The Madras High Court has granted an interim stay in appeal against a GST show cause notice for the 2017–18 assessment year.
The bench of Justice Dr Anita Sumanth and Justice S. Raveekumar observed that the notice, issued after the deadline for regular assessment, did not prima facie contain a finding that would justify invoking the extended period under Section 74 of the Central Goods and Services Tax Act, 2017.
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The court recorded that tax officers inspected Canon India on September 26, 2023, in relation to the 2017–18 assessment year. It noted that, in light of the Supreme Court decision cited in its order, the time for completing a regular assessment under Section 73 expired on December 31, 2023.
The authorities subsequently issued a show cause notice on July 13, 2024, under Section 74, relying on the extended limitation period. Canon India challenged that notice before the writ court and has now approached the Division Bench in appeal.
Section 73 addresses cases involving unpaid or short-paid tax, erroneous refunds, or wrongly availed or utilised input tax credit that do not involve fraud, wilful misstatement or suppression of facts to evade tax. Section 74 concerns cases involving those allegations.
The Division Bench said that invoking Section 74 requires a finding in the show cause notice that the alleged short payment of tax or availment of input tax credit was due to fraud, wilful misstatement or suppression of facts. On its initial examination, the court did not find such a finding in the notice challenged by Canon India.
That observation is significant because the July 2024 notice was issued after the December 2023 deadline identified by the court for regular assessment. The question before the Bench is whether the authorities had stated the grounds necessary to proceed under the extended-period provision.
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