Invalidity of GST Demand Issued Beyond Five-Year Limitation and During Pending Parallel Proceedings on Same Subject Matter

In brief

The question

1. Whether the show cause notice for FY 2017-18 was issued within the five-year limitation period prescribed under Section 74(10) of the CGST Act.

The court held

The court allowed the petition in part, holding that the SCN and Order-in-Original for FY 2017-18 were without jurisdiction.

It also directed

It further held that proceedings regarding "excess ITC availment" for 2018-19 and 2019-20 were barred by Section 6(2)(b).

The Order-in-Original dated 03.02.2025 was set aside in its entirety and the matter remitted to Respondent No. 5 to pass a fresh order within three months, limited only to aspects of short payment of GST and FY 2020-21 liability. The petitioner was granted six weeks to file an additional reply.

01Facts

The petitioner, a proprietor of M/S Shekhar Chandra Podder, challenged a Demand-cum-Show Cause Notice (SCN) dated 22.07.2024 issued by the Joint Commissioner, Central GST (Respondent No. 5) under Section 74(1) of the CGST/TSGST Act, and the subsequent Order-in-Original dated 03.02.2025.

p. 2

The SCN covered four financial years: 2017-18, 2018-19, 2019-20, and 2020-21.

p. 3

The petitioner contended that the proceedings for FY 2017-18 were time-barred.

p. 3

For FY 2018-19 and 2019-20, parallel proceedings on the same subject matter (Input Tax Credit mismatches) had already been initiated and subsequently dropped by State GST (SGST) authorities.

p. 4

02Issues

i.1. Whether the show cause notice for FY 2017-18 was issued within the five-year limitation period prescribed under Section 74(10) of the CGST Act.

p. 3

ii.2. Whether Section 6(2)(b) of the CGST Act prohibits the Central GST authorities from initiating proceedings on the "same subject matter" (excess ITC availment) previously handled by State GST authorities.

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iii.3. Whether the SCN remained valid regarding distinct infractions such as "short payment of GST" not covered by prior SGST proceedings.

p. 9

03Law Applied

Section 74(10) of the CGST Act, 2017, which mandates a five-year limitation period from the due date of the annual return for initiating and concluding proceedings in cases of fraud or willful misstatement.

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Section 6(2)(b), which prohibits parallel proceedings by Central and State authorities on the "same subject matter".

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The Supreme Court precedent in M/s Armour Security (India) Ltd. v. Commissioner, CGST, which established a twofold test for "same subject matter": identical liability/offense on the same facts and identical relief sought.

¶ 25 · pp. 7-8

Section 168A regarding the government's power to extend deadlines during force majeure.

p. 5

Provisions in the judgment · 4 · Linked ones open on LawLens

Central Goods and Services Tax Act, 2017 Section 74 Section 6 Section 168

Tripura State Goods and Services Tax Act, 2017 Section 74

04Reasoning

Regarding FY 2017-18, the court found the SCN dated 22.07.2024 was issued beyond five years from the annual return due date of 31.12.2018; the court clarified that Notification 06/2020 (extending return filing dates) benefited taxpayers, not the Department's limitation period.

p. 5

For FY 2018-19 and 2019-20, the court applied the Armour Security test and found that the CGST authority's claim regarding "excess ITC availment" was the same subject matter already adjudicated (and dropped) by SGST authorities, thus triggering the statutory bar under Section 6(2)(b).

p. 9

The court identified that "short payment of GST" for those years and tax liability mismatches for FY 2020-21 were distinct infractions not covered by previous SGST actions, and therefore, the Central authority retained jurisdiction over these specific, separate issues.

pp. 9-10