TaxTMI 
TaxTMI 
TaxTMI 
Section 73 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) gives power to the Proper Officer for determination of tax in case of tax is not paid, or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or wilful mis-statement or suppression of fact for the period up to the financial year 2023 – 2024. Section 73(2) of the Act provides that the proper officer shall issue th notice at least three months prior to the time limit specified under Section 73(10) of the Act for issuance of order.
Section 73 (10) of the Act provides that the proper officer shall issue the order within 3 years from the due date for furnishing annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to within 3 years from the date of erroneous refund.
As per the provisions of Section 73(10) of the Act, the Proper Officer is to pass an order within a period of 3 years from the due date for furnishing the annual returns for the said financial year. According to Section 73(2) of the Act the show cause notice is to be issued at least 3 months prior to the outer limit prescribed for passing of an order under Section 73(10) of the Act.
The Delhi High Court in Tata Play Ltd Versus Sales Tax Officer Class II/ AVATO. - 2025 (8) TMI 68 - DELHI HIGH COURT, analysed the provisions of Section 73(2) and 73(10). The High Court observed that the purpose of Section 73(20) is to fix the date by which an adjudication or an order is to be issued. The purpose of Section 73(2) is to ensure that at least 3 months is available to taxable person for filing a reply to the show cause notice issued to them and for being heard in a proper manner. Thus, the High Court held that the time period between the issuance of show cause notice and the outer time limit for passing of the order should be at least 3 months.
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 Section 75 of the Act stipulates that the taxpayer is not only entitled to a notice before any assessment is carried out but also the right of personal hearing, irrespective of whether such personal hearing is requested. There is a possibility of passing an adverse order being passed against the tax payer. In such a case, the taxpayer can obtain at least three adjournments for personal hearing. The High Court observed that said provisions, protecting the interests of the tax payer, would be rendered otiose, if notice should be permitted to be sent without a minimum period. The said protections can be by passed by the authorities issuing show cause notice within a week’s time or 10 days and calling upon to taxpayers to file its reply or objections within the short span of time. This is not the intent of the provisions of Section 73(2) and Section 73(10) of the Act, the High Court observed.
Therefore, the AP High Court held that the time limit for issuing show cause notice under Section 73(2) is mandatory and violation of this time limit cannot be condoned and it would render the show cause notice otiose.
In A.M. Marketplaces Pvt. Ltd., New Delhi through its authorized signatory and Director Ms. Suchishree Mukherjee W/o Sandeep Kunte Versus The Union of India, through Ministry of Finance, Department of Revenue, New Delhi and ors. - 2026 (1) TMI 1454 - BOMBAY HIGH COURT, the High Court directed the petitioner to submit an affidavit of service. The petitioner submitted the affidavit of service. The High Court found that the Registrar has not recorded its satisfaction as regards service to the respondents. A vague report is filed by the petitioner. The High Court directed the Registrar to examine the affidavit and to make remarks as regards service to the respondents.
After that the case was heard by the High Court. The only issue involved in this case is as to whether the time gap of 3 months should be maintained between the issuance of show cause notice and passing of the order by the Proper Officer.
The petitioner contended that the purpose of Section 73(2) of the Act it has been clearly held to provide the minimum period of 3 months to the assessee for filing the reply to the show cause notice. The three months’ period is mandatory.
The High Court relied on the judgments of various High Courts in this regard. The High Court elaborated the necessity for the three months’ time gap between the issuance of show cause notice and passing of the order by the Proper Officer. The necessity arises because multiple activities are involved in the intervening period between the show cause notice and the passing of order. This period includes the following principles of Natural Justice, opportunity of payment of tax etc. The rationale behind 3 months’ time is to afford meaningful opportunity of hearing to the taxpayers. If this time is shortened, the requirements of Section 73(3) and (5) providing for service of a statement upon the noticee, giving all the details of the demand proposed to be raised and option to the assesee by paying tax by doing a self assessment and to pay the amount will not be achieved. There is also possibility of passing an adverse order against the taxpayer, the facility of obtaining at least three adjournments for personal hearing etc. will be rendered otiose. If the assessment is done lesser than time limit, the protection guaranteed under the provisions of Act will not be extended.
In view of the above, the High Court held that it is mandatory to keep the gap of three months’ time between issuance of show cause notice and passing the final order. In the present writ petition, the High Court observed that the notice has been issued on 18.11.2024 and the order has been passed on 31.01.2025. The time gap in this case is less than 3 months i.e., two months and 13 days.
The High Court allowed the writ petition and quashed the show cause notice issued and the order made by the Proper Officer. The High Court remanded the matter back to the Department to consider the case afresh in accordance with law and directed the petitioner to co-operate with the Department in deciding the matter.