2025 (3) TMI 54 - HC - GST

Kerala HC rejects challenge to GST demand notice under sections 73-74, finds audit completed within three-month limit under section 65

M/s. Rajive And Company Versus The Deputy Commissioner (Audit), The State Tax Officer and State of Kerala, Thiruvananthapuram

Kerala HC dismissed the writ petition challenging SCN issued under sections 73 and 74 of CGST/Kerala SGST Act, 2017. Petitioner argued audit exceeded the ... Challenge to SCN issued u/s 73 and 74 of the Central Goods and Services Tax Act, 2017/Kerala State Goods and Services Tax Act, 2017 - non-compliance with the period stipulated for completing the audit - HELD THAT:- The audit contemplated under Section 65 of the CGST Act stipulates that it shall be completed within a period of three months from the date of commencement of the audit. The Commissioner is given the power to extend the said period by a further period not exceeding six months. However, the explanation to the aforesaid provision stipulates that the commencement of the audit shall mean the date on which the records and other documents called for by the Tax Authorities are made available or the actual institution of audit at the place of business whichever is later. Though a question can arise whether the time limit is mandatory or only directory in view of the use of the word 'shall', the said question is left open for consideration in appropriate case, considering the circumstances of this case. The hearing notice dated 26.03.2024 and 02.04.2024 have not been produced. However, it is evident from the Ext.P5 communication issued by the petitioner itself that additional evidences were called for by the respondents from the petitioner. The said additional records are stated to have been produced on 09.04.2024, as seen from Ext.P5. Therefore, it can safely be concluded that the date on which the documents called for by the respondents were produced by the petitioner on 09.04.2024. It is necessary to refer to the Explanation to Section 65 which stipulates that the expression 'commencement of audit shall mean the date on which the records and documents called for by the Tax Authorities are made available by the registered person'. Viewed in the above perspective, the documents called for by the Tax Authorities were made available by the petitioner on 09.04.2024 and the audit ought to have been completed within three months from the aforesaid date. Since the final report was filed within time, the contention raised by the petitioner on the basis of limitation stipulated in Section 65(4) of the GST Act has no application. Conclusion - The audit was completed within the prescribed period - The petitioner's argument regarding the audit's timeliness under Section 65(4) of the GST Act was deemed inapplicable. There are no merit in this writ petition and it is dismissed. The writ petition challenged show cause notices under Sections 73 and 74 of the Central Goods and Services Tax Act, 2017/Kerala State Goods and Services Tax Act, 2017, along with a final audit report dated 08.07.2024. The petitioner, operating a jewelry business named 'Chungath Jewelry,' contended that the audit conducted for the period between 2017-18 to 2021-22 exceeded the statutory time limit of three months. The main issue revolved around the timeliness of the audit and the subsequent issuance of show cause notices and the final audit report.The petitioner argued that the audit, which was supposed to commence on 10.01.2024, was delayed due to the submission of records on 19.02.2024. The final audit report dated 08.07.2024 was deemed to be beyond the statutory period, even considering the extended timeline. The petitioner also highlighted that the audit enquiry notice was issued on 07.03.2024, further supporting their contention that the audit exceeded the permissible time frame.On the other hand, the respondents asserted that they received all necessary documents from the petitioner only on 06.05.2024. They argued that the audit completion deadline should be calculated from this date, giving them until 08.07.2024 to finalize the audit. The respondents maintained that the audit was conducted within the stipulated time frame based on the documents' submission date.The court analyzed Section 65 of the CGST Act, which outlines the audit procedures and timelines. The provision mandates that audits should be completed within three months from the audit's commencement, with a provision for a six-month extension under specific circumstances. The explanation to the provision clarifies that the audit's commencement is triggered when the required records and documents are made available by the registered person.The court noted conflicting arguments regarding the date when the documents were submitted by the petitioner. While there was no concrete evidence of the submission date, a communication dated 09.04.2024 from the petitioner acknowledged the submission of additional evidence requested by the respondents. Based on this communication, the court inferred that the documents were made available on 09.04.2024, triggering the audit's commencement from that date.Considering the statutory provision and the timeline of document submission, the court concluded that the audit was completed within the prescribed period. Therefore, the petitioner's argument regarding the audit's timeliness under Section 65(4) of the GST Act was deemed inapplicable. Consequently, the court found no merit in the writ petition and dismissed it.The court's decision hinged on the interpretation of the statutory provisions governing audit timelines and the actual date of document submission by the petitioner. By aligning the audit completion date with the document submission date, the court upheld the legality of the audit process and the subsequent issuance of show cause notices and the final audit report.