HC Quashes GST SCN for Violating Mandatory Three-Month Time Limit for Issuance.

HC Quashes GST SCN for Violating Mandatory Three-Month Time Limit for Issuance.

Issue

Whether a Show Cause Notice (SCN) issued under Section 73 of the CGST Act is legally valid if it is served on the taxpayer less than the mandatorily prescribed three-month period before the final statutory date for passing the assessment order.

Facts

• An SCN under Section 73 was issued to the petitioner for FY 2019-20, alleging wrongful availment of Input Tax Credit (ITC) of ₹11.85 crore.
• The statutory deadline for passing the final order for this period (as extended by Notification No. 56/2023-CT) was August 31, 2024.
• The law (Section 73(2)) requires that an SCN must be issued at least three months prior to this final deadline. Therefore, the last valid date for issuing the SCN was May 31, 2024.
• While the SCN was dated May 31, 2024, it was actually issued and communicated to the taxpayer only on August 12, 2024.
• This left the taxpayer with less than three weeks to respond, which is a clear violation of the mandatory three-month window.
• The Revenue department defended the delay, citing a “technical glitch” in the GST portal and the fact that the notice had been dispatched to an outdated address.

Decision

• The Delhi High Court quashed the Show Cause Notice and all subsequent proceedings.
• It held that the SCN was barred by limitation as it was not issued within the timeframe prescribed by Section 73(2).
• The court reaffirmed that the three-month period between the SCN and the final order deadline is mandatory, ensuring the taxpayer has adequate time to respond.
• Excuses such as “technical glitches” or administrative errors (like using an old address) were rejected as being insufficient to override the clear statutory mandate.
• Relying on its earlier ruling in Tata Play Ltd., the court confirmed that any deviation from this mandatory timeline renders the entire proceeding void.

Key Takeaways

• Three-Month Rule is Mandatory: The requirement under Section 73(2) to issue an SCN at least three months before the final order deadline is a non-negotiable, jurisdictional requirement, not a mere procedural formality.
• Date of Issuance is What Matters: The relevant date is not the date on the SCN, but the date it is actually issued or served on the taxpayer, which triggers the response period.
• “Technical Glitches” are Not a Valid Excuse: The department cannot use its own technical failures or administrative errors as a defense for violating statutory timelines that protect the taxpayer’s right to due process.
• Invalid SCN Voids All Proceedings: If the SCN itself is invalid for being time-barred, all subsequent proceedings based on it are rendered void ab initio (from the beginning).