Court Rules Audit Commencement Date Based on Later of Document Submission or Actual Audit Institution; Rejects Petition to Quash Show-Cause Notices on Limitation Grounds
In a significant ruling on 23rd October 2026, the Gujarat High Court (Division Bench) dismissed the writ petition filed by Hubergroup India Private Limited challenging the validity of GST audit proceedings conducted by the Union of India and others. The petitioner sought to quash eight show-cause notices issued under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act), contending that the audit was time-barred as it was not completed within the prescribed three-month period under Section 65(4) of the CGST Act.
The dispute arose from audit proceedings concerning financial years 2017-18 to 2019-20. The petitioner argued that it had furnished all necessary documents by August 2022, and hence, the audit should have been completed within three months from that date. However, the respondents contended that the audit actually commenced at the petitioner's business premises on 19th June 2024, following which the final audit report was issued on 2nd August 2024, well within the statutory three-month period.
The Court meticulously analyzed Section 65 of the CGST Act, especially the Explanation under subsection (4), which defines "commencement of audit" as the later of two events: either the date on which the registered person makes available the documents requested or the date on which the audit is actually instituted at the place of business. This alternative basis ensures that the limitation period is fair and practical, especially where disputes arise regarding document submission timelines.
Despite the petitioner's assertion of timely document submission, the Court found there was a factual dispute about whether all requisite documents were furnished initially. Furthermore, the respondents had issued multiple notices seeking documents, but failed to specify which documents were outstanding, contributing to delays. Nonetheless, since the audit was instituted physically on 19th June 2024, the audit report issued on 2nd August 2024 was held to be within the three-month limitation.
The Court emphasized the duty of tax authorities to communicate missing or incomplete documents promptly to facilitate timely completion of audits. However, it held that such procedural lapses cannot invalidate the audit when statutory provisions provide an alternative basis for determining the audit commencement date.
Regarding the show-cause notices issued under Section 74, the Court declined to interfere at the pre-adjudication stage, allowing the petitioner to respond to the notices and pursue statutory appellate remedies under Section 107 of the CGST Act.
This ruling clarifies the interpretation of audit commencement and limitation provisions under the CGST Act, providing guidance to taxpayers and authorities on the procedural aspects of GST audits.
Bottom Line:
GST - Audit under Section 65 of the CGST Act - For computing limitation of three months for completion of audit, "commencement of audit" is to be reckoned from the later of two events, namely, furnishing of records/documents or actual institution of audit at place of business - Where dispute existed regarding whether all documents were furnished, audit commenced on date of actual institution at place of business and audit report issued within three months was held valid - Show-cause notices under Section 74 not interfered with at writ stage.
Statutory provision(s):
Central Goods and Services Tax Act, 2017 Section 65(1), 65(2), 65(3), 65(4), 65(5), 65(6), 65(7), 74, 107
Hubergroup India Private Limited v. Union of India, (Gujarat)(DB) : Law Finder Doc Id # 3002565
