Extended Limitation under Section 74 to be First Decided by Adjudicating Authority

Case: K.M. Siddique v. State of Kerala & Others
Court: High Court of Kerala at Ernakulam
Petition No.: WP(C) No. 31434 of 2024
Judgment Date: 12 September 2024
Category: Input Tax Credit / Extended Limitation under Section 74
Relevant Sections: Section 74, CGST/SGST Act, 2017; Article 226, Constitution of India; CBIC Circular No. 5/2023 dated 13.12.2023

Facts of the Case (Ref: Para 1–3)

• The petitioner challenged Show Cause Notice dated 02.08.2024 (Ext.P1) issued under Section 74 of the CGST/SGST Act on the ground that it lacked any allegation justifying invocation of the extended period of limitation (Para 1).

• The petitioner relied on CBIC Circular No. 5/2023 (Ext.P2) requiring misstatement, suppression, or fraud to be explicitly stated in such notices (Para 3).

• The State and CBIC argued that whether extended limitation applies is a question of fact to be adjudicated by the proper officer, and the writ petition is premature (Para 2).

Questions in Consideration (Ref: Para 1–4)

1. Whether absence of reasons for invoking Section 74 in a SCN makes it without jurisdiction and liable to be quashed in writ proceedings?

2. Whether the issue of extended limitation can be decided directly by the High Court or must first be adjudicated by the competent authority?

Observations of the Court (Ref: Para 4)

• The Court noted that the existence of reasons to invoke Section 74 is essentially a factual matter.

• Such issues should be adjudicated first by the adjudicating authority, not directly under Article 226 (Para 4).

• However, fairness requires that the adjudicating authority must decide the question of extended limitation as a preliminary issue before proceeding further (Para 4).

Judgment of the Court (Ref: Para 5)

• The writ petition was disposed of with directions:

  • The petitioner must file a reply to SCN (Ext.P1) within 2 weeks raising objections on extended limitation (Para 5).

  • The Deputy Commissioner (Respondent 2) shall decide as a preliminary issue whether invocation of Section 74 was justified before proceeding with merits (Para 5).

  • The petitioner to appear before Respondent 2 on 04.10.2024 at 11:00 AM through authorized representative (Para 5).

Between Fine Lines (Simple 5-line Summary)

This case clarifies that the High Court will not quash a GST show cause notice merely because extended limitation under Section 74 was invoked without reasons. Instead, the adjudicating authority must first decide whether such invocation is valid. Taxpayers can raise jurisdictional objections before the authority itself. The High Court ensures procedural fairness by directing the issue to be treated as a preliminary matter. Thus, the case balances taxpayer rights with proper adjudication process.

Summary of Referred Cases

(No external case law was referred by either side in the judgment. Only CBIC Circular No. 5/2023 was cited.)

Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”