Wrongful ITC Availment: Delhi High Court Quashes GST Demand Notice Issued After Limitation Period Of 3 months

The Delhi High Court has set aside a Show Cause Notice (SCN) issued by the Central Goods and Services Tax (CGST) Delhi (South) Commissionerate against a taxpayer for an alleged wrongful availment of Input Tax Credit (ITC) amounting to ₹11.85 crore for the Financial Year 2019-20, holding that the notice was issued and served beyond the statutory time limit of 3 months as prescribed under the CGST Act, 2017. The bench of Justice Prathiba M. Singh and Justice Shail Jain has observed that the Department’s stand that due to a technical glitch, the DRC-01 could not be issued on 31st May, 2024 but was reissued on 12th August, 2024 would not be tenable in law. Further, the impugned SCN dated 31st May, 2024 was not served to the Petitioner within the time limit prescribed in Section 73(2) read with Section 73(10) of the CGST Act. Moreover, even the address of the Petitioner at which the same has been communicated is the wrong address considering the amendment of the Petitioner’s address was permitted by the Department on 15th May, 2024 itself. The CGST Department conducted a scrutiny of the returns filed by the petitioner for FY 2019-20 and subsequently issued an SCN dated 31 May 2024 under Section 73 of the CGST Act, seeking recovery of ₹11,85,45,612/- towards allegedly wrongful ITC claims. However, the notice was issued to the petitioner only on 12 August 2024. It was the petitioner’s case that the SCN was barred by limitation in terms of Section 73(2) read with Section 73(10) of the CGST Act, as the notice was required to be issued at least three months prior to the last permissible date for passing the adjudication order. For FY 2019-20, the Central Government had extended the deadline for passing adjudication orders under Section 73(10) up to 31 August 2024, via Notification No. 56/2023-Central Tax dated 28 December 2023. However, Section 73(2) mandates that the SCN must be issued at least three months prior to the order passing deadline. Therefore, the SCN was required to be issued by 31 May 2024 at the latest. The petitioner contended that the SCN was not served within the mandated limitation period and was in fact issued only on 12 August 2024. Further, although the notice was claimed to have been dispatched earlier, it was sent to an outdated address despite the department updating the petitioner’s address on 15 May 2024. The Department argued that due to a technical glitch, the DRC-01 form could not be generated on time, citing CBIC instructions dated 2 August 2024. The Department also claimed that the SCN had been dispatched on 3 June 2024, but this was disputed due to the incorrect address used. The High Court referred to its earlier judgment in Tata Play Limited v. Sales Tax Officer, emphasizing that: Section 73(2) is mandatory and ensures that assessees receive a minimum three-month period to respond. The timeline under Section 73(10) fixes the outer date for passing the adjudication order. Both provisions must be read harmoniously, and failure to serve the SCN within the prescribed period renders the notice invalid. The Court also rejected the Department's reliance on alleged technical glitches, holding that such administrative difficulties cannot override statutory timelines. The Court held that the SCN was issued and served beyond the permissible limitation period and thus stood vitiated. Therefore, the SCN and all proceedings arising from it were quashed. “The SCN dated 28 May 2024 dispatched on 3 June 2024 cannot be held to be within time… Accordingly, the said SCN and any other order passed consequent thereto stand quashed,” the Court ruled. The petition was allowed, and all pending applications were disposed of. Case Details Case Title: C.H. Robinson Worldwide Freight India Private Limited Versus Additional Commissioner, CGST -Delhi-South & Ors. Case No.: W.P.(C) 15508/2024, CM APPL. 65096/2024 Date: 06/10/2025 Counsel For Petitioner: Kamal Sawhney Counsel For Respondent: Atul Tripathi Click Here To Read Order Read More: Income Tax Assessment Doesn’t Bar Separate Benami Proceedings: Kerala High Court

Wrongful ITC Availment: Delhi High Court Quashes GST Demand Notice Issued After Limitation Period Of 3 months

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