2025 (2) TMI 362 - HC - GST

SCN issued within time limitation or not - requirement to carry out assessment in relation to short payment of tax etc - HELD THAT - The Hon ble Supreme Court in the case of Himachal Pradesh and Another vs. Himachal Techno Engineers and Another 2010 (7) TMI 875 - SUPREME COURT were considering the time limit of three months set out in Section 34 of the Arbitration and Conciliation Act 1996. In that case the award had been passed on 05.11.2007 and a petition under Section 34 was filed on 11.03.2008. The said application was rejected on the ground that the period within which the application should have been filed was three months which would be 90 days reckoned from 11.11.2007 and ending on 10.11.2007 and a further grace period of 30 days which would end on 10.03.2008 whereas the application was filed on 11.03.2008 - the Hon ble Supreme Court held that the petition filed on 11.03.2008 was well in time and was not barred by limitation. Whether the delay of two days in issuing the said notice can be condoned or whether the issue is not relevant as the provision is only directory? - HELD THAT - 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. The said provisions protecting the interest of the tax payer would be rendered otiose if notice should permitted to be sent without a minimum waiting period. The said protections can then be bypassed by the authorities issuing show cause notice with a week s time or 10 days and calling upon tax payer to put forth his objections in that shortened time. That does not appear to be intent of the provisions of Section 75 (2) or Section 73 (10) of the GST Act - the time permit set out under 73 (2) of the Act is mandatory and any violation of that time period cannot be condoned and would render the show cause notice otiose. Conclusion - The time limit set out in Section 73 (2) is mandatory and any violation of this period renders the show cause notice void. Petition allowed.

Summary

The primary legal issue considered in this judgment is whether the show cause notice issued to the petitioner under Section 73 (1) of the APGST Act, 2017 was issued within the statutory time limit prescribed by the Act. The petitioner challenged the validity of the notice on the grounds that it was issued beyond the permissible period, rendering it void.

The relevant legal framework involves Section 73 of the APGST Act, which mandates the issuance of a show cause notice at least three months prior to the deadline for issuing an assessment order, which is three years from the due date for filing the annual return for the relevant financial year. Rule 81-A of the CGST Rules, applicable to the APGST proceedings, specifies that the due date for filing the annual return for the financial year 2020-2021 was February 28, 2022. Consequently, the last permissible date for issuing a show cause notice was November 28, 2024.

The petitioner contended that since the notice was issued on November 30, 2024, it exceeded the statutory limit and was thus non est. The petitioner relied on precedents, including the Supreme Court's judgment in the case of Himachal Pradesh vs. Himachal Techno Engineers and the House of Lords' decision in Dodds vs. Walker, to argue that the term "month" should be interpreted as a calendar month, not a fixed number of days.

The Court's interpretation focused on the mandatory nature of the time limits set under Section 73 (2) and (10) of the APGST Act. The Court examined the legislative intent behind these provisions, emphasizing the protections afforded to taxpayers, such as the right to a reasonable period to respond to a show cause notice and the opportunity for personal hearings as outlined in Section 75 of the GST Act.

The Government Pleader argued that the term "month" should be understood as a calendar month, and therefore, the notice issued on November 30, 2024, was within the permissible period. Additionally, the Government Pleader contended that the provisions of Section 73 (2) were directory rather than mandatory, suggesting that a minor delay in issuing the notice could be condoned.

The Court rejected the Government Pleader's arguments, holding that the statutory time limits prescribed by the GST Act are mandatory. The Court reasoned that these time limits are integral to the taxpayer protections enshrined in the Act, ensuring that taxpayers have sufficient time to prepare and present their case in response to a show cause notice. The Court emphasized that treating the time limits as directory would undermine these protections and allow authorities to circumvent the intended safeguards by issuing notices with insufficient response time.

The Court concluded that the time limit set out in Section 73 (2) is mandatory and any violation of this period renders the show cause notice void. Consequently, the Court quashed the show cause notice dated November 30, 2024, as it was issued beyond the permissible period.

Significant holdings from the judgment include the Court's affirmation of the mandatory nature of statutory time limits for issuing show cause notices under the GST Act. The Court reiterated the principle that when a period is defined in terms of months, it refers to calendar months, aligning with the precedents set by higher courts. The judgment underscores the importance of adhering to procedural safeguards designed to protect taxpayers' rights in assessment proceedings.