SCN Quashed for Violation of Mandatory Three-Month Window under Section 73(2); Technical Glitches No Defense

Issue

Whether a Show Cause Notice (SCN) under Section 73 of the CGST Act is legally valid if it is adjudicated to have been served less than three months before the statutory deadline for passing the final order, specifically when the delay is attributed by the Revenue to technical glitches on the portal.

Facts

• Petitioner: C.H. Robinson Worldwide Freight India (P.) Ltd.

• Dispute Period: Financial Year 2019-20.

• Statutory Deadline: The time limit for passing the adjudication order for FY 2019-20 was extended to 31st August 2024 vide Notification No. 56/2023-CT.

• SCN Deadline: As per Section 73(2), the SCN must be issued at least three months prior to the order deadline. Therefore, the SCN had to be issued by 31st May 2024.

• The Breach:

  • The SCN was dated 31st May 2024 (technically meeting the date on paper).

  • However, it was actually served/dispatched to the petitioner only on 12th August 2024, leaving less than 20 days for adjudication, far short of the mandatory 3-month window.

• Revenue’s Defense: The department argued that the delay was due to a “technical glitch” on the GST portal preventing timely upload and that they had attempted dispatch to an old address.

Decision

• The Delhi High Court ruled in favour of the assessee and quashed the SCN and all consequential proceedings.

• Mandatory Timeline: The Court held that the time limit prescribed under Section 73(2) is mandatory, not directory. The three-month period is a statutory safeguard designed to ensure the assessee has adequate time to defend themselves.

• “Issuance” Means Effective Communication: Merely signing or dating an SCN on the cut-off date is insufficient. The notice must be dispatched or served to the assessee within the timeframe to be considered “issued.”

• Technical Glitches Rejected: The Court rejected the “technical glitch” defense, stating that administrative inefficiencies or portal errors cannot override statutory mandates that protect the taxpayer’s rights.

• Service to Old Address Invalid: Dispatching the notice to an old address, despite the taxpayer having updated their details (amendment approved on 15.05.2024), was held to be invalid service.

Key Takeaways

• Strict Adherence to Section 73(2): Tax authorities cannot shorten the adjudication window. If the SCN is not effectively served at least 3 months before the final order deadline, the entire proceeding becomes time-barred.

• Administrative Failures are Fatal: Technical issues with the GSTN portal or internal delays are not valid grounds to breach limitation periods.

• Date of Service Matters: For the purpose of limitation, the date on which the SCN leaves the control of the department (dispatch/upload) is critical, not just the date typed on the document.