Madras High Court Upholds GST Order Passed Within Extended Limitation Period Under Section 73 of CGST Act

Case Overview: City Enterprises Vs Deputy State Tax Officer-1 (Madras High Court)

The Madras High Court recently adjudicated a writ petition filed by City Enterprises challenging a demand order dated 20.08.2024 passed under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act). The order under challenge pertained to the tax period April 2019 to March 2020 and confirmed a demand raised through a Show Cause Notice issued in Form DRC-01 dated 22.05.2024.

The total demand confirmed against the petitioner stood at Rs. 9,97,196, comprising tax, interest, and penalty components. The Court disposed of the writ petition at the admission stage itself, with the consent of both parties, issuing directions that balanced the legal position on limitation with the practical reality of an ex parte order.

Demand Breakdown Confirmed in the Impugned Order

The revenue demand confirmed against the petitioner under the impugned order dated 20.08.2024 was structured as follows:

Issue SGST CGST IGST CESS Total
Underdeclaration of output tax + Excess ITC claim Rs. 2,56,298 Rs. 2,56,298 0 0 Rs. 5,12,596
Interest Rs. 2,16,670 Rs. 2,16,670 0 0 Rs. 4,33,340
Penalty Rs. 25,630 Rs. 25,630 0 0 Rs. 51,260
Total Rs. 4,98,598 Rs. 4,98,598 0 0 Rs. 9,97,196

The primary ground on which the petitioner challenged the impugned order was that it had been issued in violation of the limitation periods prescribed under Section 73(2), Section 73(9), and Section 73(10) of the CGST Act.

Petitioner's Argument on Limitation

The counsel representing the petitioner advanced the following contentions before the Court:

  • Notification No. 9/2023-CT dated 31.03.2023 and Notification No. 56/2023-CT dated 28.12.2023, both issued in exercise of powers under Section 168A of the CGST Act, were argued to extend limitation only for recovery of tax — not for determination of tax.
  • Since the dispute related to FY 2019–20, the last date for filing the annual return in GSTR-9 would ordinarily have lapsed on 31.12.2020 under Section 44 of the CGST Act r/w Rule 80 of the CGST Rules, 2017, subject to COVID-19-related extensions.
  • Without such statutory intervention, the Show Cause Notice under Section 73(2) was required to be issued at least three months before the outer time limit prescribed under Section 73(10).
  • The petitioner contended that the limitation for both issuing the notice and passing the order had already expired, rendering the impugned order legally unsustainable.

Court's Analysis: Notification Language and Extended Time Limits

The Madras High Court rejected the petitioner's limitation argument, holding it to be legally untenable in light of the explicit language employed in the two notifications.

Exact Text of the Relevant Notifications

Notification No. 9/2023-C.T., dated 31.03.2023 reads as follows:

"hereby, extends the time limit specified under subsection (10) of section 73 for issuance of order under sub-section (9) of section 73 of the said Act, for recovery of tax not paid or short paid or of input tax credit wrongly availed or utilised, relating to the period as specified below namely:-
(i) for the financial year 2017-18, up to the 31st day of December, 2023;
(ii) for the financial year 2018-19, up to the 31st day of March, 2024;
(iii) for the financial year 2019-20, up to the 30th day of June, 2024."