Short Tax | Timeline For Issuing Show Cause Notice U/S 73(2) Is Mandatory, Not Discretionary: Andhra Pradesh High Court

A division bench of Justices R Raghunandan Rao and Harinath N. added that any violation of that time period cannot be condoned and would render the show cause notice otiose.

It observed, “The GST Act, has put in place certain protections for tax payers. One of the primary protections is that orders cannot be passed against the tax payers, beyond the periods stipulated in the Act. It is settled law that these periods of limitation are mandatory and not orders can be passed beyond the periods set out in the Act. In such a situation, it would be difficult to hold that the stipulation as to the period of initiation, of such proceedings, by issuance of a show cause notice, would only be directory and not mandatory.”

The Petitioner in this case had challenged the show cause notice dated 30.11.2024, issued to it under Section 73(1) r/w Rule 142 of the APGST Rules, in relation to alleged short payment of tax etc. in relation to the assessment year 2020- 2021. It contended that the notice was time-barred.

It contended that the provisions of Section 73(2) of the GST Act use the word “shall” and the same would have to be treated as a mandatory requirement.

Section 73(2) of the APGST Act stipulates that the notice under subsection(1) which initiates the assessment proceedings, would have to be issued at least three months prior to the time limit specified in Section 73(10) for issuance of the order.

Section 73(10) stipulates that the assessment order would have to be issued within three years from the due date for furnishing of annual return for the said financial year.

The Government Pleader on the other hand contended that the provisions of Section 73(2) can at best be treated as a directory requirement and not a mandatory requirement whose violation would render the proceedings non est.

Petitioner also contended that a conjoint reading of Section 73(2) with Rule 81-A of the CGST Rules would make it amply clear that the last date for issuance of a show cause notice, for the assessment year 2020-2021 would be the 28th day of November 2024. As the show cause notice has been issued on 30.11.2024, the same is beyond time and is non-est.

Rule 81-A stipulates that the due date for filing the annual return, under Section 44 of the GST Act, for the financial year 2020- 2021 would be the 28th day of February 2022.

The GP however argued that a “month”, as stipulated under Section 73, would mean “a calendar month”. As the 28th of February is the end of the month of February, the last date of issuance of a notice would be the 1st of December, 2024 or at the worst 30th of November, 2024.

At the outset, the High Court observed that when a period, available for a certain action, is defined in terms of months, it would mean that the corresponding date of the corresponding month would be the cutoff date.

Reliance was placed on Himachal Pradesh and Another vs. Himachal Techno Engineers and Another (2010) where the Supreme Court had held that a `month' does not refer to a period of thirty days but refers to the actual period of a calendar month.

“If the month is April, June, September or November, the period of the month will be thirty days. If the month is January, March, May, July, August, October or December, the period of the month will be thirty one days. If the month is February, the period will be twenty nine days or twenty eight days depending upon whether it is a leap year or not,” it illustrated.

In the present case, since the cutoff date for issuing an order was 28.02.2024, the Court said, “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 stipulated under Section 73(2) of the GST Act.”

Further coming to the mandatory or discretionary nature of the timeline under Section 73, the Court said the purpose for which such limitation has been prescribed under the Act is to protect the interest of the taxpayer. Thus, its intent cannot be merely discretionary. Court observed,

“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.”

As such, the petition was allowed and SCN was quashed.

Counsel for the Petitioner: KARTHIK RAMANA PUTTAMREDDY

Counsel for the Respondent(S): GP FOR COMMERCIAL TAX

Case title: M/s. The Cotton Corporation Of India v. Assistant Commissioner St Auditfac and Others

Case no.: WRIT PETITION NO: 1463/2025

Click here to read order