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of <h1>SCN held invalid for late service under Section 73(2) read with 73(10) CGST Act; reissue and glitch not curative</h1> <h3>C.H. Robinson Worldwide Freight India Private Limited Versus Additional Commissioner, CGST-Delhi-South & Ors.</h3> The HC held the SCN alleging wrongful availment of input tax credit was not validly served within the mandatory three-month period under Section 73(2) ... Challenge to SCN - Time limitation- the impugned SCN is dated 31st May, 2024 the same was issued only on 12th August, 2024 - wrongful availment of Input Tax Credit - HELD THAT:- The purpose of Section 73(2) of the CGST Act has been clearly held to provide the minimum period of three months to the assessee for filing the reply to the SCN. The three month’s period prescribed in Section 73(2) of the CGST Act is mandatory when read with Section 73(10) of the CGST Act. Accordingly, in the present case, the Department’s stand that due to a technical glitch, the DRC-01 could not be issued on 31st May, 2024 but was reissued on 12th August, 2024 would not be tenable in law. Further, the impugned SCN dated 31st May, 2024 was not served to the Petitioner within the time limit prescribed in Section 73(2) read with Section 73(10) of the CGST Act. Moreover, even the address of the Petitioner at which the same has been communicated is the wrong address considering the amendment of the Petitioner’s address was permitted by the Department on 15th May, 2024 itself. The SCN dated 28th May, 2024 dispatched on 3rd June, 2024 cannot, therefore, be held to be within time in terms of Section 73(2) of the CGST Act. Accordingly, the said SCN and any other order passed consequent thereto stand quashed - Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a show cause notice under Section 73(1) of the Central Goods and Services Tax Act, 2017 is time-barred if it is not issued at least three months prior to the outer limit prescribed by Section 73(10), having regard to a Government notification extending the Section 73(10) outer limit for the relevant financial year. 2. Whether a departmental explanation of a 'technical glitch' for not issuing the notice within the three-month minimum prescribed by Section 73(2) is legally tenable to cure non-compliance with the statutory timeline. 3. Whether dispatch of the notice to an address which had been formally updated in departmental records prior to dispatch constitutes valid service for purposes of Section 73(2) read with Section 73(10). ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of issuance of show cause notice in view of Sections 73(2) and 73(10) and the Government notification extending the Section 73(10) limit Legal framework: Section 73(10) prescribes an outer limit of three years from the due date for furnishing the annual return within which an order under Section 73(9) must be issued; Section 73(2) mandates that the notice under Section 73(1) be issued at least three months prior to the time limit specified in Section 73(10). A Government notification extended the Section 73(10) outer limit for the relevant financial year to 31st August, 2024. Precedent treatment: The Court relied on its prior interpretation of Sections 73(2) and 73(10), which held that Section 73(10) sets the outer limit for passing an adjudication order while Section 73(2) requires issuance of the show cause notice at least three months before that outer limit so that the noticee has adequate time to reply and be heard. Interpretation and reasoning: The two sub-sections perform distinct functions: Section 73(10) fixes the outer limit for passing an order; Section 73(2) guarantees a minimum interregnum of three months between issuance of the SCN and that outer limit. The statutory purpose of Section 73(2) is to ensure meaningful opportunity of reply/hearing (linked to Section 73(3) statement and Section 73(5) option to pay). The extension notification adjusted the outer limit under Section 73(10), and consequently the three-months requirement under Section 73(2) must be computed with reference to the extended outer limit. Ratio vs. Obiter: Ratio - the three-month period under Section 73(2) is mandatory and must precede the outer limit set by Section 73(10), including when Section 73(10) is extended by notification; the SCN must therefore be issued at least three months prior to the extended outer limit. (This is applied as binding interpretation; any ancillary observations about statutory purpose are explanatory.) Conclusions: An SCN issued so as to leave less than three months before the extended Section 73(10) outer limit is barred by limitation. Where the outer limit for the financial year was extended to 31st August, 2024, the SCN had to be issued on or before 31st May, 2024 to comply with Section 73(2). Issue 2: Effect of departmental 'technical glitch' on statutory timeline under Section 73(2) Legal framework: The mandatory language of Section 73(2) - 'shall issue the notice... at least three months prior to the time limit specified in sub-section (10)' - admits no qualification in the provision for administrative errors or post hoc explanations. Precedent treatment: The Court applied its earlier holding that the three-month requirement under Section 73(2) is mandatory and intended to secure procedural fairness; administrative explanations which post-date the statutory timeline do not enlarge or cure the statutory deadline. Interpretation and reasoning: A technical glitch causing inability to issue the prescribed form of notice (DRC-01) within the statutory window does not operate to extend or retroactively validate issuance beyond the minimum three-month requirement. The statute creates a non-derogable timeline tied to the outer limit; administrative difficulties cannot alter the mandatory nature of that timeline nor supply the substantive protection (time to reply/hear) the statute mandates. Ratio vs. Obiter: Ratio - administrative or technical difficulties do not excuse non-compliance with the mandatory three-month issuance requirement under Section 73(2). Conclusions: The departmental contention of a technical glitch is not a legally tenable basis to validate issuance of the SCN after the three-month cut-off; issuance outside that period is time-barred despite the glitch explanation. Issue 3: Validity of service where notice dispatched to an address that had been updated in departmental records prior to dispatch Legal framework: Proper service of statutory notices is a precondition to the noticee obtaining the procedural protections envisaged by Section 73; correctness of the address in departmental records at the time of dispatch is material to effective service. Precedent treatment: The Court treated service and correct dispatch address as integral to lawful issuance and effect of the SCN, in line with the statutory scheme that contemplates receipt of the notice and opportunity to reply. Interpretation and reasoning: If the department had permitted amendment of the noticee's address prior to dispatch (here, on 15th May, 2024), dispatch to the earlier/wrong address cannot be treated as effective service. Dispatch to the wrong address undermines the statutory object of ensuring a meaningful opportunity to reply within the timeline; where service is defective and the three-month requirement is not satisfied in any event, the defect reinforces invalidity. Ratio vs. Obiter: Ratio - dispatch to an address that had been updated in departmental records prior to dispatch does not constitute valid service for purposes of Section 73(2) and related procedural protections. Conclusions: The purported dispatch on 3rd June, 2024 to an address that had been changed on 15th May, 2024 cannot be treated as timely or effective service; defective service further supports quashing of the SCN. Remedial Conclusion Given (i) the mandatory three-month issuance requirement under Section 73(2) read with the extended outer limit under Section 73(10), (ii) the inability of a departmental 'technical glitch' to cure non-compliance with that mandatory period, and (iii) defective service to an address already updated in departmental records, the SCN issued outside the prescribed minimum period and/or not validly served is time-barred and liable to be quashed. Any consequential orders passed pursuant to such SCN stand quashed.
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