The Delhi High Court has quashed both a GST special audit communication and the consequential demand proceedings initiated against a taxpayer after finding that the statutory time limit for passing an adjudication order under Section 73 of the Central Goods and Services Tax (CGST) Act had expired.
The bench of Justice Anil Kshetrapal and Justice Shail Jain held that once the limitation period had lapsed without any adjudication order being passed, the impugned proceedings could not survive.
The petitioner approached the Delhi High Court challenging multiple actions initiated by the GST authorities concerning Financial Year 2018-19.
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The company sought quashing of the Form GST ADT-03 communication dated 24 August 2023 directing a special audit under Section 66 of the CGST Act; the DRC-01 dated 1 August 2024, contending that it was unsigned and had been issued without a valid show cause notice under Section 73; and the special audit report and covering letter, alleging that they were contrary to the requirements prescribed under Section 66 of the CGST Act and Rule 102 of the CGST Rules.
The petitioner argued that the proceedings suffered from multiple legal infirmities, including lack of jurisdiction and non-compliance with the statutory framework governing special audits and adjudication.
During the hearing, the petitioner raised a decisive legal objection regarding limitation. It was submitted that the statutory period available to the department for passing an adjudication order pursuant to the proceedings under Section 73 had already expired.
The petitioner relied upon Notification No. 56/2023, which prescribed that the last date for passing the adjudication order in the relevant category of cases was 30 April 2024. Since no adjudication order had been passed within that extended period, it was argued that the entire proceedings had become unsustainable.
The GST Department sought instructions and did not dispute the factual position.
The department admitted before the Court that no adjudication order had been passed by the competent authority on or before 30 April 2024, the last permissible date under the applicable notification.
This concession effectively removed any factual controversy regarding compliance with the statutory limitation period.
The Bench observed that it had no option but to allow the writ petition.
The Court held that since the statutory period for passing the adjudication order had expired without any order being made, the Form GST ADT-03 communication dated 24 August 2023 directing the special audit for FY 2018-19 could not survive and deserved to be quashed.
The Bench further ruled that, for the very same reason, the DRC-01 dated 1 August 2024 was also liable to be set aside.
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