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 73 of the CGST Act, reasoning that the period secures principles of natural justice by enabling service of the statement of proposed demand, effective exercise of the option to self-assess, and meaningful personal hearing including obtaining adjournments; shortening the interval would vitiate those protections. Applying those principles, an adjudication order rendered within about one month and 24 days of the notice was held unsustainable and was quashed along with the notice.

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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.

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