2025 (7) TMI 834 - HC - GST

Challenge to show cause and order passed - requirement to issue SCN at least three months prior to the expiry of the time limit specified in sub-Section 10 of Section 73 for issuance of such order - HELD THAT - Prima facie it would transpire that though ordinarily a show-cause notice having regard to Section 73(2) of the said Act is required to be issued at least three months prior to the expiry of the time limit specified in sub-Section 10 of Section 73 for issuance of such order however in the instant case it is found that for the relevant assessment year that is 2020-21 having regard to the insertion of Rule 80 (1A) the time to file annual returns having been extended up to 28th February 2022 the show-cause notice or the order passed thereon cannot be said to be irregular. Having regard to the observation made and noting that an order under Section 73(9) has already been passed on 20th February 2025 which appears to be within the time specified having regard to the insertion of Rule 80 (1A) of the said Rules it is found that there is no scope to entertain writ petition on the jurisdictional issue. Thus in the event the petitioner prefers an appeal from the order dated 20th February 2025 within the period of 4 weeks from date the appellate authority shall having regard to the observations made herein hear out and dispose of the appeal on merits subject to compliance of all other formalities by the petitioner - petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the show-cause notice dated 28th October, 2024 issued under Section 73(1) of the WBGST/CGST Act, 2017 was validly issued, considering the limitation period prescribed under Section 73(10) of the Act for initiating proceedings in respect of the financial year 2020-2021.

- Whether the extension of time to file the annual return under sub-Rule 1A of Rule 80 of the WBGST/CGST Rules, 2017, inserted with effect from 29th December, 2021, affects the limitation period for issuance of the show-cause notice and consequential orders under Section 73(10) of the Act.

- Whether the petitioner's contention that no annual return was required to be filed for the relevant financial year has any bearing on the jurisdiction of the proper officer to issue the show-cause notice within the prescribed time.

- Whether the petitioner's remedy lies in challenging the order passed under Section 73(9) of the Act dated 20th February, 2025 before the appropriate forum, and whether the petitioner's delay in preferring an appeal can be condoned.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the show-cause notice dated 28th October, 2024 under Section 73(1) of the WBGST/CGST Act, 2017

Relevant legal framework and precedents: Section 73(10) of the WBGST/CGST Act, 2017 prescribes a limitation period of three years from the due date for furnishing the annual return for issuance of any order in respect of tax not paid, short paid, or ITC wrongly availed or utilized. Section 44 mandates filing of the annual return electronically in Form GSTR 9 by 31st December following the end of the financial year.

Court's interpretation and reasoning: The petitioner argued that since the show-cause notice was issued less than three months before the expiry of the three-year period from the due date of filing the annual return, the notice was invalid and a "non-starter." However, the respondents contended that the limitation period was extended by virtue of sub-Rule 1A of Rule 80 of the WBGST/CGST Rules, 2017, which extended the time for filing the annual return to 28th February, 2022.

Key evidence and findings: The Court noted that the show-cause notice was issued after the insertion of Rule 80(1A), which extended the time for filing annual returns, thereby extending the limitation period for issuance of show-cause notices and consequent orders under Section 73(10).

Application of law to facts: The Court held that the show-cause notice issued on 28th October, 2024 was not barred by limitation because the extended due date for filing the annual return was 28th February, 2022, and the notice was issued within three years thereafter.

Treatment of competing arguments: The petitioner's argument that no annual return was required to be filed was considered but found insufficient to negate the extension of limitation period provided under Rule 80(1A). The Court emphasized the importance of the statutory extension in determining the limitation period.

Conclusions: The issuance of the show-cause notice was held to be valid and within the prescribed time limit.

Issue 2: Effect of Rule 80(1A) of the WBGST/CGST Rules, 2017 on limitation period under Section 73(10)

Relevant legal framework and precedents: Rule 80(1A), inserted with effect from 29th December, 2021, extended the time for filing annual returns, thereby affecting the limitation period for issuance of orders under Section 73(10).

Court's interpretation and reasoning: The Court recognized that the insertion of Rule 80(1A) effectively extended the limitation period for issuance of show-cause notices and orders under Section 73(10) by extending the due date for filing annual returns.

Key evidence and findings: The respondents produced an order dated 20th February, 2025 passed under Section 73 of the Act, which was within the extended limitation period.

Application of law to facts: The Court applied the extended limitation period to uphold the validity of the order passed on 20th February, 2025, and consequently the show-cause notice issued earlier.

Treatment of competing arguments: The petitioner's contention that the extension did not apply was rejected, and the Court emphasized statutory compliance with the extended timeline.

Conclusions: The extension under Rule 80(1A) was held to be operative and binding, thereby validating the issuance of the show-cause notice and the subsequent order within the extended timeline.

Issue 3: Jurisdictional scope and remedy available to the petitioner

Relevant legal framework and precedents: Section 73(9) of the Act provides for issuance of orders after show-cause notices. Remedies against such orders lie before appellate authorities as per the procedural provisions of the Act.

Court's interpretation and reasoning: The Court observed that since an order under Section 73(9) had been passed on 20th February, 2025 within the extended limitation period, the jurisdictional challenge to the issuance of the show-cause notice was not maintainable before the writ jurisdiction.

Key evidence and findings: The order dated 20th February, 2025 was produced, and the petitioner's delay in filing an appeal was noted.

Application of law to facts: The Court held that the petitioner's remedy was to prefer an appeal against the order dated 20th February, 2025 before the appropriate forum.

Treatment of competing arguments: The petitioner submitted that the appeal period had expired due to pendency of the writ petition. The Court, however, granted liberty to prefer the appeal within four weeks and directed the appellate authority to decide the appeal on merits.

Conclusions: The Court declined to entertain the writ petition on jurisdictional grounds and directed the petitioner to pursue remedy by way of appeal within the stipulated time.

3. SIGNIFICANT HOLDINGS

"Though ordinarily a show-cause notice having regard to Section 73(2) of the said Act is required to be issued at least three months prior to the expiry of the time limit specified in sub-Section 10 of Section 73 for issuance of such order, however, in the instant case, I find that for the relevant assessment year that is 2020-21, having regard to the insertion of Rule 80 (1A), the time to file annual returns having been extended up to 28th February, 2022 the show-cause notice or the order passed thereon cannot be said to be irregular."

"Having regard to the observation made hereinabove and noting that an order under Section 73(9) has already been passed on 20th February