Supreme Court’s COVID-19 Limitation Extensions Validated Lower Court ITC Denial Proceedings Beyond Normal Deadlines

By | June 27, 2026
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Supreme Court’s COVID-19 Limitation Extensions Validated Lower Court ITC Denial Proceedings Beyond Normal Deadlines

Supreme Court’s COVID-19 Limitation Extensions Validated Lower Court ITC Denial Proceedings Beyond Normal Deadlines

Issue

Whether the Department’s show cause notice and subsequent demand order for Input Tax Credit (ITC) mismatches during the fiscal year 2017-18 were barred by limitation under Section 73 or Section 74 of the CGST/TNGST Act, 2017, considering the invocation of extended timelines and COVID-19 suspension periods.

Facts

  • The petitioner faced an Input Tax Credit (ITC) dispute arising from a mismatch between the auto-populated GSTR-2A and the actual ITC claimed in their GSTR-3B return for the period 2017-18.

  • Initially, the Department issued an intimation in Form GST DRC-01A, to which the petitioner objected, arguing that any demand under Section 73 was time-barred.

  • Subsequently, the Department issued a formal Show Cause Notice (SCN) in Form GST DRC-01, invoking the extended period of limitation under Section 74.

  • An assessment order was passed confirming a demand of ₹11.84 lakhs as tax due, along with applicable interest and penalties.

  • The petitioner challenged the order via a writ petition, claiming the Department wrongfully invoked Section 74 as a disguise to bypass the expired Section 73 limitation period, noting that the initial intimation referenced Section 73.

Decision

  • Limitation periods extended by COVID-19 rulings: Under normal circumstances, counting from the annual return filing deadline of December 31, 2018, the limitation for passing an order under Section 73 would have expired on December 31, 2021, and under Section 74 on December 31, 2023.

  • Supreme Court directions applied: Due to the nationwide lockdown and the disruption caused by the COVID-19 pandemic, the Hon’ble Supreme Court issued blanket extensions in Cognizance for Extension of Limitation, In re, directing the exclusion of specific periods for initiating or concluding legal proceedings across tax enactments.

  • Proceedings held within time: Accounting for these legally sanctioned exclusions and extensions under Section 168A, the proceedings initiated by the Department were well within the valid, extended timeframe.

  • Final Ruling: The court found no merit in the petitioner’s argument that the proceedings were time-barred under either section. The writ petition was dismissed in favor of the revenue.

Key Takeaways

  • Overriding Effect of Pandemic Relief Extensions: The statutory limitation periods provided under Section 73 and Section 74 of the GST Act cannot be calculated purely on a standard calendar basis for periods overlapping with the COVID-19 pandemic; they must incorporate the exclusion periods mandated by the Supreme Court and subsequent Government notifications.

  • Shifting from Section 73 to 74: An initial pre-notice intimation issued under Section 73 does not legally prevent the Department from later issuing a formal Show Cause Notice under Section 74, provided the core ingredients of fraud, willful misstatement, or suppression of facts are established.

