Tag: Period within which SCN needs to be issued

Period of Three Months u/s. 73(2) is mandatory and not directory – SCN is quashed

Citation:

Cotton Corporation of India vs. Assistant Commissioner (ST) (Audit) (FAC) [

High Court of Andhra Pradesh

2025] 171 taxmann.com 326 (Andhra Pradesh)[05-02-2025]

Facts of the Case:

  1. Show Cause Notice dated 30th November 2024 was issued u/s. 73(1) read with Rule 142 for AY 2020-21 was received demanding why assessment should not be carried out for short payment of tax.

Petitioners have submitted that:

  1. As per Section 73(10), Order needs to be issued within 3 years from the due date for Annual Return for the FY.
  2. As per Section 73(2), SCN under Section 73(1) needs to be issued at least 3 months prior to the date of the Order u/s. 73(10).
  3. As per Rule 81A of CGST Rules, Annual Return u/s. 44 for FY 2020-21 needs to be filed by 28th February 2022. SCN should have been issued by 28th November 2024, whereas it was issued on 30th November.
  4. The decision of Himachal Pradesh and Another v. Himachal Techno Engineers and Another (2010) 12 SCC 210 was also quoted.
  5. Provisions of Sec 73(2) are mandatory, due to the use of the Words “Shall” and also that the legislature has intended that at least three months should be available to the taxpayer, considering the possible three adjournments of Personal Hearing.

Department has submitted that:

Month means Calender Month and 3 months prior to 28th February would be 1st December and in worst case, it is 30th November, and the SCN was issued within due date. Provisions of Sec. 73(2) are directory requirement and not mandatory.

Hon’ble High Court has held that:

  1. Cutoff date for issuing an order is 28.02.2025. The three months period which would elapse from this date would be 28.11.2024. Since the notice was issued on 30.11.2024, it would be beyond the time as per Section 73(2).
  2. Section 75 of the GST Act, stipulates that the tax payer is not only entitled to a notice before any assessment is carried out but also the right of personal hearing, irrespective of whether such personal hearing is requested. When there is a possibility of an adverse order being passed against tax payer, the facility of obtaining at least three adjournments for personal hearing etc would be available. Hence, Time Period allowed under 73(2) of the Act is mandatory and any violation of that time period cannot be condoned, and would make the show cause notice Invalid.
  3. SCN dated 30th November 2024 is quashed.

Relevant Provisions:

Section 73(2): The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.

Section 73 (9): The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent of tax or ten thousand rupees, whichever is higher, due from such person and issue an order.

Section 73 (10): The proper officer shall issue the order under sub-section (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.