3 Months Interval Between GST Notice under Section 73 and Demand Order: Gauhati HC

The Gauhati High Court has fortified the procedural integrity of tax adjudications by ruling that the statutory three-month interval between a show cause notice and a final order must be calculated as full calendar months, ensuring taxpayers are not deprived of a fair window to contest demands. This decision effectively rebuffs rigid 'backward counting' challenges, clarifying that as long as three calendar months remain after excluding the date of notice issuance, the proceedings are legally sustainable.

A bench comprising Chief Justice Ashutosh Kumar and Justice Arun Dev Choudhury delivered this significant ruling while presiding over an intra-court appeal. The Bench was tasked with interpreting the temporal boundaries of Section 73 of the Central Goods and Services Tax Act 2017 and the Assam Goods and Services Tax Act, 2017, specifically addressing whether a notice issued on the penultimate day of a deadline satisfies the mandatory minimum interval before the final adjudication date.

Key Takeaways

Calendar Month Rule Validated

Tax authorities must reckon 'months' under Section 73(2) of the Central Goods and Services Tax Act 2017 as calendar months per the General Clauses Act, 1897, rather than a fixed 30-day block.

Exclusion of Issuance Date

In computing the three-month window, the date on which the show cause notice is issued must be excluded, following established principles of statutory interpretation.

Procedural Fairness Over Technical Rigidity

The 'at least three months' requirement is intended to prevent illusory adjudicatory processes, ensuring taxpayers have sufficient time to submit representations and seek hearings.

Impact on Limitation Periods

Taxpayers cannot invalidate notices based on a mechanical backward-counting method if the requisite calendar months are substantively available before the terminal date.

Time Limit for GST Notice under Section 73

The Gauhati High Court examined the statutory mechanism for the determination of tax not paid or short-paid under the GST regime. It observed that the issuance of a notice under Section 73(1) is the commencement of a statutory adjudicatory process which culminates in the determination and order under Section 73(9). The bench noted that Section 73(2) regulates the initiation by prescribing a minimum interval before the outer limit fixed for its culmination under Section 73(10).

Referring to the General Clauses Act, 1897, the Court affirmed that in the absence of a specific definition in the GST Acts, a 'month' must be understood as a month reckoned according to the British calendar.

The Gauhati High Court expressed that "Section 73(2) does not prescribe an independent period of limitation expiring on a corresponding date. It prescribes the minimum interval that must be available between the initiation of the proceeding and the outer limit fixed for its culmination. Therefore, the requirement is satisfied if three calendar months are available after excluding the day on which the notice is issued and before the statutory terminal date."

GST Notice Time Limit Computation

The Gauhati High Court rejected the appellant’s contention that a 'corresponding date' principle should be applied backward from the terminal date. It held that such a construction would introduce a degree of rigidity not found in the legislation.

The Bench issued the following directions "Accordingly, we interfere with the order dated 28.02.2025 passed under Section 73(9) of the AGST Act., to enable the appellant to avail his right to contest the Notice dated 29.11.2024. The appellant shall, if so desired may file his reply to the notice dated 29.11.2024 within a period of four weeks from today. In the event such a reply is filed, the entire proceeding shall be completed within a period of three months thereafter. However, if no such reply is filed within the time specified hereinabove, the order dated 28.02.2025 shall revive and the Revenue authority shall proceed in accordance with AGST/CGST Act."

Ratio

Section 73(2) of the Central Goods and Services Tax Act 2017 regulates the interval between the initiation of tax proceedings and their culmination. The requirement of issuing a notice 'at least three months prior' to the time limit for an order is satisfied if, after excluding the date of notice issuance, three calendar months (as defined by the General Clauses Act, 1897 remain available before the statutory terminal date specified under Section 73(10).

Background

Surya Business Private Limited, a cellular phone distributor, challenged a show cause notice dated November 29, 2024, issued for the financial year 2020-21. The notice alleged wrongful availment of Input Tax Credit (ITC). The appellant argued that since the final deadline for issuing an order was February 28, 2025, the notice should have been issued by November 28, 2024, to satisfy the three-month gap required by Section 73(2).

A Single Judge had previously dismissed the writ petition, holding that by excluding the date of issuance (Nov 29), the full months of December, January, and February were available, thus meeting the statutory requirement. The Gauhati High Court, while upholding this logic, noted that during the pendency of the writ, an ex-parte order had been passed and Rs. 10 Lakhs recovered. To balance the scales, the Bench set aside the ex-parte order to allow the appellant a fair chance to reply to the notice on merits, while maintaining the legal validity of the notice itself.

Case Details:
Case No.: WA/64/2026
Case Title: Surya Business Private Limited v. The State of Assam and 2 Ors
Appearances:
For the Petitioner(s): Mr. Ankit Kanodia, Advocate; Ms. N Upadhyay, Advocate; Mr. P Das, Advocate; Mr. Zeehan Islam, Advocate.
For the Respondent(s): Mr. B. Gogoi, Additional Advocate General, Assam; Mr. M. Bhuyan, Advocate.

Source: 2026 CaseBase(GAU) 1272