SCN ISSUED POST 2 DAYS OF LIMITATION PROVIDED UNDER SECTION 73(2) OF APGST ACT, 2017 HELD TIME-BARRED.

New jurisprudence delivered by the Andhra Pradesh High Court in the case of M/s. The Cotton Corporation of India Versus Assistant Commissioner (ST) (Audit) (FAC), 2025 (2) TMI 362 - ANDHRA PRADESH HIGH COURT, wherein it has been held that prescribed time limits for issuing Show Cause Notices (SCNs) under Section 73 of the GST Act should be followed strictly.

Case Background

A division bench comprising of Justice R Raghunandan Rao and Justice Harinath N. observed that the Show Cause Notice (SCN) issued on November 30, 2024, for FY 2020-21 under Section 73(1) of APGST Act, 2017 r/w Rule 142 of the APGST Rules, 2017 was time-barred and therefore liable to be set aside.

The focus of this conflict was around Section 73(10) of the APGST Act, 2017 which requires that the assessment order must be issued within three years from the due date for furnishing the annual return for the relevant financial year. In addition, Section 73(2) of the APGST Act,2017 also provides that the SCN should be issued at least three months prior to the expiration of this three-year period.

Relevant Dates and Key Statutory Provisions Considered

According to Rule 81-A of the APGST Rules, the last date of annual return filing for FY 2020-21 was February 28, 2022.
The requirement under Section 73(10) of the APGST Act is that the assessment order should be issued within the three years from the due date, making November 28, 2024, the deadline.
On the other hand, Section 73(2) of the APGST Act states that the SCN must be provided at least three months before expiration of the three-year period; therefore, deadline for issuance of SCN was August 28, 2024.
With the date of November 30, 2024, an extension was the consequence of exceeding the expected date. This was not in compliance with the set benchmark, and, thus, it is illegitimate.

Court’s Observations

Court cited Section 75 of the APGST Act,2017 wherein it is provided that a taxpayer has the right to be heard by the first appellate authority passing an adverse order, and this could be the only time that an adjournment is allowed for the personal hearings before a fresh demation of the case is ordered.
In this case, the petitioner made a reference to the use of the word "shall" as found in Section 73(2) to argue that it is a mandatory requirement and not a directory provision.
Respondents claimed, that "a month" means a calendar month, and thus the new date, November 30, 2024, was still within the limitation period. However, the bench turned down his argument and said that the due date must be strictly adhered to.
High Court held that there was violation of limitation provided under Section 73(2) of APGST Act,2017. Therefore, SCN issued was unsustainable.

MyGST Refund's View: Implications for Taxpayers

This ruling reiterates the significance of prompt action by tax authorities and strict compliance with procedural requirements under the GST law. The following are some important takeaways for taxpayers:

Statutory Timelines Awareness: Companies need to be careful about statutory time limits for assessment proceedings. In case a notice is issued after the specified period, it can be challenged on the basis of this ruling.
SCNs issued must comply with Section 73(2) of CGST Act: The statutory three-month period prior to the conclusive assessment order is crucial. In the event of an SCN beyond this time period, it becomes legally unsustainable.
Taxpayer's Right to a Fair Hearing: Due process, with the right response time and personal hearings, is due to taxpayers. If such right is not provided, It is a clear case of violation of principles of natural justice.
Legal Defense Strengthening: Taxpayers who receive delayed or irregular SCNs need to take immediate legal advice to object to such notices on the basis of this precedent.

Conclusion

This judgment is an insightful verdict upholding fair taxation and procedural integrity. It underscores the necessity of strict adherence with tax laws, contest procedural omissions. Further, this ruling follows well-settled principal of law pertaining to tax laws i.e. “Tax laws shall be construed strictly.”

MyGST Refund continues to ensure that taxpayers are aware of important rulings and assists in efficiently managing GST intricacies. For professional GST advice and automated compliance services, visit www.mygstrefund.com.

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