Three Months Time Period of Issuance of SCN u/s 73(2) is Mandatory and Can’t be Diluted Due to Administrative Glitches

The CGST Department has conducted a scrutiny of the return filed by the M/s C. H. Robinson Worldwide Freight India Private Limited (“The Petitioner”) for FY 2019-20. Upon filing the discrepancies, the SCN has been issued of Rs. 11.85 Crores on ground of wrongful availment of ITC. The impugned SCN is dated 31st May, 2024, however, the same was issued only on 12th August, 2024. 

The Petitioner contended that as per Section 73(2) of the CGST Act, the minimum period of 3 months are required prior to the time limit prescribed for issuance of order under Section 73 of the Act. However, the respondent contended that SCN could not be issued on time due to technical glitch.

Hon’ble High Court held that the purpose of Section 73(2) of the Act is clearly to provide the minimum period of 3 months to the assessee for filing the reply to the SCN. The three month’s period prescribed in Section 73(2) of the CGST Act is mandatory when read with Section 73(10) of the CGST Act. However, the Department’s stand that due to a technical glitch, the DRC-01 could not be issued on 31st May, 2024 but was reissued on 12th August, 2024 would not be tenable in law. Therefore, SCN dated 28th May, 2024 dispatched on 3rd June, 2024 cannot be held to be within time in terms of Section 73(2) of the CGST Act. Accordingly, the said SCN and any other order passed consequent thereto stand quashed.

1. Brief Facts of the case

• The CGST Department has conducted a scrutiny of the return filed by the M/s C. H. Robinson Worldwide Freight India Private Limited (“The Petitioner”) for FY 2019-20.

• Upon filing the discrepancies, the impugned SCN has been issued raising a demand of Rs. 11,85,45,612/- on the ground of wrongful availment of Input Tax Credit.

• The Petitioner contended that The impugned SCN is dated 31st May, 2024, however, the same was issued only on 12th August, 2024. 

2. Relevant legal extract

Relevant provisions of the GST Law is reiterated below for ready reference:

• Section 73(2) of the CGST Act, 2013:

““73. Determination of tax pertaining to the period up to Financial Year 2023-24 not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilfulmisstatement or suppression of facts. 

[...] 

(2) The proper officer shall issue the notice under subsection (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order. 

[...] 

(10) The proper officer shall issue the order under subsection (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund.” 

• Notification 56/2023-Central Tax dated 28th December, 2023

“....the Government, on the recommendations of the Council, hereby, extends the time limit specified under sub- section (10) of section 73 for issuance of order under sub-section (9) of section 73 of the said Act, for recovery of tax not paid or short paid or of input tax credit wrongly availed or utilized, relating to the period as specified below, namely:-  

(i) for the financial year 2018-19, up to the 30th day of April, 2024; ) for the financial year 2019-20, up to the 31st day of August, 2024.”

3. Contention of the Petitioner

The Petitioner contended that:

• For FY 2019-20, The impugned SCN should have been issued by 31st May, 2024.

• However, the impugned SCN was sent by the Department only on 12th August, 2024 and not before. 

• As per Section 73(2) of the CGST Act, the minimum period of three months required prior to the time limit prescribed under subsection 10 of Section 73 of the CGST Act has not been adhered to and hence, the impugned SCN is barred.  

4. Contention of the Respondent

The Respondent contended that:

• There was a technical glitch due to which DRC-01 could not be issued by the Department as recorded in instructions dated 2nd August, 2024 issued by the Central Board of Indirect Taxes. Accordingly, the same was issued on 12th August, 2024.  

• Further, the Department placed additional documents to support the contention that the impugned SCN was dispatched to the Petitioner on 3rd June, 2024.

• However, the petitioner contended that the SCN was dispatched to the wrong address of the Petitioner.

5. Findings and Analysis by Hon’ble High court

The Hon’ble High Court made following findings and analysis:

• In W.P.(C) 4781/2025 titled Tata Play Limited vs. Sales Tax Officer Class II/AVATO, following observations were made:

• The limitation for issuance of such a notice under Section 73 of the CGST Act has to be construed in the light of Section 73(2) and 73(10) of the CGST Act. 

• As per such provisions, an order has to be passed by the ‘proper officer’ within a period of 3 years from the due date for furnishing the annual returns for the said financial year. 

• For issuance of a show cause notice, at least three months’ period prior to the time limit under Section 73(10) of the CGST Act would be available.

• Thus, the show cause notice has to be issued at least three months prior to the outer limit prescribed for passing of an order under Section 73(10) of the CGST Act.  

• There is a difference in the language of the two sub-sections discussed herein above. Section 73(10) of the CGST Act prescribes an outer limit for passing of an adjudication order under the Act.  

• Whereas, Section 73(2) of the CGST Act provides that at least three months prior to the outer limit, a notice is to be served.  

• Section 73(10) fix the date by which an adjudication order has to be issued. However, Section 73(2) ensure that at least 3 months is available to the taxable person for filing a reply to the SCN issued to them and for being heard in a proper manner. 

• Thus, the time period between issuance of the show cause notice and the outer limit for passing of the order should be at least three months. 

• The statutory intent behind providing this gap of 3 months can be interpreted to arise from a further reading of Section 73, CGST Act wherein, Section 73(3), CGST Act contemplates the service of a statement upon the noticee, giving all the details of the demand proposed to be raised. 

• Further, under Section 73(5), CGST Act, the noticee has the option of paying the tax by doing a self-assessment and if such amount is paid within 30 days of the issuance of the show cause notice under Section 73(1), CGST Act, no penalty would be payable by the noticee.

• Therefore, purpose of Section 73(2) of the CGST Act has been clearly held to provide the minimum period of 3 months to the assessee for filing the reply to the SCN. 

• The three month’s period prescribed in Section 73(2) of the CGST Act is mandatory when read with Section 73(10) of the CGST Act.

• In the present case, the Department’s stand that due to a technical glitch, the DRC-01 could not be issued on 31st May, 2024 but was reissued on 12th August, 2024 would not be tenable in law. 

• Further, the impugned SCN dated 31st May, 2024 was not served to the Petitioner within the time limit prescribed in Section 73(2) read with Section 73(10) of the CGST Act. 

6. Order of the Hon’ble High Court

Hon’ble High Court held that:

• The SCN dated 28th May, 2024 dispatched on 3rd June, 2024 cannot be held to be within time in terms of Section 73(2) of the CGST Act.

• Accordingly, the said SCN and any other order passed consequent thereto stand quashed.  

7. Conclusion

Every notice issued under GST Law must adhere to the specified time limits established by the GST Law and must be issued in accordance with its provisions. Any failure to comply while issuing a Show Cause Notice (SCN) may render such SCN illegal and invalid. The Assessee should seek assistance from a professional to manage legal notifications. Our team at V J M Global has expertise in addressing GST-related issues, and our specialists ensure that legal notices and communications are managed according to GST provisions and practical prudence.