HIGH COURT OF MADRAS
Tvl. Power Lead Electricals
v.
Deputy State Tax Officer
C. Saravanan, J.
W.P. No. 31815 of 2025
W.M.P. No. 35622 of 2025
JUNE  8, 2026
Adithya Reddy for the Petitioner. V.Prashanth Kiran, Government Adv. for the Respondent.
ORDER
1. This case was heard along with a batch of 250 Writ Petitions and as one of the 53 Writ Petitions which were finally heard on the larger issue regarding the challenge to the proceedings under Section 74 of the respective GST Enactments.
2. In this Writ Petition, the Petitioner has challenged the Impugned Order dated 03.02.2025 for the Tax Period 2017-2018.
3. The Petitioner was earlier issued with an Intimation in Form GST DRC-01A dated 20.09.2023 for the Tax Period 2017-2018, to which, the Petitioner had replied on 29.10.2023 stating that the proposal in the said Intimation in Form GST DRC-01A dated 20.09.2023 was time barred in terms of limitation under Section 73 of the respective GST Enactments.
4. The disputed had arisen on account of a mismatch between the amount in GSTR-2A and the amount claimed by the Petitioner as Input Tax Credit in GSTR-3B.
5. The facts reveal that the Petitioner had claimed excess Input Tax Credit in GSTR-3B for discharging the tax liability during the Tax Period 2017-2018.
6. Since the Petitioner’s reply was not found acceptable, a Show Cause Notice in Form GST DRC-01 dated 06.12.2023 was issued to the Petitioner. At this time, the Department has invoked Section 74 of the respective GST enactments. The Petitioner replied to the Show Cause Notice by a reply dated 04.01.2024. Pursuant to which, the Impugned Order has been passed under Section 74 of the respective GST Enactments on 03.02.2025.
7. By the Impugned Order, a sum of Rs.11,84,332/- has been confirmed as tax due from the Petitioner together with interest and penalty.
8. It is submitted by the learned counsel for the Petitioner that the invocation of machinery under Section 74 was a disguised. It is further submitted that the Respondent could have at best issued a Notice under Section 73 of the respective GST Enactments, within the time stipulated under the Act.
9. It is submitted that the Respondent had invoked Section 73 in the intimation dated 20.09.2023. Since the Petitioner objected the same on the ground of limitation, the Respondent had subsequently issued a Notice in Form GST DRC-01 dated 06.12.2023 by invoking Section 74 of the respective GST Enactments.
10. It is further submitted by the learned counsel for the Petitioner that absolutely, there is no case made out for invoking the jurisdiction under Section 74 of the respective GST Enactments. That apart, it is submitted that having invoked the jurisdiction under Section 73 while issuing intimation in Form GST DRC-01A, it is not open to the Respondent to invoke machinery under Section 74 at a later point of time, after the Petitioner filed an objection on 29.10.2023.
11. The learned Government Advocate for the Respondent, on the other hand, would submit that the question of limitation either under Section 73 or 74 of the respective GST Enactments would not apply in the facts of the case as the last date for passing orders fell during the time when the limitation was suspended due to outbreak of Covid-19. It is submitted that the limitation under Section 73 of the respective GST Enactments could not have expired on 31.12.2021.
12. It is further submitted that since there is a variation in the amount specified in the returns in GSTR-2A and GSTR-3B that the Petitioner had claimed excess Input Tax Credit in GSTR-3B as compared to GSTR-2A, the Department was justified in invoking machinery under Section 74 of the respective GST Enactments, although an intimation was earlier issued under Section 73 of the respective GST Enactments in Form GST DRC-01A on 20.09.2023.
13. In the reply, the learned Government Advocate for the Respondent would submit that after the Petitioner was issued with an Intimation in Form GST DRC-01A dated 20.09.2023, the Petitioner failed to give a reply on merits. Instead, the Petitioner by reply dated 29.10.2023 stated as under:-
Sir, I have already given detailed reply on 25.07.2023. Kindly drop the further action. Further I submitted under this Section the Proper Officer shall issue the order under Section 73 within a period of three years from the due date for furnishing Annual Return for the financial year to which the tax not paid or short paid or Input Tax credit wrongly availed or utilised. It is therefore, the Central Government has issued an Order called the Central Goods and Services Tax Act, (Removal of Difficulties order) (Order 1/2018 dated 11.12.2018) under Section 172 of the CGST Act. Hence, the due date for the year 2017-2018 is 31.12.2018 only. Accordingly, the time limit for issuing the order falls on 31.12.2021. Hence, the proposed assessment is time barred and not called for as per the limitation period.
14. It is submitted that since the Petitioner’s reply was inadequate and did not deal with the intimation in Form GST DRC-01A dated 20.09.2023, a fresh Notice was issued in Form GST DRC-01 dated 06.12.2023 by invoking Section 74 of the respective GST Enactments.
15. The learned Government Advocate for the Respondent would submit that since the Petitioner failed to respond to the intimation in Form GST DRC-01A, there is a suppression within the meaning of Explanation-2 to Section 74 of the respective GST Enactments. Therefore, it is submitted that no case is made out for interfering with the Impugned Order confirming the demand under Section 74 of the respective GST Enactments.
