The Delhi High Court has held that merely generating or uploading a show cause notice on the tax department’s internal system does not satisfy the statutory requirement of issuance when the notice has not been made available to the taxpayer through a legally recognised mode of service.
Quashing a GST show cause notice and the consequential adjudication order for financial year 2019–20, the bench of Justice Anil Kshetarpal and Justice Bharat Parashar ruled that a technical glitch in the department’s portal cannot extend the mandatory limitation period under Section 73(2) of the Central Goods and Services Tax Act, 2017.
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The Bench also held that scrutiny communications in Form ASMT-10 and opportunities for personal hearing cannot substitute for a valid show cause notice issued within the prescribed time.
The petitioner/assessee is a Hyundai car dealership registered under GST in 2017, challenged a show cause notice made available on the GST portal on August 8, 2024, and the consequential Order-in-Original dated August 23, 2024.
The proceedings arose from scrutiny of the company’s GST returns for financial year 2019–20. The department alleged that the company had availed ineligible input tax credit of ₹10,57,392 from suppliers whose registrations had been cancelled retrospectively on a suo motu basis. It also alleged availment of ITC of ₹5,57,720 from suppliers who had not furnished their GSTR-3B returns for the relevant tax periods.
The other discrepancies concerned an alleged outstanding late fee of ₹1,03,100 for delayed filing of GSTR-1 returns and unpaid interest of ₹3,39,603 on delayed payment of GST.
According to the adjudication order, the discrepancies had been communicated through Form ASMT-10 dated February 29, 2024. Personal hearing opportunities were subsequently offered on July 12, July 22 and July 31, 2024.
The company argued that, even after applying the extended limitation under Notification No. 56/2023-Central Tax dated December 28, 2023, the show cause notice had to be issued by May 31, 2024. Since it became available to the company only on August 8, 2024, the notice was barred by limitation.
The department maintained that the notice dated May 30, 2024, had been generated and uploaded within time on the AIO system in Form GST DRC-01. However, a technical glitch during migration from the AIO system to the GST BO portal prevented integration with GSTN. It was therefore re-uploaded on August 8, 2024, with an explanatory remark.
Rejecting this defence, the Court examined the relationship between the limitation provisions under Section 73 and the service requirements under Section 169.
Section 73(2) requires a show cause notice to be issued at least three months before the deadline for passing the adjudication order under Section 73(10). The Bench held that this requirement is mandatory and intended to give the taxpayer a meaningful opportunity to respond and be heard.
For financial year 2019–20, Notification No. 56/2023 had extended the deadline for passing an order to August 31, 2024. Consequently, the show cause notice had to be issued on or before May 31, 2024.
The Court noted that the notice admittedly became available to the petitioner on the GST portal only on August 8, 2024, beyond that deadline.
The department’s portal records did not establish an earlier legally effective issuance. The DRC list page placed before the Court showed an entry dated May 29, 2024, with the GSTN status recorded as “awaiting GSTN confirmation”. The entry also lacked a Common Reference Number.
The Bench held that these deficiencies indicated that the notice had not been integrated with the common portal and had never been communicated to the taxpayer.
Issuance under Section 73(2), the Court explained, must be read together with the modes of service prescribed under Section 169. A notice remaining on an internal system, unconfirmed and without a Common Reference Number, could not be treated as having been issued in law.
The Court further held that re-uploading the notice on August 8, 2024, acknowledged that the earlier notice had not become effective. Neither its original generation date nor an explanatory remark accompanying the later upload could give it retrospective effect.
The proper officer had no statutory power to extend the limitation under Section 73(2). The Bench observed that the mechanism for extending time was a notification under Section 168A, and no further notification extending the applicable deadline beyond Notification No. 56/2023 had been brought to its attention.
The Court also faulted the department for failing to use alternative modes of service despite being aware of the technical problem. Section 169 permits service through methods including registered post, speed post and email.
Administrative lapses, the Bench held, could neither be visited upon the taxpayer nor enlarge a limitation period fixed by Parliament.
The department’s reliance on the earlier ASMT-10 communication and the taxpayer’s alleged failure to respond or attend hearings was also rejected. The Court explained that scrutiny under Section 61 and communications in Form ASMT-10 are preliminary steps. They do not replace the show cause notice that forms the foundation of adjudication under Section 73 and must specify the charges and quantum of demand.
A taxpayer’s non-response to scrutiny communications or non-participation in hearings does not waive the statutory limitation or relieve the department of its obligation to comply with it.
Holding that limitation went to the root of the department’s jurisdiction, the Court concluded that the show cause notice dated May 30, 2024, uploaded on August 8, 2024, was time-barred. It accordingly quashed both the notice and the consequential Order-in-Original dated August 23, 2024, and allowed the petition.
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