GST show cause notice quashed as time-barred; court holds limitation under Section 73(2) to be mandatory, not directory

Case Title: M/s. The Cotton Corporation of India v. Assistant Commissioner (ST) (Audit) (FAC), Vijayawada & Others
Court: High Court of Andhra Pradesh, Amaravati
Petition No.: W.P. No. 1463 of 2025
Date of Judgment: 05 February 2025
Category: Limitation period – Validity of Show Cause Notice under Section 73(2)
Relevant Sections: Sections 73(1), 73(2), 73(10), 75 of the CGST/APGST Act 2017; Rule 142 and Rule 81A of CGST Rules, 2017

Facts (Paras 1–4)

The petitioner, M/s. Cotton Corporation of India, registered under the APGST Act 2017, received a show-cause notice dated 30 November 2024 for FY 2020-21 under Section 73(1) r/w Rule 142, alleging short payment of tax. The petitioner challenged it as being issued beyond the limitation prescribed under Section 73(10). Under Rule 81A, the due date for filing annual return for FY 2020-21 was 28 February 2022. Hence, the latest permissible date for issuing notice, allowing three months before expiry of the three-year limitation, was 28 November 2024.

Questions before the Court (Paras 4–6)

1. Whether the notice issued on 30 November 2024 was within the limitation prescribed under Section 73(2) of the Act?

2. Whether the time requirement of “at least three months prior” in Section 73(2) is mandatory or merely directory?

Observations (Paras 7–14)

• The Court examined State of Himachal Pradesh v. Himachal Techno Engineers (2010) 12 SCC 210 and Dodds v. Walker (1981 2 WLR 609 HL) to clarify the meaning of “month.”

• It held that when law prescribes time in months, it refers to calendar months, not fixed 90 days.

• Applying this, the three-month period from 28 February 2025 ended on 28 November 2024. Thus, a notice dated 30 November 2024 was beyond time.

• The Bench rejected the State’s plea that the limitation was merely directory, holding that limitation under Sections 73(2) and 73(10) is a substantive safeguard for taxpayers.

• The mandatory timeline ensures taxpayers get adequate opportunity for reply, hearing, and adjournments envisaged under Section 75. Any breach would defeat these legislative protections.

Judgment (Para 15)

The Court allowed the writ petition and quashed the show-cause notice dated 30 November 2024 as time-barred and hence void ab initio. It reiterated that the limitation prescribed in Section 73(2) is mandatory, and any notice issued even a day beyond the prescribed period renders proceedings non est in law.

Table: Case Law Referred

Between Fine Lines

This judgment underscores that timely issuance of show-cause notices is not a procedural formality but a statutory mandate. Even a two-day delay invalidates proceedings. Tax authorities must vigilantly adhere to calendar-month computation while calculating limitation under Section 73 to avoid nullification of assessments.

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