16. The learned counsel for the Petitioner relied on the following cases:-
(i) Rajaa Offset v. State Tax Officer [W.P. No. 30189 of 2024] ;
(ii)Chennai Silks v. Assistant Commissioner [W.P. No. 29104 of 2023];
(iii) Emco Cables (India) (P.) Ltd. v. Union of India 102 GST 962/83 GSTL 357 (Delhi)/W.P. (C) No. 1622 of 2024;
(iv) Subhash Singh v. Deputy Commissioner, State GST  (Uttarakhand)/Special Appeal No.100 of 2024 and
(v) Tata Play Ltd. v. Union of India  (Madras)/W.P. No.17184 of 2024.
17. I have considered the arguments advanced by the learned counsel for the Petitioner and the learned Government Advocate for the Respondent.
18. As stated earlier, by a Common Order today in Turbo Energy (P.) Ltd. v. Additional Commissioner [W.P. No. 2142 of 2026, dated 22.01.2026], Fastenex (P.) Ltd. v. Union of India [W.P. Nos. 35967, 35970, 35974 and 35976 of 2024] and Ispahani Estates (P.) Ltd. v. State Tax Officer [W.P. Nos. 14487, 14492 and 14500 of 2025, dated 8-6-2026], a detailed order has been passed insofar as the invocation of extended period of limitation under Section 74 of the respective GST Enactments.
19. In this case, the dispute pertains to the Tax Period 2017-2018. The last date for making demand under Section 73 would have expired on 31.12.2021 and the last date for passing order under Section 74 would have expired on 31.12.2023, 31.12.2018 being the last date on with the return for the Tax Period 2017-2018 had to be filed. However, from 15.03.2023, lock down was imposed due to outbreak of Covid-19. The time for passing orders/for initiating proceedings under various tax enactments including indirect tax enactment viz., respective GST Enactments, should have excluded the time period as per the decision of the Hon’ble Supreme Court in Cognizance for Extension of Limitation, In re 230 COMP CASE 423/441 ITR 722 (SC)/Miscellaneous Application Nos.21 and 29 of 2022 in Miscellaneous Application No.665 of 2021 dated 10.01.2022 from time to time.
20. Subsequently, TOLA ordinance was also issued and thereafter Section 168A of the respective GST Enactments was introduced vide the taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 220 (38 of 2020) published in the Gazette of India, Extraordinary, Part II, Section 1, dated 29.09.2020 which brought into force with effect from 31.03.2020 for extending the period of limitation under the statute.
21. Simultaneously, this Court has also issued Orders extending the period of limitation for passing Orders under Section 73 of the respective GST Enactments after excluding the period during the lock down. This has been captured in Tata Play Ltd. (supra) etc., batch dated 12.06.2025 as modified by 05.11.2025 [2025 32 Centax 318].
22. The substituted Paragraph 9.61 from the modified Order is extracted below:-
Sl. No. Financial Year Actual / Original due date for filing Annual Return under Section 44(1) Due date extended in exercise of power under Section 44 of CGST Act through Notifications Period of limitation under Section 73(10) of CGST Act Extended time limit under Section 73(10) for issuance of order under Section 73(9) in exercise of power under Section 168A of CGST Act (upto) Limitation under Section 73(10) after exclusion of period 15.03.2020 to 28.02.2022 as per Order dated 10.01.2022 of the Hon’ble Supreme Court
1. 2017-2018 31.12.2018 05.02.2020 07.02.2020 (Notification No.06/2020) 05.02.2023 31.12.2023 (Notification No.09/2023) 21.01.2025 Adding 715 days
2. 2018-2019 31.12.2019 31.12.2020 (Notification No.80/2020) 31.12.2023 30.04.2024 (Notification No.56/2023) 27.02.2025 Adding 424 days
3. 2019-2020 31.12.2020 31.03.2021 (Notification No.04/2021) 31.03.2024 31.08.2024 (Notification No.56/2023) 28.02.2025 Adding 334 days

 

23. In view of the above, it cannot be said that the proceedings were time barred either under Section 73 or under Section 74 of the respective GST Enactments. There are indications in the Impugned Order dated 03.02.2025 that the Petitioner’s returns were scrutinized under Section 61 and Form ASMT-10 was issued on 28.06.2023, pursuant to which the above mentioned Intimation and the Show Cause Notice were issued. Thus suppression of fact is at large. Therefore, there is no merits in this Writ Petition.
24. This is in view of the Common Order passed in the batch today by a Separate Order, wherein it has been explained in detail that the threshold for invoking the extended period of limitation under Section 74 of the respective GST Enactments is much lower compared to the earlier Indirect Tax Legislations.
25. Therefore, this Writ Petition is liable to be dismissed and it is accordingly dismissed. However, liberty is granted to the Petitioner to work out the remedy on merits before the Appellate Commissioner. The Petitioner shall file an appeal within a period of 30 days from the date of receipt of a copy of this order. In which case, the Appellate Commissioner shall entertain and dispose the appeal on merits subject to the Petitioner complying with the requirements of Section 107 of the respective GST Enactments.
26. This Writ Petition stands dismissed with the above liberty. No costs. Connected miscellaneous petition is closed.