2026 (1) TMI 1454 - HC - GST

Mandatory gap between show cause notice and adjudication under CGST affirmed; order passed within shorter interval quashed.

The note addresses the mandatory three-month interval required between issuance of a show cause notice and passing of an adjudication order under Section ... Mandatory three months gap between issuance of show cause notice and passing of adjudication order - Outer time-limit for adjudication - principles of natural justice and right to personal hearing - High Court adjudication - Right to personal hearing - HELD THAT:- The rationale behind three month’s time is to afford meaningful opportunity of hearing to the persons like the petitioner. If this time is shortened, the requirement of sub-sections (3) and (5) of Section 73 of CGST Act, which provide for service of a statement upon the noticee, giving all the details of the demand proposed to be raised and option to the assessee by paying tax by doing a self-assessment and to pay the amount, will not be achieved. The another reason is when there is a possibility of an adverse order being passed against tax payer, the facility of obtaining at least three adjournments for personal hearing etc. will be rendered otiose, if the assessment is to be done within the time lesser than three months which will fall short of giving reasonable opportunity of hearing. Thus, the protection guaranteed under the provisions of the CGST Act will not be extended, if the gap of three months between the issuance of notice and passing final order is not maintained. Thus, we hold that it is mandatory to keep gap of three months between issuance of notice and passing final order under subsection (2) read with sub-section (10) of Section 73 of the CGST Act. In the present case, the notice has been issued on 15-5-2024 and final order has been passed on 9-7-2024. Thus, there was time gap of about one month 24 days. The order impugned is, therefore, unsustainable. The petition is, accordingly, partly allowed. Show cause notice dated 15-5-2024 and order dated 9-7-2024 issued by respondent no. 5 are quashed and set aside. Issues: Whether a minimum gap of three months between issuance of notice under Section 73(2) and passing of final order under Section 73(10) of the Central Goods and Services Tax Act, 2017 is mandatory.Analysis: The Court examined the language and purpose of Section 73(2) and Section 73(10) of the CGST Act along with related provisions including Sections 73(3) and 73(5) and Section 75. Section 73(10) prescribes an outer limit of three years for passing an adjudication order; Section 73(2) requires that the notice under sub-section (1) be issued at least three months prior to that outer limit. The three-month period is intended to secure procedural safeguards: service of a statement of proposed demand, opportunity to reply and be heard, option for self-assessment and payment within 30 days to avoid penalty, and reasonable time to seek adjournments for personal hearing. Prior decisions of other High Courts interpreting these provisions were considered. On the facts, the notice dated 15-5-2024 and order dated 9-7-2024 demonstrated a gap of about one month and 24 days, falling short of the mandatory three-month period.Conclusion: The three-month gap between issuance of the notice under Section 73(2) and the final order under Section 73(10) is mandatory. The impugned show cause notice dated 15-5-2024 and the order dated 9-7-2024 are quashed and set aside. The matter is remanded for fresh consideration in accordance with law.Ratio Decidendi: Where statutory provisions require a minimum period between issuance of a show cause notice and the outer limit for passing an adjudication order, that minimum period is mandatory to secure procedural protections including the right to be heard and the option of self-assessment and payment; failure to maintain the prescribed minimum period renders the notice and ensuing order unsustainable.