The Gauhati High Court has held that a demand raised beyond the statutory limitation period under the Finance Act, 1994 is void ab initio, and any adjudication based on such a notice is unsustainable in law.
The bench of Justice Kaushik Goswami has clarified the distinction between the normal limitation period and the extended period under Section 73(1). It noted that invocation of the extended period requires strict satisfaction of conditions such as fraud, suppression of facts, or wilful misstatement with intent to evade tax—none of which justified the delayed notice in the present case.
The case arose from a writ petition challenging a Demand-cum-Show Cause Notice dated 11.04.2022 issued under Section 73(1) of the Finance Act, 1994 for the financial year 2016–2017, demanding service tax of over ₹26.57 lakh. The petitioner, engaged in execution of works contracts, contended that the services rendered were exempt under the Mega Exemption Notification and further argued that the notice itself was barred by limitation.
Despite the petitioner’s reply, the adjudicating authority confirmed the demand through an Order-in-Original dated 24.04.2024. Aggrieved, the petitioner approached the High Court invoking writ jurisdiction under Article 226 of the Constitution, asserting that the proceedings were without jurisdiction due to limitation bar.
A preliminary objection was raised by the department, arguing that the petitioner had an efficacious alternative remedy under Section 107 of the CGST Act, 2017 and should be relegated to the appellate forum. However, the Court rejected this contention, reiterating that the rule of alternative remedy is a self-imposed restraint and not an absolute bar, particularly where the proceedings are without jurisdiction.
The Court framed the core issue as whether an adjudication order based on a time-barred notice could be sustained, and whether such a defect strikes at the root of jurisdiction. Answering in the negative, the Court emphasized that limitation under Section 73(1) is not merely procedural but a substantive condition governing the exercise of power.
Relying on landmark judgments including Whirlpool Corporation vs Registrar of Trade Marks and Calcutta Discount Co Ltd vs ITO, the Court held that where jurisdictional facts are absent—such as issuance of notice beyond limitation—the entire proceedings stand vitiated. It observed that once the statutory period expires, the authority is divested of the power to initiate action, and any such attempt renders the proceedings non est in law.
The Court further observed that compelling an assessee to pursue appellate remedies against an order that is a nullity would amount to forcing participation in void proceedings, which constitutional courts must prevent.
Concluding that the Demand-cum-Show Cause Notice was ex facie time-barred and that the adjudicating authority lacked jurisdiction, the Court quashed the Order-in-Original and allowed the writ petition.
Case Details
Case Title: M/S Mahesh Kumar Chanani Versus The Union Of India
Citation: JURISHOUR-1091-HC-2026(GAU)
Case No.: WP(C)/5050/2024
Date: 04.05.2026
Counsel For Petitioner: M L Gope, Ms. N Gogoi,Ms. N Hawelia
Counsel For Respondent: DY.S.G.I., SC, GST
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