Korea Marine Transport Co Ltd Vs Sales Tax Officer (Delhi High Court)
Assessment Order Against Korea Marine Transport Quashed; Validity of GST Time Extension Notifications Pending Supreme Court Decision
NEW DELHI: In proceedings that underscored the importance of tax authorities considering taxpayer responses before issuing final orders, the Delhi High Court has set aside an assessment order against Korea Marine Transport Co Ltd. The court found that the Sales Tax Officer had passed the impugned order without adequately considering the detailed reply submitted by the company to the show cause notice.
The case brought by Korea Marine Transport Co Ltd before the High Court under Article 226 of the Constitution challenged a specific order dated December 30, 2023, issued by the Office of the Sales Tax Officer Class II/AVATO Jurisdiction, Ward 204, Delhi. Beyond this individual order, the petitioner also mounted a broader challenge to the validity of two notifications: Notification No. 9/2023-Central Tax dated March 31, 2023, issued by the central government, and Notification No. 9/2023-State Tax dated June 22, 2023, issued under the Delhi Goods and Service Tax Act, 2017. The core of the challenge to these notifications was that they were allegedly ultra vires, or beyond the powers granted by, the respective GST Acts.
These notifications are significant in the GST landscape as they relate to the extension of time limits for various actions under the law, including the issuance of show cause notices and assessment orders. The legal power to issue such extensions under the GST framework is primarily derived from Section 168A of the Central Goods and Services Tax Act, 2017, which requires a prior recommendation from the GST Council.
The Delhi High Court noted that the validity of these and similar notifications, such as Notification No. 56/2023 (Central Tax), was already under scrutiny in a batch of petitions pending before the court, with the lead case being DJST Traders Pvt. Ltd. vs. Union of India and Ors. (W.P.(C) 16499/2023). During hearings in that batch on April 22, 2025, arguments challenging the notifications focused on whether the mandatory procedure under Section 168A, particularly the requirement for prior GST Council recommendation, was strictly followed before their issuance. Specific contentions were raised regarding whether recommendations for certain notifications were retrospective or provided only after the notifications were published, contrary to the statutory mandate.
The court further observed that challenges to Notification Nos. 09 and 56 of 2023 (Central Tax) had been litigated in various High Courts across the country, resulting in divergent judicial opinions. The Allahabad High Court had reportedly upheld the validity of Notification No. 9/2023-Central Tax. The Patna High Court had upheld the validity of Notification No. 56/2023. Conversely, the Guwahati High Court had quashed Notification No. 56 of 2023 (Central Tax). The Telangana High Court, while not directly ruling on the vires, had made observations questioning the validity of Notification No. 56 of 2023 (Central Tax).
Crucially, the Delhi High Court highlighted that the judgment of the Telangana High Court concerning the validity of Notification No. 56 of 2023 (Central Tax) was presently under consideration by the Supreme Court of India. The Supreme Court had taken up the matter in S.L.P No 4240/2025 titled M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Ors.. The Supreme Court, in its order dated February 21, 2025, while issuing notice in the Special Leave Petition returnable on March 7, 2025, specifically framed the issue for consideration: “whether the time limit for adjudication of show cause notice and passing order under Section 73 of the GST Act and SGST Act (Telangana GST Act) for financial year 2019-2020 could have been extended by issuing the Notifications in question under Section 168-A of the GST Act.” The Supreme Court also noted the cleavage of opinion among different High Courts on this matter.
The Delhi High Court also noted that challenges to similar notifications were pending before the Bombay High Court and the Punjab and Haryana High Court. The Punjab and Haryana High Court, vide its order dated March 12, 2025, had disposed of all connected writ petitions, directing that those cases would be governed by the final judgment of the Supreme Court in the M/s HCC-SEW-MEIL-AAG JV SLP. The interim orders granted in the Punjab and Haryana High Court cases were ordered to continue pending the Supreme Court’s final decision.
In the Delhi High Court’s own batch lead case, DJST Traders, after hearing arguments at length, the court acknowledged on April 22, 2025, that the issue of the notifications’ validity was squarely before the Supreme Court. Consequently, on April 23, 2025, the Delhi High Court proceeded to dispose of several matters within the DJST Traders batch, clarifying that the validity of the impugned notifications in those petitions would be subject to the outcome of the Supreme Court’s proceedings in the M/s HCC-SEW-MEIL-AAG JV case.
However, the Delhi High Court decided to retain for its own consideration cases specifically challenging the State notifications, such as the Delhi Notification No. 9/2023-State Tax. The lead matter for this separate batch of petitions was identified as Engineers India Limited v. Union of India & Ors. (W.P.(C) 9214/2024).
Despite the overarching challenge to the notifications pending elsewhere, the petitioner in the Korea Marine Transport case also presented a specific factual argument regarding the impugned assessment order itself. The petitioner submitted that they had filed a detailed reply to the Show Cause Notice dated November 24, 2023, but this reply had not been considered by the Adjudicating Authority when passing the order on December 30, 2023.
The High Court carefully perused the impugned order. The relevant portion of the order indicated that the tax authority had merely noted that the taxpayer filed a reply, but summarily dismissed it with the observation: “On scrutiny of the same, it has been observed that the same is not acceptable as incomplete, not duly supported by adequate documents, without proper justification and thus unable to clarify the issue.” Based on this cursory assessment, the authority confirmed the demand and interest proposed in the show cause notice and directed recovery proceedings if payment was not made within three months.
The High Court, upon reviewing the petitioner’s reply dated November 24, 2023, observed that it contained various grounds and submissions. The court concluded that these grounds had “not been considered in the impugned order at all.”
Given this specific factual finding that the detailed reply of the taxpayer was not considered before the assessment order was passed, the Delhi High Court decided to set aside the impugned order dated December 30, 2023, in the case of Korea Marine Transport Co Ltd.
The court clarified that this decision to quash the assessment order and remand the matter was based purely on the failure of the Adjudicating Authority to consider the petitioner’s reply, and it was “made clear that the issue in respect of the validity of the impugned notifications is left open.” The validity of the Central notification would be subject to the outcome of the Supreme Court in the M/s HCC-SEW-MEIL-AAG JV SLP, and the validity of the State notification would be subject to the outcome of the Delhi High Court’s own batch in Engineers India Limited.
Accordingly, the matter was remanded for fresh adjudication by the Adjudicating Authority. The court directed the authority to issue a fresh notice for personal hearing to the petitioner at a specified email address. Furthermore, the Adjudicating Authority was explicitly instructed to consider the detailed reply filed by the petitioner on November 24, 2023, along with any further submissions made by the petitioner during the personal hearing, before passing a fresh order.
The court ensured that all rights and remedies of the parties would remain open for future recourse after the fresh adjudication. It also directed that access to the GST Portal, if not already available, should be provided to the petitioner to facilitate access to notices and related documents.
The petition was disposed of in these terms, along with all pending applications. The ruling reinforces the fundamental requirement of tax authorities to engage meaningfully with taxpayer responses and provide a fair hearing before finalizing demands, even as larger legal questions regarding the vires of time extension notifications are being resolved by higher courts.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
