2025 (4) TMI 58 - HC - GST

Legal Challenge Reveals Procedural Defect in Tax Notice Issuance Beyond Statutory Limitation Period Under CGST Act Section 73

HC finds prima facie merit in petitioner's challenge to a Show Cause Notice issued under CGST Act. The notice was served two days beyond the statutorily ... Issuance of SCN beyond the stipulated time frame - SCN issued tow days beyond the deadline date - proper Officer has jurisdiction to issue the Show Cause Notice or not - HELD THAT:- There are considerable force in the arguments canvassed by the learned Counsel appearing on behalf of the Petitioner. At least prima facie, it is held that facts in the present case are almost identical to the facts in the case before the Hon’ble Andhra Pradesh High Court in the case of Cotton Corporation [2025 (2) TMI 362 - ANDHRA PRADESH HIGH COURT] In that case, the Andhra Pradesh High Court has clearly held that the time limit prescribed under Section 73 (2) of the Act for issuance of the Show Cause Notice are mandatory and if there is any violation of the aforesaid period, the same would render the Show Cause Notice otiose. Considering that the Petitioner has made out a strong prima facie case, and this being a jurisdictional issue, the Petitioner is entitled to ad-interim relief pending the admission of the above Petition. Stand over to 22nd April, 2025 under the caption “for ad-interim reliefs”. ISSUES PRESENTED and CONSIDEREDThe core legal issue considered in this judgment is whether the issuance of a Show Cause Notice under Section 73 (1) of the Central Goods and Services Tax Act, 2017 (CGST Act) beyond the stipulated time frame renders the subsequent Order-in-Original invalid. Specifically, the question is whether the notice issued on 31st January 2024, instead of by 29th January 2024, as required by the three-month backward calculation from the deadline of 30th April 2024, invalidates the jurisdiction of the proper officer to issue such a notice.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework centers on Section 73 of the CGST Act, which outlines the procedure for determining tax not paid or short paid. Section 73 (2) mandates that a Show Cause Notice must be issued at least three months prior to the time limit specified under Section 73 (10) for issuing the order. The petitioner argues that the issuance of the notice beyond this period violates the mandatory requirements of the Act. The petitioner relies on the precedent set by the Andhra Pradesh High Court in the case of Cotton Corporation of India v/s. Assistant Commissioner St Auditfac & Others, which held that non-compliance with the stipulated time frame renders the notice otiose.Court's Interpretation and ReasoningThe Court acknowledges the argument presented by the petitioner that the issuance of the Show Cause Notice on 31st January 2024 was beyond the permissible period, thereby questioning the jurisdiction of the officer to issue the notice. The Court finds prima facie merit in the petitioner's argument, noting the similarity of facts with the case adjudicated by the Andhra Pradesh High Court, which emphasized the mandatory nature of the time limits prescribed under Section 73 (2).Key Evidence and FindingsThe key evidence revolves around the timeline of the issuance of the Show Cause Notice. The petitioner demonstrates that the notice was issued two days beyond the permissible period, thereby contravening the statutory requirement under Section 73 (2). This factual matrix forms the basis of the petitioner's challenge to the jurisdictional validity of the notice and the subsequent order.Application of Law to FactsThe application of law to the facts involves determining whether the procedural lapse in issuing the notice beyond the stipulated period affects the validity of the subsequent order. The Court, drawing on the precedent from the Andhra Pradesh High Court, leans towards the interpretation that the procedural requirement is mandatory, and non-compliance renders the notice and subsequent order invalid.Treatment of Competing ArgumentsThe respondents, represented by the learned AGP, sought additional time to file an Affidavit in Reply, indicating potential arguments against the petitioner's claims. However, the Court, in its interim analysis, finds the petitioner's arguments compelling enough to warrant ad-interim relief, pending a detailed hearing. The Court's decision to grant interim relief suggests a preliminary preference for the petitioner's interpretation of the statutory requirements.ConclusionsThe Court concludes that the petitioner has established a strong prima facie case, warranting ad-interim relief. The procedural lapse in issuing the Show Cause Notice beyond the stipulated period is deemed significant enough to question the jurisdictional validity of the notice and the order. The Court grants ad-interim relief, staying the operation of the impugned order pending further hearings.SIGNIFICANT HOLDINGSThe Court's significant holding is the emphasis on the mandatory nature of the time limits prescribed under Section 73 (2) of the CGST Act. The Court, aligning with the Andhra Pradesh High Court's decision, underscores that non-compliance with these time limits renders the Show Cause Notice otiose, thereby affecting the jurisdiction to issue subsequent orders.Core Principles EstablishedThe core principle established is the mandatory compliance with procedural timelines under tax statutes, particularly concerning the issuance of Show Cause Notices. The Court affirms that such procedural requirements are not merely directory but essential to the validity of subsequent proceedings.Final Determinations on Each IssueThe final determination, at this interim stage, is the granting of ad-interim relief to the petitioner, staying the operation of the impugned order. The Court indicates a preliminary view that the procedural lapse in issuing the notice affects the jurisdictional validity of the proceedings, pending a detailed hearing and final disposal of the petition.