Limitation to Issue SCN under Sec 74(2)

[VENU K]

Dear Experts

I have received an SCN under Sec 74 for FY 2020-21. Now the question is, is this valid ?

For FY 2020-21

Annual return due date: 28.02.2022

5 years under Section 74(10): 28.02.2027

6 months prior under Section 74(2): 28.08.2026

So an SCN issued on 31.08.2026 gives me a prima facie limitation objection under Section 74(2).

Views of Experts solicited based on wordings of Sec 74(2)."The proper officer shall issue the notice under sub-section (1) at least six months prior to time limit specified in sub section (10) for issuance of order".

[Sanjeev Agarwal]

Summary - Section 74(2) Limitation for FY 2020-21

For FY 2020-21, the extended due date for filing the annual return (GSTR-9) was 28.02.2022. Accordingly, assuming Section 74(10) applies without any further extension, the five-year outer limit for passing the order is 28.02.2027.

Section 74(2) expressly provides that the proper officer "shall issue the notice under sub-section (1) at least six months prior to [the] time limit specified in sub-section (10) for issuance of order."

Therefore:

• Section 74(10) outer date: 28.02.2027

• Six months prior under Section 74(2): 28.08.2026

• SCN issued: 31.08.2026

• Shortfall: 3 days

Thus, an SCN first issued on 31.08.2026 gives the taxpayer a strong prima facie objection under Section 74(2) because the statutory six-month interval was not preserved.

The objection should preferably be framed not merely as "SCN is beyond limitation", since Section 74(10) itself permits the order up to 28.02.2027. Rather, the argument should be that the SCN was not issued in accordance with the mandatory statutory condition in Section 74(2) requiring issuance at least six months before the Section 74(10) deadline.

The principal Revenue defence is that Section 74(2) does not expressly prescribe that an SCN issued within the final six months is void, and that the requirement may be directory, particularly where no prejudice is demonstrated.

Importantly, the mandatory-versus-directory nature of Section 74(2) is presently an unsettled issue before the Supreme Court in Bengal Cold Rollers. Hence, the SCN should not be treated as conclusively void, but the limitation objection is sufficiently strong that it should be expressly raised and preserved.

The actual date of issuance/upload on the GST portal, DIN generation date and date of communication should also be verified, as these may materially affect the limitation analysis.

Overall position: STRONG / REASONABLY DEFENSIBLE limitation objection, but final outcome remains UNCERTAIN pending authoritative Supreme Court determination.

AI Summary

Section 74 SCN limitation requires issuance at least six months before the deadline for passing the order.
Limitation for issuing a show cause notice under Section 74 for FY 2020-21 is examined by reference to the annual return due date and the order deadline under Section 74(10). Where the order deadline is 28 February 2027, Section 74(2) requires notice issuance at least six months earlier, namely by 28 August 2026. A notice issued on 31 August 2026 raises a prima facie limitation objection.