The Madras High Court, in Canon India Pvt. Ltd. v. State Tax Officer, Group-VI & Others, considered whether writ petitions challenging GST DRC-01 show cause notices issued under Section 74 of the GST enactments could be entertained on the grounds of limitation, lack of jurisdiction, and alleged absence of material to invoke the extended period for suppression of facts. The judgment examines the scope of judicial interference at the show cause notice stage and clarifies the circumstances in which an assessee must participate in statutory adjudication rather than invoke writ jurisdiction.
The petitioner challenged three show cause notices relating to the tax periods 2017-18, 2018-19 and 2019-20, contending that they were time-barred, issued without jurisdiction, and that the allegations required for invoking Section 74 had not been properly established. It was also argued that the pendency of these proceedings adversely affected the petitioner’s eligibility under the Authorised Economic Operator (AEO) Programme.
The Court rejected the challenge to limitation by following its earlier decisions dealing with the validity of proceedings under Section 74. It observed that the impugned notices had been issued within the limitation applicable under Section 74 and that questions relating to invocation of the extended period had already been answered in earlier decisions. The Court further held that disputed factual issues regarding suppression, non-production of documents during investigation and tax liability could not be decided in writ proceedings under Article 226 of the Constitution.
The Court also observed that where Section 74 has been invoked, the proper course for the taxpayer is to submit a detailed reply in Form GST DRC-06 and contest the allegations before the adjudicating authority. Merely alleging that Section 74 was wrongly invoked would not justify quashing the show cause notice without completion of the statutory adjudication process. The Court noted that each tax period constitutes an independent assessment block and that proceedings for different years cannot be invalidated merely because proceedings for subsequent years stand on a different footing.
Accordingly, the writ petitions were dismissed. However, the Court granted liberty to the petitioner to file replies to the impugned show cause notices within thirty days from receipt of the order. It further directed the adjudicating authority to complete the adjudication, after granting an opportunity of hearing, preferably within three months from receipt of the reply. A subsequent order dated 25 June 2026 modified the earlier judgment only to prescribe the thirty-day time limit for filing replies and to remove an unnecessary observation regarding bank attachment, while leaving the remainder of the judgment unchanged.
Key Takeaways
- Writ jurisdiction ordinarily will not be exercised to quash GST show cause notices involving disputed questions of fact.
- Challenges to invocation of Section 74 should generally be raised before the adjudicating authority through a detailed reply.
- Each assessment year is an independent tax period, and proceedings for one year do not automatically govern another.
- Courts are reluctant to interfere where statutory adjudication has not yet been completed.
- Taxpayers should promptly file comprehensive replies in DRC-06 instead of relying solely on writ remedies against show cause notices.
