned orders form the foundation of demand sustainability. (Para 7)

Judgment / Directions

In view of the prima facie absence of reasoning and non-consideration of the taxpayer’s submissions, the Delhi High Court stayed the operation of the adjudication order dated 26 April 2024 till the next date of hearing. The respondents were directed to file counter-affidavits within four weeks, with liberty to the petitioner to file rejoinder thereafter. The matter was listed for further hearing on 15 October 2024. (Paras 8–10)

Between the fine lines – Practical takeaway

This order reinforces that GST adjudication cannot be reduced to a mechanical exercise. Even at the interim stage, High Courts are willing to interdict recovery where the demand order is cryptic, unreasoned, and ignores the taxpayer’s reply. For industry and practitioners, the ruling underscores the strategic importance of challenging jurisdictional defects in special audits, limitation extensions under Section 168A, and non-speaking orders passed under Section 73, as these go to the very root of GST demand sustainability.

Cases referred / relied upon

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