Limitation Period for issuance of SCN under Section 73 of the CGST Act to be interpreted as ‘3 Calendar Months’ and not as 90 days

The Hon’ble Delhi High Court in Tata Play Ltd Versus Sales Tax Officer Class II/ AVATO. - 2025 (8) TMI 68 - DELHI HIGH COURT held that the issuance of the Show Cause Notice dated November 30, 2024, was within the limitation prescribed under Section 73(2) of the CGST Act, as 'three months' must be interpreted as 'three calendar months', and that sufficient opportunity for personal hearing was afforded to the Petitioner. Therefore, the SCN and the consequent adjudication order were not liable to be set aside.

Facts:

Tata Play Limited ('the Petitioner') is engaged in providing Direct-to-Home (DTH) broadcasting services and is registered under the Companies Act, 1956. The Petitioner challenged a Show Cause Notice dated November 30, 2024, and a consequent demand order dated February 28, 2025, issued by the Sales Tax Officer Class II/AVATO, Department of Trade and Taxes, New Delhi ('the Respondent'), under Article 226 of the Constitution of India, for the tax period April 2020 to March 2021. The demand order included tax of ₹5,63,52,147, interest of ₹4,22,64,110, and penalty of ₹56,35,214.

The Petitioner contended that the SCN was issued beyond the time limit prescribed under Section 73 of the CGST Act, relying on Notification No. 40/2021-Central Tax, dated December 29, 2021 and Rule 80(1) of the CGST Rules, which extended the return filing date for FY 2020–21 to February 28, 2022. Therefore, the last permissible date for issuing the SCN was November 28, 2024, but it was issued on November 30, 2024. The Petitioner also claimed that they were denied adequate opportunity for personal hearing.

The Respondent contended that the SCN was issued within limitation, interpreting 'three months' as 'three calendar months' preceding February 28, 2025, and that the Petitioner was given sufficient opportunities for hearing. It was further submitted that the Petitioner did not attend the hearing scheduled for January 27, 2025, and no further adjournment was sought thereafter.

The Petitioner approached the High Court by way of writ petition under Article 226, challenging the jurisdiction of the Respondent and alleging violation of principles of natural justice.

Issue:

Whether the impugned Show Cause Notice dated November 30, 2024, was issued within the time limit prescribed under Section 73(2) of the CGST Act, and whether adequate opportunity of hearing was afforded to the Petitioner?

Held:

The Hon’ble Delhi High Court in Tata Play Ltd Versus Sales Tax Officer Class II/ AVATO. - 2025 (8) TMI 68 - DELHI HIGH COURT held as under:

• Noted that, under Section 73(10) of the CGST Act, an order must be passed within three years from the due date for furnishing the annual return, and Section 73(2) mandates that the SCN must be issued at least three months before that date.
• Held that, the phrase 'three months' is to be interpreted as 'three calendar months' and not as '90 days', following the reasoning in State of Himachal Pradesh & Anr. Versus M/s Himachal Techno Engineers & Anr. - 2010 (7) TMI 875 - Supreme Court the General Clauses Act definition of 'month'.
• Further noted that, counting backward from February 28, 2025, the three calendar months are: December 2024, January 2025, and February 2025. Thus, an SCN issued on November 30, 2024, provides a clear period of three calendar months.
• Further held that, even if one interprets 'three months' as 90 days, the period between November 30, 2024, and February 28, 2025, amounts to 90 days, and hence, the SCN is not time-barred.
• Held that, the Petitioner was given adequate opportunity to respond and appear for a personal hearing. One adjournment was granted for the hearing scheduled on January 17, 2025, and the Petitioner failed to attend the rescheduled hearing on January 27, 2025, without seeking a further adjournment.
• Further held that, Section 75(5) of the CGST Act allows a maximum of three adjournments upon sufficient cause being shown but does not mandate a minimum of three. Therefore, the argument that three hearings are compulsory is untenable.
• Held that, the availability of appellate remedy under Section 107 of the CGST Act renders the writ petition premature.

Our Comments:

The decision clarifies that the computation of 'three months' under Section 73(2) of the CGST Act must follow the calendar month approach, as reaffirmed by the Supreme Court in State of Himachal Pradesh & Anr. Versus M/s Himachal Techno Engineers & Anr. - 2010 (7) TMI 875 - Supreme Court . In that case, the Court held that 'three months' refers to the same date in the third subsequent calendar month, not 90 days, relying on Section 3(35) of the General Clauses Act and the precedent Dodds v. Walker, [(1981) 2 All ER 609 (HL)].

In contrast, the Andhra Pradesh High Court in M/s. The Cotton Corporation of India Versus Assistant Commissioner (ST) (Audit) (FAC), State of Andhra Pradesh, Union of India. - 2025 (2) TMI 362 - ANDHRA PRADESH HIGH COURT held that a notice issued even two days after the stipulated period is time-barred, interpreting Section 73(2) strictly. The Court in that case emphasized that the limitation period protects the taxpayer and is mandatory.

However, the Delhi High Court diverged from this view, interpreting 'three months' as three calendar months rather than 90 days, thereby treating the SCN dated November 30, 2024, as timely.

On the issue of opportunity for hearing, the Delhi High Court also correctly held that Section 75(5) provides a maximum, not a minimum, of three adjournments and only upon showing sufficient cause. This reinforces procedural discipline and prevents undue delays.

Relevant Provisions:

Section 73(2),CGST Act:

“The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.”

Section 73(10),CGST Act:

“The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilized relates to or within three years from the date of erroneous refund.”

Section 75(5),CGST Act:

“The proper officer shall, if sufficient cause is shown by the person chargeable with tax, grant time to the said person and adjourn the hearing for reasons to be recorded in writing: Provided that no such adjournment shall be granted for more than three times to a person during the proceedings.”

Rule 80(1)(A) – CGST Rules, 2017

“Notwithstanding anything contained in sub-rule (1), for the financial year 2020-2021, the said annual return shall be furnished on or before the twenty-eighth day of February, 2022”

 (Author can be reached at [email protected])