Court clarifies no mandatory three-month interval required between show cause notice and assessment order under GST Act.
In a landmark decision, the Madras High Court has set aside contradictory assessment orders against Raj Machine Tools, calling for a reassessment under the Goods and Services Tax (GST) framework. The judgment, delivered by Justice Senthilkumar Ramamoorthy, clarified the interpretation of Section 73(2) of the GST Act, 2017, highlighting that it does not mandate a minimum three-month interval between the issuance of a show cause notice and the subsequent assessment order.
The petitioner, Raj Machine Tools, had challenged two separate orders from the Assistant Commissioner (ST) on the grounds of inconsistency and procedural impropriety. The orders, both dated November 13, 2025, were contradictory in nature—one suggesting wrongful availing of input tax credit on exempt supplies, while the other treated the supplies as taxable.
Justice Ramamoorthy emphasized that Section 73(2) requires the show cause notice to be issued at least three months before the expiration of the limitation period outlined in Section 73(10). This provision ensures adjudication is not rushed as the limitation period ends, but does not enforce a fixed three-month gap between notice and order issuance.
The court also recognized the contradiction in the assessment orders, validating the petitioner’s argument. Consequently, the court mandated that the orders be set aside, provided Raj Machine Tools remits 25% of the disputed tax demand. The case has been remanded for re-evaluation, allowing for thorough reconsideration of the nature of supplies involved.
The judgment further instructed the proper officer to determine whether the supplies in question are indeed exempt, with a new order to be issued within three months of the petitioner’s compliance with the remittance condition.
This ruling comes after the Bombay High Court’s stance in a similar case, which was not upheld by the Madras High Court, reinforcing a more flexible interpretation of the GST provisions. The case underscores the importance of clarity and consistency in tax assessments and the procedural fairness owed to taxpayers.
Bottom line:-
GST Law, Section 73(2) does not mandate a three-month interval between the show cause notice and the assessment order, provided the notice is issued at least three months prior to the expiry of the limitation period under Section 73(10). Contradictory assessment orders necessitate reconsideration after remittance of 25% of the disputed tax demand.
Statutory provision(s): Section 73(2) of the Goods and Services Tax Act, 2017, Section 73(10) of the Goods and Services Tax Act, 2017
Raj Machine Tools v. Assistant Commissioner (ST) (FAC), (Madras) : Law Finder Doc id # 2947372
